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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
Commissioned by the ministry of Foreign Afairs
Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Report prepared for the Embassy of the Kingdom of the Netherlands in South Africa
mdash
October 2017
Contents
1 Overview of healthcare infrastructure in South Africa Page 4
2 Healthcare infrastructure trends plans and policies Page 8
3 Healthcare infrastructure plans and trends public sector Page 13
4 Healthcare infrastructure plans and trends private sector Page 25
5 Key considerations for foreign companies Page 28
6 Commercial opportunities Page 31
7 Key stakeholders in the health sector in South Africa Page 34
8 Conclusion Page 39
Annotations and References Page 40
Appendices Page 43
2
Abbreviations
B-BBEE Broad-Based Black Economic Empowerment
BIM Building Information Modelling
Capex Capital Expenditure
DOH Department of Health
EPC Engineering Procurement Contractors
HMI Health Market Inquiry
IDMS Infrastructure Delivery Management System
IUSS Infrastructure Unit Support System
KZN KwaZulu-Natal
LED lightning-emitting diode
MEC Member of the Executive Council
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NDOH National Department of Health
NHI National Health Insurance
NHN National Hospital Network
PHC Primary Health Care
PPD Paid patient days
PPP Private Public Partnership
R Rand
SIP Strategic Integrated Project
TB Tuberculosis
VDM Value Driven Maintenance
3
1 Overview of healthcare infrastructure in South Africa
South Africarsquos healthcare sector is highly polarised While 826 of the population relies on the public healthcare provision 174 of individuals living in South Africa belong to private medical schemes1 Yet expenditure in the public and private spheres is almost at 5050 parity2 resulting in a great mismatch in the quality of healthcare provision The National Household Survey 2016 highlights that users of private health tend to be more satisfied with private healthcare facilities than users of the public healthcare facilities3 The composition and state of the infrastructure in both sectors is set out in more detail in this report
11 Public Sector
The South African healthcare system is based on a referral system Primary healthcare (PHC) which includes clinics and ward based healthcare outreach teams are the first point of contact for patients The PHC clinics refer patients to the relevant specialist in a hospital in their area Public hospitals are classified into five categories
District hospitals operate 24 hours a day and serve a defined population within a given district These facilities have general practitioners and clinical nurse practitioners District hospitals are level 1 hospitals and may provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery and family physician District hospitals may provide training for healthcare professionals where practical They are owned and funded predominantly by provincial Departments of Health with some district hospitals under the jurisdiction of municipalities They are further classified into bull Small district hospitals 50 -150 beds bull Medium district hospitals 150 - 300
beds bull Large district hospitals 300 - 600 beds
Regional hospitals operate 24 hours a day and serve a defined regional population
within provincial boundaries based on referrals from district hospitals Regional hospitals are level 2 hospitals and must provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery trauma and emergency services short-term ventilation in an intensive care unit and services in at least one of the following specialities orthopaedic surgery psychiatry anaesthetics or diagnostic radiology Regional hospitals may provide training for healthcare professionals where practical Regional hospitals fall within the jurisdiction of provincial Departments of Health A regional hospital typically has between 200 and 800 beds
Tertiary hospitals receive referrals from regional hospitals and are not limited by provincial boundaries Tertiary hospitals are level 3 hospitals and provide supervised specialist and intensive care services Tertiary hospitals fall within the mandate of provincial Departments of Health These facilities may provide training for healthcare professionals A tertiary hospital typically has between 400 and 800 beds
Central hospitals provide tertiary and central referral services and may provide national referral services Central hospitals are level 4 hospitals and are not restricted by provincial boundaries
4
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Report prepared for the Embassy of the Kingdom of the Netherlands in South Africa
mdash
October 2017
Contents
1 Overview of healthcare infrastructure in South Africa Page 4
2 Healthcare infrastructure trends plans and policies Page 8
3 Healthcare infrastructure plans and trends public sector Page 13
4 Healthcare infrastructure plans and trends private sector Page 25
5 Key considerations for foreign companies Page 28
6 Commercial opportunities Page 31
7 Key stakeholders in the health sector in South Africa Page 34
8 Conclusion Page 39
Annotations and References Page 40
Appendices Page 43
2
Abbreviations
B-BBEE Broad-Based Black Economic Empowerment
BIM Building Information Modelling
Capex Capital Expenditure
DOH Department of Health
EPC Engineering Procurement Contractors
HMI Health Market Inquiry
IDMS Infrastructure Delivery Management System
IUSS Infrastructure Unit Support System
KZN KwaZulu-Natal
LED lightning-emitting diode
MEC Member of the Executive Council
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NDOH National Department of Health
NHI National Health Insurance
NHN National Hospital Network
PHC Primary Health Care
PPD Paid patient days
PPP Private Public Partnership
R Rand
SIP Strategic Integrated Project
TB Tuberculosis
VDM Value Driven Maintenance
3
1 Overview of healthcare infrastructure in South Africa
South Africarsquos healthcare sector is highly polarised While 826 of the population relies on the public healthcare provision 174 of individuals living in South Africa belong to private medical schemes1 Yet expenditure in the public and private spheres is almost at 5050 parity2 resulting in a great mismatch in the quality of healthcare provision The National Household Survey 2016 highlights that users of private health tend to be more satisfied with private healthcare facilities than users of the public healthcare facilities3 The composition and state of the infrastructure in both sectors is set out in more detail in this report
11 Public Sector
The South African healthcare system is based on a referral system Primary healthcare (PHC) which includes clinics and ward based healthcare outreach teams are the first point of contact for patients The PHC clinics refer patients to the relevant specialist in a hospital in their area Public hospitals are classified into five categories
District hospitals operate 24 hours a day and serve a defined population within a given district These facilities have general practitioners and clinical nurse practitioners District hospitals are level 1 hospitals and may provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery and family physician District hospitals may provide training for healthcare professionals where practical They are owned and funded predominantly by provincial Departments of Health with some district hospitals under the jurisdiction of municipalities They are further classified into bull Small district hospitals 50 -150 beds bull Medium district hospitals 150 - 300
