NHI Could Push South Africa into Recession

August 19 - South Africans could find themselves deep in another recession if the government goes through with its plans to implement the National Health Insurance scheme.

The scheme, according to Reuters, will be the most expensive programme introduced in South Africa since the end of apartheid in the 1990's.

An analyst with Stanlib, Kevin Lings, said: "If it were to happen under current economic conditions, you would run the risk of tipping the recession as you try to implement the programme."

And with the economy and employment levels not set to improve in the near future, it is difficult to imagine how the government hopes to implement such an ambitious plan without causing havoc.

By 2025, it could cost the government R225 billion to implement the scheme - although these numbers could climb much higher due to facilities that are not functional and a lack of skilled staff.

Another economic expert said: "The fiscal cost of the scheme is a major concern, especially since many investors doubt the sustainability of South Africa's social spending regime.

25% of State Spending

It is estimated that South Africa will spend 25% of its state spending - more than it spends on education - on the National Health Insurance scheme.

The objective of the NHI is to bring quality healthcare to South Africa's poor. Those citizens who can afford to, will pay for NHI fees and the average taxpayer, who is already burdened with taxes that need to be paid, will need to carry the financial burden.

The government plans to revoke tax subsidies for those people who opt to stay in private health care in a bid to make it a level playing field for all.

But there is a sense of pessimism about whether the feasibility of the programme. "There are too many people dependent on too few," said analyst, Mike Schussler. "Essentially every taxpayer supports 2.8 other South Africans, if a person would have to pay more taxes to finance more people than they are currently paying for, that is not feasible when the dependency ratio is already so high."