The proposal for National Health Insurance (NHI) is without doubt the most significant development in South Africa's healthcare sector in 2010, according to analysts Frost & Sullivan.

The aim of the NHI is to create universal healthcare coverage for all the country's citizens. The government has stated that this would benefit everyone in the country by improving the public healthcare system and giving all citizens access to the level of care currently reserved for those able to afford private treatment.

However, the impact on the country's private healthcare industry promises to be immense.

Frost & Sullivan healthcare analyst Lizelle Wentzel said: "The mention of the NHI has led to uncertainty in the industry. A lack of transparency as to how the system will work has caused speculation and assumptions being made by various role players in order to forecast the impact of the changes on their businesses."

Significant effect of the NHI

Wentzel believes the NHI will have a significant effect on the fortunes of most players in the South African market, including hospital groups, medical schemes and medical device vendors.

However, it is difficult to forecast what the effects will be, as the structure of the NHI and the potential role of each of these players has not been clarified.

"Frost & Sullivan believes that the private hospital groups will be co-opted into the NHI in one way or another, which implies that they will see more patients through their doors," she said.

"However, we also expect the NHI to add further pressure on prices, so margins will be squeezed."

Local pharmaceuticals will benefit

Pharmaceutical companies, particularly local producers, will in all likelihood benefit from the proposed changes. This is because increased funding in the healthcare system will lead to greater uptake of drugs, particularly locally-produced generics.

"Medical aids are the most likely to be negatively affected," Wentzel adds. "There is already significant rationalisation amongst schemes and the NHI will certainly accelerate this."

Overall, Wentzel believes that the opportunities created by the NHI are likely to be in the fields of infrastructure improvement and human capital development. For instance, private players could play a role in upgrading hospitals and training nurses.

Public, private partnerships are key

In this scenario, public private partnerships (PPPs) are likely to become a key feature of the South African healthcare landscape. For instance, the government may become involved in supporting skills development, using the private sector as the base.

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