As Joe Biden steps into the US presidency, America has now surpassed 400 000 Covid-19 related deaths and mainstream news reports are that many locations are running low on vaccine supplies.
As even the developed world struggles with the task of vaccination procurement and roll-out, cash-strapped developing countries are being left behind in the race.
Reuters reports that the African Union will receive vaccine doses at the discounted rate of $3-$10, but experts remain concerned that many developing countries will struggle to purchase, distribute and administer the vaccine doses.
The situation is more dire for low-income countries. The World Health Organisation warned recently that only 29 doses had been administered in these countries by January 18, this year.
South Africa itself does not have the funds nor capacity to behave like the developed world, and the cost implications of acquisition and roll-out will no doubt have a negative impact on our fiscus.
In the first phase, the South African government plans to vaccinate 1.5 million people in the most vulnerable groups, including health workers.
The first batch South Africa will receive – 1.5 million doses in January and February – will be of the AstraZeneca vaccine being manufactured by Serum Institute of India. The next batch is 12 million doses (enough for two doses for about 10% of the South African population) procured through the Covax facility, which will be received from April to June.
Vaccine costs do vary. The Moderna vaccine is the most expensive at about R560 per patient. The World Health Organisation discount of $10 for the Pfizer dose reduces costs to about R280 per patient. The Russian (Sputnik) and Indian (AstraZeneca) vaccines, come at about R210 and R76 per patient, respectively.
Using the cheapest AstraZeneca vaccine for estimations, which costs about R76 per patient, with a second dose given after 4 to 14 weeks, we estimate that for 10% of the population (about 5.5 million people), the vaccination costs will be about R 4.2 billion. Using different proportions of different vaccines (i.e. 5% Moderna, 5% Pfizer; 70% AstraZeneca and 20% Johnson & Johnson) the South African government-reported cost estimates were less expensive at around R2.4 billion. These government estimates are reported to exclude Solidarity Fund donations and recoupment of fees from medical aids. It remains unclear whether these costs account for a single or double dosage.
To put this into perspective, South Africa’s annual health budget is about R230 billion. The vaccination cost of R1.13 billion is less than one percent of that, and less than 0.1% of South Africa’s total annual budget. R1.13 billion is also just over 0.2% of the coronavirus R500 billion stimulus in 2020. To vaccinate 100% of the population, it would cost R42 billion. That is still about 20% of the health’s annual budget. So, in terms of the annual public budget, the vaccination doses per patient do not appear too unaffordable.
South Africa has limited sources to fund the roll-out. These could include increased taxes, borrowing, private sector and individual donations (like the Solidarity Fund). Increased taxation and borrowing will raise the country’s fiscal policy challenges, including tax evasion, avoidance, revolt or pushing the fiscus over the cliff.
In 2020 alone, South Africa’s GDP is estimated to have shrunk by more than R275 billion due to the pandemic. As the Solidarity Fund has already been used to pay the Covax deposit, tax hikes, borrowing and further private and business donations are required to get funds to vaccinate as soon as possible.
Although government is the channel to acquire vaccines, the private sector should participate in funding some of the costs and helping with distribution and administering of the vaccines. Private sector contribution to funding the acquisition could include allocating 25% of the doses to private businesses, at double or triple the acquisition price, to ensure a cross-subsidy of the public burden.
The private sector acquisition of the 25% dose would also contribute to the faster distribution and administration of that portion to critical employees. Medical schemes should also be called on to cross-subsidise the purchasing, monitored distribution and administration of the vaccines.
It is clear that the public health system is under severe strain and the additional burden of administering the vaccines would only break the system. We cannot afford delays in the vaccination process, while the virus mutates and the effectiveness of the vaccines become questionable, nullifying initial investments in vaccines.
This is further motivation for a limited and monitored private sector partnership to ensure that the vaccine is rolled out equitably and rapidly.
It is clear that at most conservative monetary estimations, the vaccination route remains a much cheaper option, even with its associated fiscal challenges. The socioeconomic impact of the pandemic without intervention is much worse.
Statistics SA data has shown a decline of 16.4% of GDP (R5.5 trillion) in the second quarter alone of 2020. The situation was not as bad in the third and fourth quarters. But even an overall annual decline of 5% for 2020, would still mean a GDP decline of R275 billion.
Finding the money to effectively vaccinate is our only option, because the estimated costs of not vaccinating would be almost 240 times higher than estimated GDP declines.
These are only the direct monetary estimated costs of the pandemic within the same socioeconomic conditions experienced in 2020. The expected GDP growth for 2021 reflect only the rebound of the economy, and would still not take the country back to GDP levels experienced before the pandemic.
Overall, these costs don’t account for human life costs and social suffering. Going by the 2020 data of recorded Covid-19 deaths, without vaccination we should expect at least 40 000 more deaths in 2021. That is, if the new strain does not lead to more fatalities.
It is impossible to estimate monetary costs from this loss of human life.
In addition, we must consider South Africa’s moral and practical obligations to its neighbouring countries. At a moral level, South Africa, with its leadership roles in the African Union and the recent launch of the Africa Free Trade Agreement, cannot be seen to be hoarding vaccines the same way some developed countries have done.
At a practical level, millions of Southern African Development Community citizens enter and exit South Africa’s borders every year and a vaccination focused only on South Africans would be less effective in protecting the country.
As the South African government does not have the capacity to carry all these obligations, it is just rational to solicit private sector contributions and co-operation in these efforts.
Morally, these should include businesses which experienced growth during the pandemic and which have footprints across most countries on the continent, including many ITC and telecommunications corporations.
Mbatha is director of the Institute of Social and Economic Research (ISER) at Rhodes University