What is the reason for this? There are several reasons for this, but the most obvious is that Covid caused a significant delay in elective surgery, which is where hospital groups make the majority of their money.
Last week, all three of South Africa’s (SA) hospital groups released reports, all of which showed slight gains. In some ways, now that the Covid crisis has subsided, it would be a good time to invest. Mediclinic, Life Healthcare, and Netcare are all excellent firms that are innovating in amazing ways and expanding outside of South Africa or forming international alliances.
The adoption of AI, the effort to make exceptional services cheaper by pooling resources, and cross-border research and development cooperation are all excellent examples of what SA’s hospital organisations are accomplishing. Everything is there, and everything is amazing.
But, with all due respect, it’s difficult to argue that they’re the types of investment prospects that would necessitate dosing investors with Xanax to calm their excitement.
Only Mediclinic is displaying share price growth over a three-year horizon of the three companies. Profit and turnover are increasing for the firms as a whole, but it’s been slow and steady. The margins aren’t particularly high, which is actually a relief for customers. They’re all as inexpensive as chips, which says a lot.
When you think about it, South Africa’s healthcare system is somewhat unique, with a private system grafted on top of a public one. This isn’t the first time this has happened, but it’s unusual for such a large difference to exist.
Best system
The dual nature of South Africa’s healthcare system has sparked heated debate about which system the country should embrace, with the government pushing strongly for a national health insurance system that would be virtually entirely run by the government, with a few exceptions. Obviously, they’d grab the entire sum. The government claims that the healthcare system in South Africa is unjust, uneven, and elitist. Around 71 percent of the population is served by the public sector, while around 27 percent is served by the commercial sector, which is mostly funded by individual contributions to medical aid systems or health insurance.
Almost the entire political and academic establishment supports a government-run NHI system. Nobody hates to say it because it sounds elitist, but I believe that establishing a completely state-controlled system would be a disaster. It would mean worse healthcare for the average person, worse healthcare for the poor, and, most crucially, it would undo decades of progress accomplished by the private healthcare industry.
What the government does not understand is that what people pay for private healthcare is their money. It’s their choice. They could use that money for something else. It’s not a subtraction from the State’s health care effort; it’s a relief to the state’s healthcare system because it spares the State from having to care for that 27% of the population.
Why not go 100% private?
Why not move in the opposite direction, in my opinion? Close the state sector totally and transition to a 100 percent private sector, gradually of course, while forcing the private sector to offer healthcare to everybody at varied rates: free for the extremely poor, subsidised by the healthcare taxes we already pay. The government’s role should be to supervise and adjudicate rather than to provide healthcare. For the simple fact that it isn’t very good at it. And that’s putting it mildly.
If you think this is an outlandish idea, it is not. Israel, for example, has a totally private healthcare system, which is funded by taxpayers and free at the point of use. The crucial difference is that you can choose your healthcare provider, which means you retain competition within the system.
People are often repelled by the idea of private healthcare because, from the outside, the mainly private US system seems dysfunctional and expensive, while public systems, like the National Health in the UK, seem cheap, popular and effective. The problem is that the US system has a trillion different interventions of different types with big restrictions on supply and huge subsidies on demand. The UK system seems fair and just and effective, except that when you look closer, simple procedures that would take weeks to get done in SA, take months or years in the UK. It’s crazy.
Obviously, this is a complicated subject, but if you need proof of the state’s dysfunctionality, just spend some time at one of SA’s state hospitals. If you’re unwell, don’t forget to bring your own linens because the hospital’s will almost certainly have been taken.
