Where does the money go? A peregrination of government spending in South Africa

Abstract

The study looked at the relationship between GDP per capita and health expenditure per capita as well as that of GDP per capita and education expenditure per capita in South Africa between 1994 and 2012. Adolph Wagner’s “Law” proposes that a state will increase its government expenditure relatively to the national income (Henrekson, 1993). Any change in the amount of health expenditure will influence the per capita health expenditure in a country. In this study, using the Human Development Index (HDI) as the yardstick for Quality of Life (QoL), the concepts of Standard of Living (SoL) and per capita income were examined closely in relation to the role of government in its public expenditure programmes and how these programmes in turn influenced QoL. In particular, the role of government expenditure on health and education seems to signify the commitment of a government in improving the HDI or QoL. Using data on government expenditure in South, the relationships amongst these variables were examined. Since Quality of Life is related to health expenditure per capita, then QoL too should change as government health expenditure increases. The same is expected of an increase in education expenditure. From the study results, it is clear that total tax revenue has increased sharply since 2000 and at a much faster rate than its contribution to GDP but the government deficit has also burgeoned in tandem with government revenue collection as if in tango. The reality is that government expenditure has increased sharply since 1993 but has this been directed at QoL? Public service protests tell a different story. The departments of Cooperative Governance and Traditional Affairs and the Police seem to be receiving the largest revenue votes, raising the question of whether there is real value added and whether this expenditure is warrantied in terms of SoL.