NHI an ‘unpalatable burden’ on South Africa

South Africa’s proposed National Health Insurance (NHI) “will be an unpalatable burden on the fiscus” and negatively impact the country’s balance sheet, which is already rapidly deteriorating. 

This is feedback from asset management firm Ashburton Investments in its SA Fixed Income Quarterly Insights for the third quarter of 2023. 

Ashburton expects emerging markets, including South African bonds and the local currency, to perform very well for the rest of 2023. 

However, the firm did list several domestic factors that keep it defensive towards South African bonds and watchful of its exposure to the country’s debt. 

Ashburton emphasised the shortfall in revenue collections from a sharp decrease in corporate income taxes, particularly from mining companies, as one of the major threats to South Africa’s balance sheet. 

Decreasing revenue has been coupled with increased spending, leading many companies and economists to warn of a looming fiscal crisis in South Africa. 

Another threat to the country’s balance sheet, which will compound its already poor fiscal position, is the proposed implementation of the NHI. 

“Intentions around launching an NHI that will be an unpalatable burden on the fiscus is an issue that poses risks to the sovereign balance sheet,” Ashburton said. 

The National Treasury will need an additional R295.93 billion to fund the implementation of the NHI, according to a report released by the Solidarity Research Institute (SRI).

South Africa’s National Assembly passed the NHI Bill earlier this year, but there have been few details on how the insurance scheme will be funded.

The report found that R295.93 billion could theoretically be generated by abolishing the medical tax credit (about R30 billion) and levying the following taxes: 

  • A 40% surcharge on income tax 
  • Increasing VAT from 15% to 22%
  • A payroll tax of 13.4%
  • Increasing corporate income tax from 27% to 45% 
  • A combination of these 

“We are talking about massive increases in taxation to fund this, which will crush South Africa’s economic outlook,” SRI head Connie Mulder said. “It is completely unaffordable and unnecessary.”

The NHI Bill proposes converting the country’s current two-tier system into a single system that should provide all South Africans access to either public or private healthcare. 

The NHI scheme will bear the costs and enter into contracts with hospitals and other role-players.


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