Country cannot afford NHI, Nedbank economist tells tax indaba

(iStock)
(iStock)

South Africa cannot afford to implement National Health Insurance, Nedbank economist Busisiwe Radebe told delegates at the 2019 Tax Indaba in Sandton on Monday. 

National Health Insurance, which government wants to have fully implemented by 2026, will see South Africans subscribe to a national health insurance fund in a bid to provide comprehensive healthcare services equitably at private and public healthcare facilities.

Radebe's remarks come in the wake of the tabling of the NHI Bill in Parliament in early August. According to the 2017 NHI White Paper, the policy will cost the state R256bn in the 2025/2026 financial year at 2010 prices.

Radebe told delegates at the indaba that the country's flagging economy was not in a position to afford the NHI, which will be rolled out in two phases over a nine-year period. 

She was speaking on the same day that Minister of Health Zweli Mkhize told a different conference in Cape Town it was a wrong to argue that South Africa could not afford NHI. 

According to a copy of his address, Mkhize said is a "fallacy to postulate that the NHI will bankrupt the country".

"The NHI Fund will be administered by qualified and competent professionals carefully selected and appropriately trained to run an efficient operatio," he told the annual Hospital Association of Southern Africa conference in Cape Town. 

"This will be an entity in terms of schedule 3 of the PFMA [Public Finance Management Act], which means unlike an entity like Eskom, it will not have the power to take risks and engage in raising debts and other speculative financial transactions. The entity will receive funds from the fiscus and apply the funds to the defined mandate." 

Low growth

South Africa has been experiencing low GDP growth rates for most of the past decade. In the first quarter of 2019, the economy contracted by an annualised 3.2%, the largest quarter-on-quarter drop in a decade. Stats SA is set to announce SA's GDP growth figures for the second quarter next week. The Reserve Bank projects GDP will increase by 0.6% in 2019.

"We can’t afford the NHI; we have no fiscal space for it," said Radebe during a panel discussion on the economy. She stressed that in her view the state must focus on fixing debt-laden power utility Eskom, and providing a conducive space for job creation, the biggest obstruction to economic growth in a country with a small tax base.

Speaking on the growth challenges faced by the country, Chris Axelson, National Treasury's chief director of economic tax analysis, said government should work with what it already has in order to energise the economy.

Axelson mentioned the release of broadband spectrum as a key factor that could kick-start growth, adding that we are "not in a great position at the moment". The release of spectrum, managed by the Independent Communications Authority of South Africa, is expected to speed up the deployment of fifth-generation mobile technologies and broaden internet access.

* Jan Cronje contributed to this report 

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