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Viewing report
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South Africa Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Oct 2011, Pages: 105
BMI View: South Africa's timescale for enacting its National Health Insurance (NHI) scheme is practical and achievable, as are the country’s goals to improve governance, administration and funding. However, what is less welcome is the government's anti-commercial rhetoric and habit of politicising healthcare along racial lines. This will worry private healthcare providers as the government's plans to ease nonpublic healthcare prices – to move people off the state system and onto more affordable private care – could involve blanket price control measures that negatively affect the profitability of these businesses. Nevertheless, the NHI also presents huge opportunities for private health insurance providers willing to work with the government in multi-payer schemes.
Headline Expenditure Projections
- Pharmaceuticals: ZAR22.75bn (US$3.12bn) in 2010 to ZAR24.89bn (US$3. 68bn) in 2011; +9.4% in local currency and +17.9% in US dollar terms. Growth forecast down slightly from Q311 due to new macroeconomic forecasts.
- Healthcare: ZAR223.59bn (US$30.63bn) in 2010 to ZAR241.46bn (US$35.65bn) in 2011; +8.0% in local currency terms and +16.4% in US dollar terms. Historic data down slightly from Q311 due to new data.
- Medical devices: ZAR9.59bn (US$1.31bn) in 2010 to ZAR10.27bn (US$1.52bn) in 2011; +7.1% in local currency terms and +15.4% in US dollar terms. Forecast down significantly from Q311 due to new import data.
Business Environment Rating: In Q411, South Africa’s industry risk score increased to 53 (out of 100), up from 47 in Q311. This in turn has increased the market’s overall score from 54 to 56, but South Africa remains sixth of the 19 countries in the MEA region remaining above the regional average of 48.3. A high burden of disease is driving South Africa’s rewards score and the country’s relative stability compared with other states in the region gives it a favourable risk assessment.
Key Trends & Developments - South Africa's Health Minister, Aaron Motsoaledi, has announced his department's short- and long-term goals for revolutionising the country's healthcare service, choosing to first focus on the fundamentals of care administration, management and delivery. The long-term strategy is for the roll-out of the NHI scheme to take 14 years, with the first five years used to put the necessary administrative and regulatory building blocks in place.
- The Secretary-General of the ANC, Gwede Mantashe, has announced that the country's ruling party is looking into forming a state-owned pharmaceutical company to produce drugs to meet the country's surging ARV needs. BMI believes this idea to be ill-conceived, as not only would a new company be unlikely to lead to cheaper prices, but it would also take away one of the primary revenue sources from local drugmakers.
BMI Economic View: Given weak Q211 GDP data as well as various concerns regarding the global economic recovery, the author has revised down the forecasts for South African real GDP growth, to 3.3% in 2011 (from 3.5% previously) and 3.8% in 2012 (4.0% previously). The interest rate forecasts have also been adjusted: the author now see rates staying on hold through the first half of 2012, while previously we saw scope for a 50bps hike.
BMI Political View: Policy uncertainty is rising due to question marks over whether President Jacob Zuma will secure another term in office, as well as the growing influence of Julius Malema. The latter's calls for nationalisation of the mining sector are creating a sense of unease among investors, despite nationalisation being a highly unlikely scenario.
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