beds bull Large district hospitals 300 - 600 beds
Regional hospitals operate 24 hours a day and serve a defined regional population
within provincial boundaries based on referrals from district hospitals Regional hospitals are level 2 hospitals and must provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery trauma and emergency services short-term ventilation in an intensive care unit and services in at least one of the following specialities orthopaedic surgery psychiatry anaesthetics or diagnostic radiology Regional hospitals may provide training for healthcare professionals where practical Regional hospitals fall within the jurisdiction of provincial Departments of Health A regional hospital typically has between 200 and 800 beds
Tertiary hospitals receive referrals from regional hospitals and are not limited by provincial boundaries Tertiary hospitals are level 3 hospitals and provide supervised specialist and intensive care services Tertiary hospitals fall within the mandate of provincial Departments of Health These facilities may provide training for healthcare professionals A tertiary hospital typically has between 400 and 800 beds
Central hospitals provide tertiary and central referral services and may provide national referral services Central hospitals are level 4 hospitals and are not restricted by provincial boundaries
4
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Contents
1 Overview of healthcare infrastructure in South Africa Page 4
2 Healthcare infrastructure trends plans and policies Page 8
3 Healthcare infrastructure plans and trends public sector Page 13
4 Healthcare infrastructure plans and trends private sector Page 25
5 Key considerations for foreign companies Page 28
6 Commercial opportunities Page 31
7 Key stakeholders in the health sector in South Africa Page 34
8 Conclusion Page 39
Annotations and References Page 40
Appendices Page 43
2
Abbreviations
B-BBEE Broad-Based Black Economic Empowerment
BIM Building Information Modelling
Capex Capital Expenditure
DOH Department of Health
EPC Engineering Procurement Contractors
HMI Health Market Inquiry
IDMS Infrastructure Delivery Management System
IUSS Infrastructure Unit Support System
KZN KwaZulu-Natal
LED lightning-emitting diode
MEC Member of the Executive Council
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NDOH National Department of Health
NHI National Health Insurance
NHN National Hospital Network
PHC Primary Health Care
PPD Paid patient days
PPP Private Public Partnership
R Rand
SIP Strategic Integrated Project
TB Tuberculosis
VDM Value Driven Maintenance
3
1 Overview of healthcare infrastructure in South Africa
South Africarsquos healthcare sector is highly polarised While 826 of the population relies on the public healthcare provision 174 of individuals living in South Africa belong to private medical schemes1 Yet expenditure in the public and private spheres is almost at 5050 parity2 resulting in a great mismatch in the quality of healthcare provision The National Household Survey 2016 highlights that users of private health tend to be more satisfied with private healthcare facilities than users of the public healthcare facilities3 The composition and state of the infrastructure in both sectors is set out in more detail in this report
11 Public Sector
The South African healthcare system is based on a referral system Primary healthcare (PHC) which includes clinics and ward based healthcare outreach teams are the first point of contact for patients The PHC clinics refer patients to the relevant specialist in a hospital in their area Public hospitals are classified into five categories
District hospitals operate 24 hours a day and serve a defined population within a given district These facilities have general practitioners and clinical nurse practitioners District hospitals are level 1 hospitals and may provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery and family physician District hospitals may provide training for healthcare professionals where practical They are owned and funded predominantly by provincial Departments of Health with some district hospitals under the jurisdiction of municipalities They are further classified into bull Small district hospitals 50 -150 beds bull Medium district hospitals 150 - 300
beds bull Large district hospitals 300 - 600 beds
Regional hospitals operate 24 hours a day and serve a defined regional population
within provincial boundaries based on referrals from district hospitals Regional hospitals are level 2 hospitals and must provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery trauma and emergency services short-term ventilation in an intensive care unit and services in at least one of the following specialities orthopaedic surgery psychiatry anaesthetics or diagnostic radiology Regional hospitals may provide training for healthcare professionals where practical Regional hospitals fall within the jurisdiction of provincial Departments of Health A regional hospital typically has between 200 and 800 beds
Tertiary hospitals receive referrals from regional hospitals and are not limited by provincial boundaries Tertiary hospitals are level 3 hospitals and provide supervised specialist and intensive care services Tertiary hospitals fall within the mandate of provincial Departments of Health These facilities may provide training for healthcare professionals A tertiary hospital typically has between 400 and 800 beds
Central hospitals provide tertiary and central referral services and may provide national referral services Central hospitals are level 4 hospitals and are not restricted by provincial boundaries
4
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Abbreviations
B-BBEE Broad-Based Black Economic Empowerment
BIM Building Information Modelling
Capex Capital Expenditure
DOH Department of Health
EPC Engineering Procurement Contractors
HMI Health Market Inquiry
IDMS Infrastructure Delivery Management System
IUSS Infrastructure Unit Support System
KZN KwaZulu-Natal
LED lightning-emitting diode
MEC Member of the Executive Council
MTEF Medium Term Expenditure Framework
MTSF Medium Term Strategic Framework
NDOH National Department of Health
NHI National Health Insurance
NHN National Hospital Network
PHC Primary Health Care
PPD Paid patient days
PPP Private Public Partnership
R Rand
SIP Strategic Integrated Project
TB Tuberculosis
VDM Value Driven Maintenance
3
1 Overview of healthcare infrastructure in South Africa
South Africarsquos healthcare sector is highly polarised While 826 of the population relies on the public healthcare provision 174 of individuals living in South Africa belong to private medical schemes1 Yet expenditure in the public and private spheres is almost at 5050 parity2 resulting in a great mismatch in the quality of healthcare provision The National Household Survey 2016 highlights that users of private health tend to be more satisfied with private healthcare facilities than users of the public healthcare facilities3 The composition and state of the infrastructure in both sectors is set out in more detail in this report
