In his Provincial Budgets and Expenditure Review released at parliament on Thursday, he reported that this was largely because of the "apparently high input costs of South Africa's big private health sector and the growing disease burden associated with the HIV/Aids epidemic.
"The skewed distribution of funding, high disease burdens and input costs present huge health service challenges, even with comparatively high overall levels of health expenditure."
While public funding constituted "substantially less than half of total health expenditure" - 41.5% - it funded services to about 85% of the population.
"Nearly 60% of health funding goes towards funding private health care for the wealthiest 15% of the population."
The public health sector total spend was R47.5bn in 2004/05 while the private sector spent R66bn (or 57.7%).
While South Africa was behind Cuba, Argentina, Namibia, Poland, Botswana, Russia, Columbia and Turkey as far as public health expenditure was concerned it came second among comparable countries in terms of total health expenditure - including the private sector.
Argentina spent 9.5% for total health expenditure as a percentage of GDP while Cuba spent 6.1% of GDP on public health and only 6.8% of GDP on health including the private sector.
This translated into $2 638 per capita compared to South Africa's $2 584 per capital. This was far below Poland which spends $4 742 per capita.
South Africa devoted 3.4% of GDP to public health expenditure.
Manuel also reported the South African private sector medical expenditure had been growing substantially faster than public sector medical expenditure.
"Contributions to medical schemes grew by 12.5% in 2003, which is well above inflation.
"The number of beneficiaries covered remained flat at roughly 15% of the population implying that expenditure growth is due to increasing costs of services."
Private hospital expenditure increased by 15.8% and administration costs by 10.5% in 2003.
Another factor was growth in reserves which, in line with regulatory requirements, grew to R13.8bn, giving solvency levels of around 28.4%.
"With the required solvency levels achieved, expenditure growth was anticipated to slow in 2004.
But Manuel reported that the inclusion of 25 chronic conditions and anti-retroviral treatment into the prescribed minimum benefits might continue to increase expenditure.
"Average monthly contributions per member for an average family of 2.5 members will exceed R1 600 in 2005/06."