Reassurances On Funding For South African Health Scheme

by Lorys Charalambous, Tax-News.com, Cyprus

27 September 2011

The Deputy Director of General Public Finance in the National Treasury, Andrew Donaldson, has said that a tax to fund the South African government's national health insurance (NHI) scheme will not be introduced in the short-term.

Last month, the government announced the outline of broad policy proposals for the implementation of the NHI scheme in South Africa. While piloting of the scheme would commence in April 2012, it is seen as a 14-year project, the reported cost of which has been conservatively estimated at some ZAR125bn (USD15bn) in 2012, rising to ZAR214bn in 2020 and ZAR255bn in 2025.

Although the government will only know the extent of the funding required by NHI until after the pilot scheme has been initiated, the South African Finance Minister, Pravin Gordhan, has previously tried to reassure taxpayers that the NHI scheme would not cause any significant increase in taxation. He has said that finance could be found from various sources, including the issue of public debt, tax revenue, contributions from employers and partnerships with the private sector.

Speaking at the Hospital Association of South Africa's conference held in Cape Town recently, Donaldson has reiterated that “no decision had been taken on specific (NHI) funding arrangements,” and that it would be “difficult to raise additional taxes at this stage”.

He said discussion papers would be released early next year before any decision on healthcare financing arrangements, but that increasing expenditure on public healthcare from 4% to 6.2% of Gross Domestic Product, as estimated in the NHI green paper, “would place a substantial strain on the country's public finances”.

He added that difficult questions remain around what NHI included, what it should finance, who should be covered and on what terms, and importantly, the financing of the considerable hospital and clinic infrastructure required. He noted that "much of the success of the UK's National Health Service financing arrangements depended on the balance between private and public support for investment”.

Donaldson concluded that there was much scope for public private partnerships in the NHI scheme, especially in the construction, maintenance and equipping of facilities, but that “the complexity, cost and lengthy timelines need to be addressed, with revised contract terms of between 20 and 30 years."

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