11 Public Sector
The South African healthcare system is based on a referral system Primary healthcare (PHC) which includes clinics and ward based healthcare outreach teams are the first point of contact for patients The PHC clinics refer patients to the relevant specialist in a hospital in their area Public hospitals are classified into five categories
District hospitals operate 24 hours a day and serve a defined population within a given district These facilities have general practitioners and clinical nurse practitioners District hospitals are level 1 hospitals and may provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery and family physician District hospitals may provide training for healthcare professionals where practical They are owned and funded predominantly by provincial Departments of Health with some district hospitals under the jurisdiction of municipalities They are further classified into bull Small district hospitals 50 -150 beds bull Medium district hospitals 150 - 300
beds bull Large district hospitals 300 - 600 beds
Regional hospitals operate 24 hours a day and serve a defined regional population
within provincial boundaries based on referrals from district hospitals Regional hospitals are level 2 hospitals and must provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery trauma and emergency services short-term ventilation in an intensive care unit and services in at least one of the following specialities orthopaedic surgery psychiatry anaesthetics or diagnostic radiology Regional hospitals may provide training for healthcare professionals where practical Regional hospitals fall within the jurisdiction of provincial Departments of Health A regional hospital typically has between 200 and 800 beds
Tertiary hospitals receive referrals from regional hospitals and are not limited by provincial boundaries Tertiary hospitals are level 3 hospitals and provide supervised specialist and intensive care services Tertiary hospitals fall within the mandate of provincial Departments of Health These facilities may provide training for healthcare professionals A tertiary hospital typically has between 400 and 800 beds
Central hospitals provide tertiary and central referral services and may provide national referral services Central hospitals are level 4 hospitals and are not restricted by provincial boundaries
4
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
1 Overview of healthcare infrastructure in South Africa
South Africarsquos healthcare sector is highly polarised While 826 of the population relies on the public healthcare provision 174 of individuals living in South Africa belong to private medical schemes1 Yet expenditure in the public and private spheres is almost at 5050 parity2 resulting in a great mismatch in the quality of healthcare provision The National Household Survey 2016 highlights that users of private health tend to be more satisfied with private healthcare facilities than users of the public healthcare facilities3 The composition and state of the infrastructure in both sectors is set out in more detail in this report
11 Public Sector
The South African healthcare system is based on a referral system Primary healthcare (PHC) which includes clinics and ward based healthcare outreach teams are the first point of contact for patients The PHC clinics refer patients to the relevant specialist in a hospital in their area Public hospitals are classified into five categories
District hospitals operate 24 hours a day and serve a defined population within a given district These facilities have general practitioners and clinical nurse practitioners District hospitals are level 1 hospitals and may provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery and family physician District hospitals may provide training for healthcare professionals where practical They are owned and funded predominantly by provincial Departments of Health with some district hospitals under the jurisdiction of municipalities They are further classified into bull Small district hospitals 50 -150 beds bull Medium district hospitals 150 - 300
beds bull Large district hospitals 300 - 600 beds
Regional hospitals operate 24 hours a day and serve a defined regional population
within provincial boundaries based on referrals from district hospitals Regional hospitals are level 2 hospitals and must provide the following specialist services paediatric obstetrics and gynaecology internal medicine general surgery trauma and emergency services short-term ventilation in an intensive care unit and services in at least one of the following specialities orthopaedic surgery psychiatry anaesthetics or diagnostic radiology Regional hospitals may provide training for healthcare professionals where practical Regional hospitals fall within the jurisdiction of provincial Departments of Health A regional hospital typically has between 200 and 800 beds
Tertiary hospitals receive referrals from regional hospitals and are not limited by provincial boundaries Tertiary hospitals are level 3 hospitals and provide supervised specialist and intensive care services Tertiary hospitals fall within the mandate of provincial Departments of Health These facilities may provide training for healthcare professionals A tertiary hospital typically has between 400 and 800 beds
Central hospitals provide tertiary and central referral services and may provide national referral services Central hospitals are level 4 hospitals and are not restricted by provincial boundaries
4
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
They provide highly specialised and costlyservices such as heart and lung transplantsbone marrow transplants liver transplantsor cochlear implants and require highlyskilled and scarce personnel Centralhospitals are academic hospitals and mustprovide training for healthcare professionalsas well as conduct research Furthermorethey are attached to a medical school asthey are the main teaching platform forhealthcare specialists Patients are referredto central hospitals if adequate level of carecannot be provided in a tertiary hospitalCentral hospitals are controlled by theNational Department of Health (NDOH) Acentral hospital has a maximum of 1200beds
focus on a specificareas such as tuberculosis rehabilitationchronic psychiatric and infectious disease
treatments Such hospitals have amaximum of 600 beds Specialisedhospitals can provide services of asecondary tertiary and quaternary levelhospital These facilities fall predominantlywithin the mandate of provincialDepartments of Health
Many facilities fail to meet the minimumnorms and standards as set by thegovernment The majority of public hospitalswere built decades ago with relatively littlerefurbishment done over time The age ofcentral academic hospitals is presented inTable 11 A number of these hospitals werebuilt in the 1900s with almost 50 notrenovated for at least 20 years Publichealth infrastructure thus remains in needof extensive refurbishment
111 Age and state of infrastructure
Specialised hospitals
Table 11 List of centralacademic hospitals
Central (academic) hospital
