Article
GNU needs to have a robust debate on NHI
JOHANNESBURG, SOUTH AFRICA
WHILE President Cyril Ramaphosa has signed the National Health Insurance (NHI) Act into law, none of its sections has been proclaimed to allow for further negotiations within the government of national unity (GNU) on the law’s most contentious elements.
Credit to the DA for pressuring Ramaphosa to postpone the implementation of a seriously flawed piece of legislation. Negotiations with the GNU on the NHI should now focus on the three most important issues: how the NHI will be financed; how the private healthcare sector can operate in parallel; and how the NHI will be implemented.
How the NHI will be financed
It will cost more than R1.3-trillion a year to provide every SA citizen with the same healthcare cover as in the private healthcare sector, according to Momentum Health Solutions. That is a staggering amount in a nation, with lacklustre economic growth, that is already spending beyond its means. Implementation of the NHI in its current form would have significant implications for the SA fiscus.
The budget deficit is expected to rise from 4.9% to 5% of GDP in 2024/25, according to finance minister Enoch Godongwana. The public debt situation is already dire, at 74% of GDP. Part of the problem, as Godongwana confirmed recently, is that SA’s economy is not growing quickly enough to make a dent in the debt problem.
Efficient Group chief economist Dawie Roodt says it is concerning that 22% of tax revenues go to debt service costs, according to Treasury figures. This is unsustainable for SA taxpayers in the long term.
During President Cyril Ramaphosa’s first term average annual economic growth was 0.5%. The Treasury has lowered its growth forecast to 1.1% this year from 1.3% last February, and it expects growth of 1.7% next year and in 2026. This growth rate is still far too low — Rand Merchant Bank chief economist Isaah Mhlanga says SA needs at least 4% annual economic growth to reduce the unemployment rate of 32%.
As a result of the dismal growth rate tax, revenues will remain suppressed. Stronger economic growth is critical for increased tax revenues, which could help in financing the NHI.
Raising taxes to finance the NHI needs to be carefully considered. I don’t believe it is feasible. The SA personal income tax rate is already high by international standards at 45%. Compare this to Botswana, where the personal income tax rate is 25%, and Mauritius, where it is 15%.
We should be aiming to set our personal income tax rate to match those of Mauritius and Botswana, to boost our economic growth rate. Raising taxes any further will hurt already weak economic growth.
Given the fiscal and growth challenges I have discussed above, how the NHI will be financed needs to be debated rigorously in the GNU, and adjustments made where necessary. The government is embarking on an expensive, complex programme. Many countries already have universal healthcare of various kinds and they face enormous challenges on finances and efficiencies.
A space for a competitive private healthcare sector
The DA should push vigorously for a stronger private healthcare sector in the GNU negotiations on the NHI. The NHI should be implemented in a way that enables a competitive private healthcare sector to continue to operate in SA. Competition helps drive efficiency in the market, suppresses prices and boosts innovation. In the process, jobs are created and government tax revenues improved.
The current version of NHI legislation severely constraints the private sector. Any health services already covered by NHI will not be offered in the private sector. With the NHI, the ANC wants to increase government control over private healthcare. The DA is ideologically opposed to state controls and wants thriving markets in SA. In the NHI negotiations, it should fight hard for its values if it wants to remain relevant in GNU governance.
How the NHI will be implemented
The ANC should understand that things cannot be what they were before May 29; it will have to compromise and allow for adjustments to public policy now that it is governing in a coalition government. The GNU should deliberate on how the NHI programme will be implemented in the upcoming years.
Unfortunately, the ANC government was well known for poor implementation. Its projects have tended to overrun, with costs skyrocketing beyond budget costs. This cannot be allowed to happen with the NHI, or any other future government programmes. The DA should insist on a clear plan for the implementation of the NHI, and ensure that the NHI has sustainable, reasonable financing. The GNU has been positive for SA’s markets. It’s time for sensible decision-making on public policy. The NHI can be the start.
The SA Private Practitioners Forum is challenging the constitutionality of the NHI Act in court. We cannot be sure what the outcome will be. Last July the Gauteng division of the high court in Pretoria ruled that the requirement in the NHI Art that medical doctors and health practitioners obtain a “certificate of need” before being permitted to practise in a particular area was unconstitutional. It was a good ruling by the court, and obviously a blow to the NHI. PM
This article was first published on Business Day. Buy Phumlani’s book Lessons from Past Heroes here, and subscribe to his YouTube channel here.
© PHUMLANI M. MAJOZI