Government spending on health in Sub-Saharan Africa (SSA) falls short of recommended benchmarks needed to make significant progress towards Universal Health Coverage (UHC). As a case in point, Lesotho was the only SSA country that spent up to 5% of its GDP on health in 2018, while there was no country in the region that spent up to 15% of its government budget on health same year. In the same vein, only six SSA countries spent up to $86 per capita on health in 2018.[i] Meanwhile, the low-income SSA countries will still not be able to spend up to $86 per capita on health even if they commit 5% of their GDP to health. Evidence has shown that adding external funding to government health spending did not help most of the under-spending countries to reach the $86 per capita mark. The funding outlook is further gloomed in the light of unfavorable projection of future pattern of external financing for health which suggests an increase in Development Assistance for Health (DAH) at a lower growth rate compared to the rapid growth seen in last two decades.
As the DAH growth plateaued, however, there was a surge in amount of remittances coming to SSA. In 2017, the volume of remittance to Africa reached $41 billion and Nigeria alone received $22.2 billion as remittances same year. The year 2017 remittance receipt in SSA was almost at par with total net official development assistance received by the region which stood at $43.5 billion in that year. In fact, Nigeria’s remittance receipts substantially outnumbered the total official development assistance receipt of $3.4 billion in 2017. Although the flow of remittances to SSA was projected to decline by 23.1% to reach $37 billion in 2020, it is expected to return to a recovery trajectory with a 4% increase in 2021.
There are a number of growing initiatives in Africa aimed at channeling remittances to purchasing health insurance premiums for African residents with relatives in diaspora through online platforms. While these initiatives have their merits, they have a major pitfall if appraised with UHC lens. The major drawback is that benefit incidence is limited to residents and communities with relatives in diaspora which negates the principle of equity central to the UHC concept. As UHC means everybody should have access to quality health care services they need without suffering financial hardship, it is imperative to continue to seek more equitable mechanisms to finance health towards UHC goal.
Charges on remittances to SSA are higher than other regions of the world. Flipping this challenge can generate substantial additional funding for health and other social sectors in the region. The average cost of sending $200 ranged from 5.4% in South Asia to 9.0% in SSA in 2018. The global average was 6.9% in 2018. The wide range of remittance cost among different regions of the world presents a potential opportunity for mobilizing additional resources for health (and other social sectors) if an international consensus is mobilized to seek significant reduction in the cost of remittances coming to Africa and the ensuing margin channeled to purchasing health insurance especially for the poor and vulnerable residents of Africa. A sustained crusade in this direction could see a two percentage point reduction in remittance cost to SSA which translates to a sizable amount of resources far bigger than the DAH being received in most SSA countries. This option therefore, presents an opportunity for mobilizing additional resources from a constantly available source in such a way that will promote equity as the emerging pooled fund will not only benefit African residents with relatives in diaspora.
Charges on remittances to SSA countries are higher than other regions of the world. A modest cut in the charges can generate substantial additional funding for health and other social sectors in the region.
Flipping the challenge of high cost of remittance to SSA countries to create an opportunity for mobilizing additional resource for health requires a strong commitment and international consensus among key stakeholders including potential beneficiary countries. It will require, among other things, cooperation of remittance agencies and a credible institutional arrangement and partnership for managing the accruing resources in a transparent and efficient manner. The partnership should also seek to have a better understanding of the remittance cost driver with the aim of collectively proffering solutions that will bring the cost down and channeling the margin to achieve the desired objectives.
Effective utilization of the ensuing additional resources will also require strong accountability mechanism at country level. Though we recommend that funds emanating from reduction of remittance cost should be used to buy health insurance for the poor and vulnerable population, it is important to take country context into consideration. Appraisal of existing country financial protection mechanisms will help to decide the most appropriate mechanism to channel the funds through to ensure strong country ownership. As much as possible, parallel mechanisms that are capable of causing further fragmentation of already weak health financing subsystem should be avoided.
Dr. Gafar Alawode
Program Director, DGI Consult
[i] WHO global health expenditure database