Mahatma Gandhi Memorial Hospital KwaZulu-Natal 1997 NA Inkosi Albert Luthuli Central Hospital KwaZulu-Natal 2002 NA Addington Hospital KwaZulu-Natal 1878 1967 King Edward VIII Hospital KwaZulu-Natal 1936 NA RK Khan Hospital KwaZulu-Natal 1969 NA Prince Mshiyeni Hospital KwaZulu-Natal 1987 NA Nelson Mandela Academic Hospital Eastern Cape 2004 NA Chris Hani Baragwanath Hospital Gauteng 1942 2010 Charlotte Maxeke Academic Hospital Gauteng 1978 2016 Dr George Mukhari Hospital Gauteng 1972 2014 Steve Biko Hospital Gauteng 2006 NA Groote Schuur Hospital Western Cape 1938 1984 Red Cross Childrens Hospital Western Cape 1956 2013
Province Year Opened
Year renovated
5
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Furthermore state clinics and hospitals tend to be concentrated in urban areas which requires rural populations to travel long distance to access care There remains a great need for appropriate infrastructure capacity to address the existing supply shortage and manage increasing demand going forward However as staff and operational expenses tend to consume the majority of the budget spending on capital and maintenance projects is constrained
The Government is forecast to spend R1875 billion (euro116 billion 4) ca 12 of its total budget on health provision in the financial year 201718 The total expenditure of the NDOH over the Medium Term Expenditure Framework (MTEF) an annual rolling three year expenditure plan is anticipated at R606 billion (euro376 billion) However despite such high projected spending the public health sector remains underfunded
Many of the challenges faced by the South African public healthcare sector are deeply rooted in its past Today the country continues to grapple with a shortage of resources including qualified medical staff and adequate infrastructure and equipment
12 Private Sector
The private healthcare industry in South Africa is highly regarded for the quality of care provided The sector is dominated by three large publicly listed companies which control 75 of the market These companies are Netcare Group (lsquoNetcarersquo) Life Healthcare Group (lsquoLife Healthcarersquo) and Mediclinic Southern Africa (lsquoMediclinicrsquo) The remainder of the market
while catering to a growing and ageing population5 and a high burden of disease
The National Infrastructure Plan announced in 2012 aims to address some of the aforementioned infrastructure challenges faced by the public sector The Plan comprises 18 Strategic Integrated Projects (SIPs) addressing the countryrsquos infrastructure needs ranging from energy transport education and healthcare to ICT connectivity SIP 12 focuses on extensive refurbishment of public health facilities including the refurbishment of hospitals revitalisation of nursing colleges and building or upgrading six major academic hospitals in preparation for the National Health Insurance (NHI) system
The bulk of the works are being financed by the state The six academic hospital refurbishment projects were to be procured and developed under a PPP framework The projects were however suspended soon after coming out to market (refer to section 31 on PPPs) New developments suggest that the initiative may pick up pace with the government reiterating its commitment to infrastructure plans and acknowledging the role and importance of the private sector
6
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
-
-
-
-
comprises a number of smaller upcoming groups 6 with the result that competition is relatively low The cost of private healthcare is estimated to be one of the highest in the world and became the subject of the Competition Commission inquiry that started in 2014 and is still ongoing
There are currently approximately 300 private hospitals and clinics in the country Expansion in private healthcare facilities has
SIP 6 Integrated municipal infrastructure project
SIP 7 Integrated urban space and public transport programme
SIP 11 Agri logistics and rural infrastructure
been constrained by several factors such as the uncertainty regarding the outcomes of the Competition Commission enquiry The government has also reduced the number of operating licences being issued which affected the growth of the larger operators While the smaller independent prospective operators on the other hand have struggled with access to capital to fund infrastructure projects
SIP 12 Revitalisation of hospitals and other health facilities
SIP 13 National schools building programme
SIP 14 Higher education infrastructure
SIP 15 Expanding access to communication technology
SIP 16 SKA amp MeerKat
SIP 9 Green Energy in support of the South African economy
SIP 10 Electricity generation to support socio economic development
SIP 12 Electricity transmission and distribution for all
SIP 1 Unlocking the Northern mineral belt with Waterberg as the catalyst
SIP 2 Durban Free Statendash Gauteng logistics and industrial corridor
SIP 3 South Eastern node amp corridor development
SIP 4 Unlocking the economic opportunities in North West Province
SIP 5 Saldanha Northern Cape
SIP 17 Regional Integration for African cooperation and development
SIP 18Water and Sanitation Infrastructure Master Plan
Figure 11 Overview of the National Infrastructure Plan
development corridor
7
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
2 Healthcare infrastructure trends plans and policies
Public health infrastructure has been undergoing a systematic albeit slow transformation driven largely by the goals set out in the National Development Plan 2030 In contrast the private sector has seen no new regulations being introduced in about a decade that would alter the market dynamics This stagnation is primarily the result of governmentrsquos focus on the design and legislating of the National Health Insurance With NHI finally being gazetted and the Competition Commissionrsquos findings due by the end of the year change is expected with potentially far reaching implications for the shape and state of both the public and private healthcare facilities The following sections address some of the key trends and regulatory initiatives
21 National Health Insurance
The NHI policy gazetted on 28 June 2017 aims to provide quality healthcare to all citizens and long-term residents in the country regardless of their financial status
While the theoretical merits of NHI cannot be disputed the financing of NHI has been a topic of national debate The proposal is for the scheme to be financed through general taxation which will necessitate significant structural reforms involving higher taxation7
The white paper on NHI has also become a focal point in the national debate around the quality of and access to the public healthcare NHI entails far reaching operational reforms designed
bull To improve service delivery incorporating improvements and expansion of the facilities
bull To even access to healthcare in rural and urban areas and
bull To effectively address the countryrsquos considerable burden of disease
NHI is expected to result in a shift in focus towards health promotion and disease prevention This implies that PHC provision will become a focus in lieu of more costly
reactive treatment Currently great emphasis is being placed on improving PHC facilities to meet the required minimum standards for the NHI Fund accreditation Furthermore NHI dictates that PHC centres be located within specific radius of human settlements This requires that additional facilities be built in order to reduce distance to healthcare for rural populations in particular
