Myles Ritchie, a senior health advisor at Mott MacDonald working in South Africa to strengthen the healthcare system within the public sector, gives perspective into the health system and its inequalities in South Africa, says Sophia Kurz

South Africa’s healthcare system is separated into two distinct sectors – private and public. Both sectors, at their respective base, have the same components necessary in order to operate, including providers, facilities, devices, equipment, supplies, and medicines.

Healthcare in South Africa is under the jurisdiction of the Department of Health. In 2019, a survey conducted by Statistics South Africa (StatsSA) found that 71.5 per cent of South African households used public healthcare facilities whenever healthcare was required, while 27.1 per cent of South African households used private healthcare facilities.

Ritchie explains the breakdown of funding provided by the South African government to different federal branches and developments, in which 12.3 per cent of the budget is granted to healthcare (229.7bn Rand or £11.5bn).

The state of the health sector now

South Africa’s population is roughly 60m people. The public healthcare sector is used by around 42m South Africans, while 87m use the private sector.

The public health facilities, in terms of beds available, is around 93,000, with a majority of those beds belonging to public district hospitals. The remaining beds are divided between public psychiatric hospitals, public central hospitals, public tertiary hospitals, public regional hospitals, and public specialised care units.

In private health facilities, there are 35,000 beds available, with the majority of the beds belonging to private general hospitals (30,543 beds). The remainder of the beds belong to private psychiatric units, sub-acute care facilities, and private day hospitals.

Within the public health sector, responsible for the health of the majority of the population, there is 184bn rand of health expenditure, and 136bn rand in the private sector. The public health sector has approximately 14,000 GPs and 4,700 medical specialists, while the private health sector has approximately 13,000 GPs and 8,000 medical specialists. This can be ratioed by 1 doctor for every 2,457 persons (public sector) and 1 private doctor for every 429-591 persons.

Ritchie stresses the complete imbalance between the two sectors, and further outlines how the private sector “accounts for approximately 50 per cent of total health care spending” while only providing healthcare for the minority of the population.

Prevalent health concerns in South Africa

South Africa has what is described by Ritchie as “a quadruple burden of disease”. This burden consists of the HIV/AIDS/Tuberculosis (TB) epidemic, high maternal & child mortality rate, high levels of violence & injury, and the growing rate of NCD’s (non-communicable disease).

Ritchie further attributes these disease burdens to what he describes as “social detriments of health”. These detriments include unemployment, poor housing, inadequate water and sanitation, a suboptimal food environment – poor diet, alcohol or substance abuse – and low levels of social cohesion.

“This translates to an unaffordable and over-serviced private healthcare system and a public health system that’s really battling to provide services,” adds Ritchie.

Barriers and enablers for working in this market

At the moment, there is a policy uncertainty particularly concerning the private sector. The bill for the new National Health Insurance Fund proposes the creation of this fund as a means to drive South Africa on the path towards universal health coverage (UHC).

Ritchie adds that “it will have to be a single find and it will have to make provision for coverage across the country. Therefore contracting mechanisms and rates are going to be kept and definitely lowered in terms of current rates being offered by specialists in the private sector, so there’s a lot of uncertainty.”

To improve public medical coverage within the country, the Medical Schemes Amendment Bill was introduced and had goals to calculate premiums based on income level, widen prescribed minimum benefits and eliminate co-payments.

There was a “rather scathing and cutting” health market inquiry a few years ago, which exposed the issues in the private sector surrounding hyperinflation, high in-hospital claims, high utilisation and ICU admission rates, and a domination by three big hospital groups in South Africa. There were accusations made against the hospitals, including that of collusion, which has caused great uncertainty within the country.

Other barriers in South African healthcare include hyperinflation in health, rise in corruption and other factors affecting investors’ confidence, COVID-19 and related economic downturn, and issues doing business with certain medical facets (such as telemedicine and other digital healthcare).

Another barrier, apparently more specific to South Africa, is businesses redressing measures to retender their eligibility with winning government contracts. This is a barrier specifically to international firms wishing to enter the South African healthcare market. Ritchie suggests remedying this by partnering with local firms to try and build a base from there specifically.

On the opposite end of the spectrum, key enablers in South African healthcare have been a political priority to improve the quality of the health system and lifelong treatments for HIV (which makes for a high life expectancy). The growing reputation of South Africa as a powerhouse for life sciences and academia within Africa, as a convenient location for firms wishing to enter the African market, as well as regional firms looking to expand, makes it an attractive destination.

Opportunities in the health infrastructure

For those looking to break into South Africa’s healthcare infrastructure, there are several opportunities.Within the public sector, Ritchie suggests that the best options for breaking in would be to:

• Develop and lease (find land, build a facility, then enter into a long-term lease agreement with a private sector company of the health department)
• Develop, lease, and operate (essentially the same gist as solely developing and leasing, except you would be responsible for the maintenance and developments of the facility)
• Independent project evaluation services (these services can range from performing due diligence on projects, reviewing project designs and making sure they comply with standards and requirements, etc.)

Within the private sector, opportunities exist for new competitors who are able to visualise facilities that have the ability to treat both insured and uninsured patients within the same environment. Another option would be to develop small – midsized (10-30 bed) specialised health centers (medical and surgical), which Ritchie notes would appear attractive to insurers.

Opportunities in pharmaceuticals

Pharmaceuticals is an ever-expanding industry which has numerous career opportunities and is arguably the backbone of healthcare. Breaking into pharmaceuticals in South Africa has many benefits, especially if you’re looking to break into the African pharmaceutical market, since South Africa is the only country on the continent that meets the WHO standards to manufacture pharmaceutical products. Other benefits include overhauling of regulatory processes to be faster and more transparent, active pharmaceutical ingredients can be produced domestically, large-scale vaccine manufacturing is achievable, and local manufacturing capacity is possible (if enough capital is available and if the right partnerships are established).

Conclusion

South Africa is home to a unique health care system, which also makes for a great environment for business opportunity and expansion. The COVID-19 pandemic presented opportunities (especially with digital medicine and vaccine manufacturing /dispersal) within the healthcare infrastructure that local firms have the potential to add on to. With attractive investment opportunities the South African market has great potential to grow and expand, so South Africa may very well become a healthcare hub one day.