There is no doubt that South Africa’s healthcare industry is one of the most dynamic sectors in the world. Currently, the public sector provides health care for 80% of the population and accounts for approximately 48% of total health care spending. However, the private sector provides health care for 20% of the population and accounts for approximately 50% of total health care spending while the remaining 2% is provided by non-governmental organisations.
Of the private-sector spending, 81% is funded from private prepaid plans and about 14% from out-of-pocket payments.
Based on this observation, it is clear that the private healthcare sector in South Arica is truly one of the nation’s greatest assets and is gaining both political and economic relevance, as it is playing a pivotal role in assisting the government to fulfill its constitutional mandate of providing quality healthcare services to the South African citizen.
Moreover, profits in investments in South African healthcare are good, although seen mostly in the private sector with the power in private healthcare embedded in hospitals. Over the past 10 years, private hospitals have increased their prices at almost double the rate of consumer inflation. Experiencing exceeding profitability are the three big groups (Netcare, Life Healthcare, and Mediclinic) which earn significantly higher than their competitors. They collectively dominate about 80 percent of the private hospital market in South Africa.
Dominance of the “Big 3” hospital groups
Netcare Limited operates the largest private healthcare network in South Africa. The Life Healthcare Group Limited, with its Hospital, Occupational Health, Rehabilitation and Esidimeni divisions, is South Africa’s second largest private healthcare company; while Mediclinic Southern Africa, which is a division of Mediclinic International, ranks third, collectively the “Big 3.”
The other operators are made up of a grouping of independently-owned private hospital facilities the NHN, and other independent hospitals that are not part of the NHN. The fragmented nature of the remaining 30% of the market are controlled by independent operators. There is an opportunity to consolidate some of these independently held beds under one group. This would give our new group the same kind of competitive advantage that is enjoyed by the big 3.
Number of Private Hospital Beds in South Africa, by holding groups (2013–2016):
The surge of the private healthcare sector as we know it, is as a result of the direct correlation between its impressive growth, and the challenges faced by the public health sector in supplying quality services to an increasing demand by South African citizens.
However, such quality healthcare comes at a hefty price for the majority of the population. But as medical schemes introduce more affordable healthcare options and the quality of care provided by the public and private sectors widens, it is expected that more people will join medical schemes and/or access private healthcare.