This approach to PHC provision should be beneficial to the public given that PHC clinics remain the first point of contact for most South Africans In 2016 643 of patients reported to first access public PHC clinics followed by private doctors (238) and public hospitals (71)8
NHI is currently being rolled out in 10 pilot districts The results of these pilots will inform the debate around the ability of provincial and district health authorities to deliver the significant service improvements associated with NHI
8
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
211 Ideal Clinic framework
PHC clinics will have to meet the minimum quality standards to be accredited for NHI These standards are outlined in the Ideal Clinic framework which was launched in July 2013
To date the Ideal Clinic programme has assessed all PHC facilities in the country Initially none of the governmentrsquos 3477 clinics were compliant with the Ideal Clinic standards However within the first year more than 190 have reached ideal levels of functioning with 106 of these facilities located inside NHI pilot districts By 201516 322 facilities qualified as Ideal Clinics with the number increasing to an estimated 750 in 201617 The NDOHrsquos plan is for 1000 clinics in total to qualify as Ideal Clinics by the end of 201718 1500 by the end of 201819 and 2823 by the end of 2019209
212 Impact on the private sector
In the white paper on NHI the government indicated its intention to involve the private sector in the administration and provision of public healthcare in the future
bull Administration there is expectation particularly amongst large administrators that existing private sector administrators may be chosen to manage the entire NHI Fund This expectation was created by the need to draw upon ldquoexisting expertise in the area of administration and management of insurance fundsrdquo expressed in the white paper on NHI
bull Provision it is anticipated that private sector operators will receive payments from the NHI Fund to provide publicly funded healthcare
However at this stage it remains uncertain how the government intends to contract
Figure 21 National Health Insurance - anticipated impact
National Health Insurance
Other facilities
Academic hospitals
Training facilities PHC facilities
Quality Quantity
9
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
with the private sector and what types of services the government sees as priorities This uncertainty has been one of the main reasons behind a relative lack of activity in the private health infrastructure market
It is also anticipated that the populationrsquos ability to afford private medical schemes will decrease as mandatory NHI contributions through payroll tax are introduced10 This may potentially result in a
213Training facilities for medical staff
The expansion of access to healthcare envisioned by NHI will require significant increases in the number of healthcare professionals in the country To date smaller initiatives have been put forward such as easing the licensing process for foreign-trained doctors working in South Africa However given the scale of the shortage of medical staff the country will need to increase the number of domestic professionals it trains
The training of medical staff falls within the mandate of the NDOH Central hospitals which are currently run by provincial Departments of Health are one of the key platforms for the training of healthcare professionals11 There is an expectation that the following initiatives will be prioritised
bull Refurbishment of existing academic hospitals
bull Refurbishment of other public training facilities and
bull Development of new infrastructure to facilitate training
The NHI envisages that the NDOH will assume control of tertiary care facilities
decrease in demand for private healthcare provision once NHI is fully implemented
It is likely that the private sector will need to reorganise significantly to reduce its emphasis on inpatient treatment in favour of PHC provision through NHI Moreover it is expected that the focus will be on low cost PHC facilities as the NHI rates are anticipated to be much lower than those currently paid by medical schemes
This is an unpopular decision with many provincial health departments though which may face significant resistance
Another possibility is that restrictions on training doctors nurses and specialists currently imposed on the private sector will be lifted Some of the large private healthcare groups including Life Healthcare have expressed interest in training medical staff12 This might require developing new infrastructure as currently private hospital groups have limited nurse training facilities only
10
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
22 Health Market Inquiry
As mentioned in section 12 the Competition Commission has launched the Health Market Inquiry (HMI) to investigate the root causes of the high costs of healthcare provision in the private sector The investigation intends to provide transparency into the system and the incentives which exist in the private healthcare sector as a whole - and the private hospital market specifically The inquiry started in January 2014 and took submissions from the sector in 2015 and again in 2016 The findings of the inquiry are intended to be released in Q4 2017
The Competition Commission has reasons to believe that there are features of the market that prevent distort or restrict competition The initial hypothesis was that there was an excessive concentration in the health system with three large private healthcare providers having 75 of the market and three medical scheme administrators claiming around 90 of the market
However public submissions have pointed to a different challenge ie ineffective and inadequate regulation As such it is anticipated that the HMI will trigger regulatory reforms which will be aligned with NHI and other global trends For instance at present tariffs are negotiated individually between healthcare providers and medical schemes This creates enormous complications and heavily favours the larger players It is expected that a national tariff list will be introduced to level the playing field and reduce tariffs across the board
The fee-for-service payment system is another area that currently encourages providers to produce volume rather than quality and increase costs It also prevents cooperation between providers It is anticipated that this system will be replaced with a range of new contracting methods where providers are paid based on the value they add For instance should payments for treatment be set per population rather than individual procedures it may be more profitable for private healthcare providers to focus on disease prevention to reduce the cost of treatment otherwise borne by providers
In summary with regulations in the health sector rapidly being aligned with the needs of NHI and the anticipated results of the HMI private sector players have already begun to position themselves to adapt to and take advantage of the expected changes It is anticipated that the three groups that currently dominate the private healthcare market will potentially not increase the numbers of hospital facilities they own but rather focus on developing clinics and innovative home-care services
