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South Africa’s healthcare dilemma
A 200 000-bed shortfall is likely to stall National Health Insurance ambitions.
In the face of a 200 000 bed deficit, South Africa’s healthcare ambitions hang in the balance, with investors on the sidelines awaiting fiscal clarity, writes Luyanda Njilo, Global Markets Research Analyst at Nedbank Corporate and Investment Banking.
President Cyril Ramaphosa signed the National Health Insurance (NHI) Bill this week, a move that signalled the start of a campaign against the legislation that could end up in the Constitutional Court. But the pivotal debate remains: How will South Africa finance the hefty annual price tag of at least R200 billion for proposed universal healthcare.
The discourse on NHI also often overlooks a critical question: Does South Africa possess the necessary healthcare infrastructure required to provide universal care, and if not, what is the cost to develop it and, importantly, the source of funding? Common assumptions suggest that merging public and private sector healthcare infrastructure would suffice but reality paints a different picture. The World Health Organization recommends a standard of 5 hospital beds per 1 000 individuals; South Africa falls well short at 2,1 (4,8 beds per 1000 in the private sector, 1,8 in the public sector).
To meet this international standard, an additional 200 000 beds are necessary, supplementing the existing 127 000. Unfortunately, current trends offer little optimism. Despite a population surge exceeding 50% over 3 decades, the number of hospital beds has remained virtually the same, declining in the public sector and rising in the private sector. Yet, growth in the private sector has stalled over the last decade due to a stagnant medical aid membership, which has kept bed occupancy at just 66%. This imbalance underscores the challenges in fulfilling healthcare demands.
A scant 3% of the government’s health budget is spent on infrastructure, in contrast to the 6% of revenue that the private sector spends on maintenance alone
Compounding the bed scarcity, the NHI Bill stipulates that the NHI Fund – a government-managed monetary reserve for citizen healthcare services – will reimburse only facilities accredited by the Office of Health Standards Compliance. With most public hospitals being non-compliant, immediate, substantial investments would be imperative for refurbishment, in addition to the 200 000 new beds needed if NHI were implemented today. Clinics also reflect this grim scenario, with only half of them meeting the mark of adequacy.
A scant 3% of the government’s health budget is spent on infrastructure, in contrast to the 6% of revenue that the private sector spends on maintenance alone. On paper, South Africa is an attractive prospect for investors in healthcare infrastructure. Its rapidly growing population is also quickly urbanising, creating ideal conditions for good returns. Life expectancy has improved sharply in the last 20 years and continues to trend upwards, suggesting healthcare outcomes are expected to keep improving. Investors are also attracted by negative factors, including South Africa’s obesity rate of almost 30% of the population and the high rate of diabetes.
Given these dynamics, South Africa presents a promising business opportunity for investors interested in addressing the country's need for more hospital beds. Public–private partnerships – with private entities financing the development of hospitals and managing them, while the government contracts for their services – could yield lucrative returns and foster sustained private engagement to satisfy the escalating demand for healthcare.
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