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 The plan could tip the economy into recession

South Africa already has per capita healthcare expenditures that far exceed any other country on the continent 

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South Africa’s proposed National Health Insurance (NHI) scheme, aimed at curing a broken health system, is shaping up to be the most expensive government programme since the end of apartheid and could push Africa’s biggest economy into recession.     

Plans to finance NHI will be worked out over the next several months but one thing economists agree on is that tax payers will be hard squeezed to fund the ambitious programme that comes as jobs are being shed in a stagnant economy.     

“If it were to happen under current economic conditions, you would run the risk of tipping the economy into recession as you try to implement the programme,” said Kevin Lings, chief economist at Stanlib.     

The government estimates a fully implemented scheme will cost 255 billion rand ($36 billion) by 2025, but the figure could be much higher given the shortage of skilled staff, dysfunctional facilities and failing infrastructure.     

“The fiscal cost of the scheme is a major concern, especially since many investors doubt the sustainability of South Africa’s social spending regime,” said Anne Fruhauf, an Africa specialist for the political risk consultancy Eurasia Group.       

The NHI is supposed to fix healthcare for the country’s poor majority, who have little access to quality care despite South Africa having per capita health care expenditures that far exceed any other country on the continent.     

BUDGET BUSTER?     

When fully implemented, the spending projections for the scheme would be equal to about 25% of state spending, outpacing the largest government expenditure — education.     

All South Africans who can afford it will be required to pay NHI fees as well as employers, many of whom already pay for private health care for their workers.      

Funding will also come from the state budget, placing an additional burden on the country’s 6 million taxpayers who help pay for welfare programmes that benefit 12 million others.     

Funds will be collected by the South African Revenue Services and go into what will be called the NHI Fund, which will be the sole payer of claims and administered by the health minister and parliament.     

Economists expect money to be diverted from other areas of the budget into healthcare — slowing potential economic growth.

They also see the NHI fees as similar to a new tax that would take more money of paychecks.     

The government envisions people who pay for private healthcare moving into the public system but given the appalling conditions at many public hospitals, it seems likely that many workers will pay for two insurance plans and only use the private one.     

But tax subsidies for those who stay in private health care plans will be revoked while those who choose the public option will place even more strain on an already overburdened system.     

Since coming to power in 1994 after decades of white minority rule, the African National Congress has made strides in providing decent housing, education and healthcare to the poor.      

But it has done little to close one of the biggest gaps in the world between the haves and have-nots. NHI could reduce political pressure on the ANC who has faced violent protests for not doing enough to improve the plight of the underclass.     

But, the worries again arise about costs.     

“There are too many people dependent on too few. Essentially every taxpayer supports 2,8 other South Africans, if a person would have to pay more taxes to finance more people than they are currently paying for, that is not feasible when the dependency ratio is already so high,” said Mike Schussler of economists.co.za     

“There are lots of things that government wants to do that end up being a pipe dream and that’s what I think we have in a sense with the NHI.” - Reuters    

Comments

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Sun May 19 09:58:17 SAST 2013 ::

Aug 17, 2011

Mybra

Then the economy will be hospitalised since it has a medical aid cover.
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Aug 17, 2011

Mec

You have to laughaAnd cry. Foreign direct investment is collapsing. Mining and other jobs will be destroyed. This economy will seize up. All because we handed policy-making to this lot...

Signed
Concerned Taxpayer!!!!!


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Aug 17, 2011

usher

Is this the same Leratong Hospital where the infamous saucy incident took place? Great work Sowetan for keeping the story alive, lol!
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Aug 17, 2011

Jaquo

Again Government has undertaken the route of implementing yet another big project without proper consultation- why didnt they start this as a small pilot project sort of like a small parastatal insurance company then grow it into NHI over a number of years-now they want to take a whol big risk coz they under pressure to do it in 5 years or less when it has taken western countrys more than 50 years to build a national health scheme.........

This Goverment is just a bunch of Panzi's......thye want to nationalise already.....dont they learn what has happened to other countrys.....people get smart when this happens only those who are in such positions will benefit for a short period as well.......currently south africa is well off but if they cant utilise the current money and conditions then which time and conditions are they waiting for???? its like a man that earns R5000 and says if i can R10000 i will be able to do more....thats just being theattrical.....reality is if you give him R10000 he will still say only if he can get R15000- ad what am trying to say is if you cat do with what you have in the current condtions chances are that you will never do it no matter what the condition is
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Aug 17, 2011

Maroroza

Lord have mercy on us(tax payers) .these fat cats are sucking us dry left ryt and centre. YESSES
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Aug 17, 2011

Bolander

IF it works it will be wonderful and worth every cent, but most importantly how are they going to address the unacceptably low levels of service within the public healthcare system - surely, this must be their largest concern? No matter how much money is pumped into the system, if you have poorly trained doctors and nurses, etc - you might as well through the money into the sea ..
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Aug 17, 2011

Mec

@Bolander - That's exactly what is happening! Tax payers money (yes, yours and mine) will be thrown deep into the sea! Very deep...
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Aug 17, 2011

BELO

For this to work, you need an employement rate of 90% +.
Don't they realise that there will be more toi-toing from all union members to get a wage increase to accomodate this tax deduction.
Just think of the ripple effect.
Bigger salary expence for govenment as they are actualy the biggest employer
I wish these guys would think something through before they make these statements
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Aug 17, 2011

Warric

Nc nc nc nc,yet another flop from the not so clever ..........
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Aug 17, 2011

2Ligit

Then can we really blame people for embarking on national strike and destroying property for the sake of a large wage increase of 18%. The leaders have walked this path of vandalism under the name of terrorism before. They justified their cause for bombing targeted government buildings of the past regime as being right since the Mr nice guy approach did not work period. In any case What can you really achieve from a peaceful demonstration especially when the perpetrator is not in agony as you . It takes a few fires and looting of cities to get a wealthy political noble, to wake up at night in their sleeping gowns and attend to social problems with a high degree of commitment. Stick to peaceful protests and no politician will even realize that you are struggling to stay alive. By keeping critical protests peaceful you are only doing them a favor to spent your money without fear of any consequences. I would love to be in their place - cripple the country with erratic policies. Try one solution after another without success and still be able to keep my job.
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