Furthermore it is also expected that smaller groups andor outside investors will enter the market by developing new facilities in areas that the dominant players do not cover This would create more competition in the sector and increase coverage to unreached areas
11
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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This is a publication of
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Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
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This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
23 Energy and water environmental and cost implications
The primary source of electricity in South Africa is from the national grid which is owned and operated by Eskom the national electricity producer The majority of Eskomrsquos electricity is generated from coal-fired power plants which is increasingly becoming a subject of national debate due to the adverse environmental impact of fossil fuel combustion Additionally a drive to reduce reliance on the national grid has been triggered by concerns over the security of supply and affordability of electricity distributed by Eskom A trend is therefore fast developing amongst public and private institutions alike to employ alternative power generation solutions such as photovoltaic panels Given the countryrsquos conducive climate solar energy has gained a particular appeal despite relatively high capital costs of installing such technologies Currently one of two health PPP projects under procurement is the installation of tri-generation plants in Chris Hani Baragwanath Hospital in Gauteng
The utilisation of water in healthcare facilities is an area that also needs improving in order to reduce water wastage To this end there are initiatives to implement solutions to reduce
consumption of municipal water Such solutions could potentially include extraction of borehole water andor identification and implementation of water consumption optimisation projects
Netcare for instance recently undertook a water extraction feasibility study as well as training of facility managers in identifying and implementing opportunities for optimisation of water consumption
In the public sector the Western Cape DOH has committed to implementing green strategies across healthcare facilities Their current approach called the ldquo5Lrdquo strategy focusses on all areas impacting the environment with specific emphasis on water and energy Such initiatives are likely to become more common over time as limited water resources increasingly become a concern for the country
12
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
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Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
3 Healthcare infrastructure plans and trends public sector
As outlined in the previous sections the state of public health facilities remains poor and therefore needs a significant amount of intervention to ensure access to quality healthcare for all This requires the government not only to develop policies but also to implement the various projects that have been identified in the Medium Term Strategic Framework (MTSF) and other initiatives such as SIP 12 The following sections set out the prevailing trends in the public health infrastructure sector and plans of the National and Provincial Departments of Health
31 Private Public Partnerships
PPPs in South Africa gained momentum in the early 2000s with 28 projects closed in the first decade However since 2010 the number of PPP transactions has decreased dramatically with only 3 projects reaching financial close The total number of closed PPP projects in the health sector to date is 8 with the last one reaching financial close in May 2007 Refer to Appendix 2 for a full list of closed PPPs
Since 201112 the value of PPP transactions across all sectors including health decreased from an estimated R107 billion (euro663 million) to R48 billion (euro298 million) in 201617 This was reported to be mainly a result of delays and cancelled projects in the health and security sectors driven by concerns over affordability of such projects However going forward the government anticipates that the value of PPP projects will gradually increase to an estimated R59
billion (euro366 million) by 201920 This is expected to be facilitated by improvements in the PPP implementation processes The National Treasury is currently considering ways to reduce the time it takes to plan projects as well as streamlining the implementation of such partnerships The National Treasury has also teamed up with both local and international development finance institutions to explore alternative financing mechanisms while diversifying sources of funding to encourage private sector participation This is expected to increase the pool of funds available and help decrease project costs13
In the 2011 State of the Nation address the President prioritised the PPP Health Flagship Programme This programme comprised the development or redevelopment of six central academic hospitals as presented in Table 31
Table 31 PPP Health Flagship Programme list of centralacademic hospitals
Name of hospital Region Type of project Chris Hani Baragwanath Academic Hospital Gauteng Revitalisation project Dr George Mukhari Academic Hospital Gauteng Revitalisation project Limpopo Academic Hospital Limpopo New hospital King Edward VIII Hospital KZN Revitalisation project Nelson Mandela Academic Hospital Eastern Cape Revitalisation project Nelspruit Academic Hospital Mpumalanga New hospital
13
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Of the six projects only four were released to market and transaction advisors procured The entire programme was however subsequently suspended One of the key reasons for the suspension of the programme was the perception that PPPs did not offer value for money but benefited the private sector instead This resulted in the government having to reconsider the way PPP transactions had been structured
The NDOH is anticipated to release these projects back into the market The following four of the six hospitals have been prioritised and should return to market over the MTEF The combined capital value for the four projects is R15 billion
bull Limpopo Academic Hospital
bull Dr George Mukhari Academic Hospital
bull Nelson Mandela Academic Hospital and
bull King Edward VII Academic Hospital
Out of the above four hospitals the Limpopo Academic Hospital project has been the furthest advanced
Lower tier regional and district hospitals
Table 32 Pipeline of PPP projects under review
may also be considered by the relevant authorities for procurement under the PPP framework These facilities are also in a dire need of refurbishment of physical infrastructure and related services such as facilities management The implementation of PPPs would be subject to affordability and value for money criteria amongst others However there is currently no indication of such transactions being actively pursued
At present there are only two health PPP projects confirmed as under procurement as presented in Table 32 These are
