As the government’s provision of public services has deteriorated over the years, private companies have stepped in to provide these services to South Africans – and have seen significant profits as a result.
Particularly in the education, healthcare and energy sectors, the quality of government services has steadily deteriorated.
This has created a gap for the private sector to step in and provide those services to South Africans who can afford them.
These private services come at a higher price tag, but for many, this has become a price they are willing to pay for the quality these services guarantee. These companies have profited handsomely.
Below is an overview of how some companies in the education, healthcare and energy sectors have been able to profit from the government’s failures.
According to the Centre for Development and Enterprise, South Africa is the biggest learning underperformer relative to GDP per capita among low and middle-income countries.
In 2019, the IMF said, “A South African learner can expect 9.3 years of basic education by the age of 18, but when adjusted for quality, this is equivalent to 5.1 years of learning.”
One particularly shocking statistic is that more than three-quarters of Grade 4 learners in the country cannot read for meaning.
An October report by the Office of the Auditor-General has also found that early childhood development infrastructure was inadequately maintained, with some sites posing health risks. The average pupil-to-teacher ratio was 40.
In one school, 215 pupils were enrolled across two classes, with some having to sit on the floor “as the furniture was not enough to accommodate all of them”, Bloomberg reported.
The failures of the public education system have created a space for private education companies like Curro, ADvTECH, and STADIO to fill the gap.
Curro was founded in 1998 and now has 78 campuses and 182 schools across Southern Africa.
Its latest results for the six months ended 30 June 2023 showed a 13% increase in profit for the period to R191 million.
Since listing on the JSE in 2011, Curro’s share price has grown by over 34% and is up 22.88% over the past year.
ADvTECH was founded two decades before Curro and is Africa’s leading private education provider.
Its businesses include 24 brands in total and 17 education brands, encompassing over 153 education, training and recruitment sites across Africa.
It operates well-known schooling brands, including Crawford International, Trinity House and Abbotts College.
Its latest results for the six months through June 2023 revealed a 25% increase in profit to R479.7 million.
ADvTECH listed on the JSE in 2001 with a share price of just over 31 cents. Since then, its share price has increased by 7,780.92% to around R25. Over the past year, the share price is up 34.46%.
STADIO is the newest competitor on the block, having launched in 2016. However, unlike the other two companies, its focus is mainly on higher education.
STADIO Holdings is an investment company in private higher education, with six institutions that collectively offer over 90 accredited programmes, from Higher Certificates to Masters Degrees and Doctorates.
Since listing on the JSE in 2017, the company’s share price has increased by 11% and is up almost 9% over the past year.
The Global Health Security Index ranks South Africa 56th out of 195 countries.
While South Africa has a better public healthcare industry than many other African countries, it still has a long way to go in competing with the private sector.
Many public hospitals and clinics in the country are understaffed and underfunded and have inadequate resources and infrastructure. This leads to lower quality healthcare.
In contrast, private healthcare companies in South Africa are booming as citizens who can afford to, opt for private healthcare.
Discovery Health Medical Scheme is the largest open medical scheme in South Africa, covering over 2.8 million beneficiaries as of 31 December 2022.
Discovery was founded in 1992 and has since grown to offer medical aid, a bank, insurance, and investments.
In its latest results for the year ended June 2023, the company made a profit of R5.32 billion.
It listed on the JSE in 2000 with a share price of around R9.50, which has since increased by 1,385.27% to around R140.
Netcare has followed a similar trajectory in South Africa after launching in 1996.
For the year ended 30 September 2023, the company made a profit of R1.34 billion.
Since listing on the JSE in 2000, its share price has grown by 1,810.96%.
Eskom’s failures over the past decade have been well-documented, as the state-owned power utility has failed to consistently meet the country’s demand for electricity for years.
2023 saw the worst year for load-shedding yet, with 335 days of load-shedding in the year, meaning South Africa experienced load-shedding for 82% of the year.
Eskom’s unreliability pushed many South Africans to seek alternative power solutions – and opened a gap for private companies to provide those solutions.
In particular, South Africa saw a solar boom in 2023 as solar panel installations reached record highs.
The country saw over 4,400 MW of rooftop solar installed outside of the government-procured solar in 2023. This is expected to increase by 420% by 2030.
Data from Eskom and Professor Anton Eberhard revealed that South African households and businesses had installed 4,412 MW of rooftop solar in the 12 months to June 2023, a 349% increase from March 2022.
The import of solar panels has also hit a new record, with R12 billion worth of panels imported by South Africans in 2023, adding 2,200 MW of capacity to the grid.
Research from RMB Morgan Stanley has shown that the private sector will effectively replace Eskom’s generation fleet in the next two years.
The fourfold increase in rooftop solar power generation capacity has already begun to impact Eskom’s revenue as fewer private sector clients rely on the utility for electricity.
The surge in the installation of solar panels on houses and business premises has cut Eskom’s sales by 2.3%, according to Public Enterprises Minister Pravin Gordhan.
This money is, therefore, being redirected from the public sector to the private sector.