bull The installation of tri-generation14 plants at Chris Hani Baragwanath Hospital in Gauteng to reduce dependence on the national grid This is in line with a general trend observed nationwide and
bull The refurbishment staffing and equipping of renal dialysis units in three hospitals in the Northern Cape province
There are more opportunities for such projects to be rolled out in other public hospitals and facilities
Project Name
Implementing Agent
Capex Project Description Current Status
Chris Hani Baragwanath Hospital
Gauteng Department of Infrastructure Development
NA Installation of tri-generation plants to reduce dependence on the national grid
Procurement
Northern Cape Renal Dialysis
Northern Cape DOH
NA Refurbishment staffing and equipping hospitals in Kimberley Upington and Springbok with renal dialysis units
Procurement
Source National Treasury Full Budget Review 20172018
14
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Table 33 Major infrastructure projects under way
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description Current Status
Health Facility Revitalisation Grant15
Provincial departments
178 Construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
National Health Insurance Indirect Grant
NDOH 30 Accelerate construction maintenance upgrading and rehabilitation of new and existing infrastructure
Work in progress
Limpopo Siloam Hospital
NDOH 16 Replace hospital Under construction
Dr Pixley ka Seme Hospital
KwaZulu-Natal DOH
27 Replace hospital Under construction
Ngwelezane Hospital and Lower Umfolozi War Memorial Hospital Complex
KwaZulu-Natal DOH
10 Construct hospital complex Under construction
King George V KwaZulu-Natal DOH
12 Upgrade and add to existing hospital
Under construction
Boitumelo Hospital
Free State DOH
06 Revitalise existing hospital Practical completion
Chris Hani Baragwanath
Gauteng DOH 08 Construct pharmacy x-ray and outpatient departments
Completed
Rob Ferreira Hospital
Mpumalanga DOH
15 Upgrade and additions of the existing hospitals
Under construction
Cecilia Makiwane Hospital
Eastern Cape DOH
13 Construct main hospital (phase 4)
Under construction
Bophelong Hospital
North West DOH
11 Construct new hospital Under construction
St Elizabeths Hospital
Eastern Cape DOH
07 Upgrade existing facility Under construction
Source National Treasury Full Budget Review 20172018
15
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
32 Other infrastructure plans
The national government has budgeted approximately R606 billion for health provision over the MTEF Out of this budget R23 billion has been allocated to lsquobuilding and other fixed fixturersquo and R126 billion to lsquomachinery and equipmentrsquo The budgeted expenditure on infrastructure including
equipment is set out in more detail in Table 33 which indicates major infrastructure projects under way (note that the project costs presented below are not limited to the MTEF therefore the total amount exceeds the R23 billion in the budget allocated to infrastructure)
Table 34 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
In addition to the abovementioned projects projects are expected to be financed on that are at various stages of balance sheet with the procurement of implementation the National Treasury has construction companies and medical identified the following major infrastructure equipment providers projects over the MTEF (Table 34) These
16
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
118 projects identified The fiveects in monetary terms are set35
33 Provincial Departments of Health
Annual Performance Plans (APP) provide detail of key priorities and projects to be undertaken towards achieving the MTSF The plans include expected capital costs of individual projects The most recent 201718 APPs cover projects that are planned for the financial years 201718 to 201920 The projects included in the provincial
departmentsrsquo APPs include new and replacement assets upgrades and additions rehabilitation renovations and refurbishments and non-Infrastructure The total value of planned spending on capital projects by each of the five provinces under review is presented in Graph 32
Graph 31 Provincial Departments of Health Planned capital projects
(Rm)
1 800
1 600
1 400
1 200
1 000
800
600
400
200
-KZN Western Cape Limpopo Gauteng Eastern Cape
201718 201819 201920
331 Gauteng DOH
The total combined budget of the Gauteng DOH for infrastructure development and refurbishment over the MTEF is R432 billion with largest proj out in Table
Gauteng
17
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
In addition to the provincial facilities indicated above the City of Johannesburg proposed the following health infrastructure plans over the fiscal year 201718
bull R222 million for the Ebony Park Clinic renewal
bull R222 million for New Florida Clinic
bull R30 million for the procurement of Health Information System to improve health services and
bull R1 million to begin work on the new Naledi Clinic (R31 million allocated over three years)
Table 35 List of top 5 projects based on budget allocated Gauteng
Name of Hospital
Project Description
Project Status (IDSM)16 MTEF Capex (Rrsquom)
Lillian Ngoyi Hospital
Construct new district hospital adjacent to existing community health centre
Project status detailed design (February 2017) Construction was expected to start in February 2017 Completion expected in February 2020
1102
Johannesburg FPS Mortuary
Construct new mortuary
Project status tender was awarded prior to February 2016 Completion expected in October 2019
165
Hillbrow District Hospital
Convert community health centre into district hospital
Project status design (February 2017) Construction was expected to start in December 2017 Completion expected in December 2020
150
Discoverers Community Health Centre
Convert community health centre into district hospital
Project status detailed design (February 2017) Construction was expected to start in June 2017 Completion expected in July 2020
120
Daveyton Hospital
New Hospital
Project status design development (February 2017) Construction was expected to start in April 2017 Completion expected in March 2020
114
Source Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year
18
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
332 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-Natal DOH for infrastructure development and refurbishment over the MTEF is R115 billion with 113 projects identified Five largest project in monetary terms out in Table 36
are set
KwaZulu-Natal
Table 36 List of top 5 projects based on budget allocated KwaZulu-Natal
Name of Hospital
Name of Project Project Status (IDMS) Capex (Rrsquom)
Ngwelezane Hospital
Develop new 8-theatre block new entrance parking and upgrade of sewerwater services
Project status Infrastructure Planning (Stage 1) Project completion appears to be beyond the current MTEF
400
Prince Mshiyeni Memorial Hospital
Upgrade fire protection system
Project status Package Definition (Stage 4) Project completion appears to be beyond the current MTEF
140
Umphumulo Hospital
Develop new core block
Project status Package Preparation (Stage 3) Project completion appears to be beyond the current MTEF
120
King Edward VIII Hospital
Storm water unblocking and nursery upgrade
Storm water unblocking project status Under Construction (Stage 7) Completion date not stated Upgrading nursery project status Design Development (Stage 5) Completion date not stated
111
Osindisweni Hospital
Repairs and renovations to TB ward
Project status Design Development (Stage 5) Completion date not stated 100
Source Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920
19
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
333 Western Cape DOH
The total combined budget of the Western Cape DOH for infrastructure development and refurbishment over the MTEF is R197 billion with 233 projects identified The five largest projects in monetary terms are set out in Table 37 In terms of strategic direction Western Cape DOHrsquos priority is the maintenance of existing health infrastructure The province is currently
considering the application of open source maintenance management systems for the maintenance of healthcare facilities and medical equipment (Pragma is currently employed in 6 facilities as the maintenance management platform)
It is interesting to note that the Western Cape provincial government has adopted an alternative approach to NHI using their autonomous provincial authority The approach was called Universal Healthcare Access which focused on curative and preventative strategies with 95 of cases seen first at PHC clinics This approach reduced the number of patients treated in hospitals and hence the overall cost to the province
Western Cape
Table 37 List of top 5 projects based on budget allocated Western Cape
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Regional Hospital
Construction of a new hospital
Project status infrastructure planning (Stage1) Start date expected in August 2018 with construction potentially starting in 202122 and planned completion in March 2026
2400
Observatory Forensic Pathology Laboratory
Replacement of forensic pathology laboratory and Health Technology
Construction budget R275 million Health technology budget R45 million Project status production information (Stage 6A) Tender for the construction contractors issued in November 2016 Completion expected in November 2020 Health technology expected to be implemented in May 2019 - May 2021
320
20
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Name of Hospital
Nature of Project Project Status (IDMS) Capex (Rrsquom)
Tygerberg Hospital
Health Technology refurbishment
Non-infrastructure health technology refurbishment project Commenced in October 2016 implemented in stages with scheduled for completion in March 2030
300
Groote Schuur Hospital
A number of smaller upgrade projects
Emergency Centre upgrade project status Design Development (Stage 5) Project commenced in July 2010 with an expected completion in June 2022 (budget R127 million) Ventilation and AC refurbishment project Infrastructure Planning (Stage 1) Project to commence in April 2018 with schedule completion March 2023 Outpatient department refurbishment project status Infrastructure Planning (Stage 1) Project to commence in December 2018 with schedule completion November 2021
237
Bloekombos Community Day Centre
New community day centre
Project status Preparation and Briefing (Stage 3) Project commenced in May 2017 with an expected completion in April 2022
100
Source Western Cape Department of Health Annual Performance Plan 2017 - 2018
334 Eastern Cape DOH
The total budget of the Eastern Cape DOH for capital projects over the MTEF is R454 billion set out in detail in Table 38 A breakdown of the specific projects planned has not been provided in the provincial departmentrsquos APP
Eastern Cape
21
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
r health infrastructure developmentbishment over the MTEF is R125th 265 projects identified Five ofst project in monetary terms areTable 39
Table 38 Planned infrastructure spending Eastern Cape DOH
Expenditure Type 20172018 (Rrsquom)
20182019 (Rrsquom)
20192020 (Rrsquom)
Total (Rrsquom)
Maintenance and Repairs 436 497 473 1405
Upgrades and Additions 122 181 229 531
Refurbishment and Rehabilitation 335 326 485 1146
New Infrastructure Assets 552 501 401 1454
Total 1445 1506 1587 4537
Source Eastern Cape Department of Health Annual Performance Plan 20172018
335 Limpopo DOH
The total combined budget of the Limpopo DOH fo and refur billion wi the large set out in
Limpopo
Table 39 List of top 5 projects based on budget allocated Limpopo
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Musina Hospital
Replacement of hospital on a new site malaria centre emergency services mother lodge nursing education institute equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920
148
22
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
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copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
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Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Name of Hospital
Name of Project Project Status (IDMS) MTEF Capex (Rrsquom)
Dr MMM Nursing School
Replacement of the nursing school at the Thabamoopo Hospital site
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
77
FH Odendaal Hospital
Upgrade health support maternity complex reorganisation of casualty and out-patient department
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
60
Sekororo Hospital
Upgrade maternity complex and medical gas plant room
Project anticipated to start in 201718 Expenditure projected over 201718 and 201819 suggesting scheduled completion in 201819
53
Mahale Clinic
Replacement of existing clinic on the same site including furniture amp equipment
Project anticipated to start in 201718 Expenditure projected over 201718 201819 and 201920 40
Source Limpopo Department of Health Annual Performance Plan 201718
34 Medical equipment
A large percentage of medical equipment is currently imported from abroad The NDOH expressed concern over the lack of domestic manufacturing opportunities Therefore it was suggested that companies explore opportunities to manufacture medical equipment in South Africa which would be beneficial for the country and add value to the supply chain Furthermore the supply of medical equipment in particular oncology equipment is monopolised in the country The NDOH is of a view that this is an area where increased competition would benefit the country
23
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
35 ICT infrastructure
The modernisation of operational systems within the various hospitals and other public health facilities has been acknowledged as vital for the efficient management of patients and the facilities themselves While ICT infrastructure is outside the scope of this study it is an area that is worth exploring by foreign companies with capability in electronic management systems The implementation of the following systems amongst others has been identified as crucial to improve the operational management of public health facilities and patient records going forward
bull Electronic patient records established on a national database
bull Inventory management for better stock control
bull Automated ward planning tools for effective management of nursing resources
Dutch companies interested in commercial opportunities in the health ICT infrastructure should conduct further research and analysis of the South African market
24
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
4 Healthcare infrastructure plans and trends private sector
As mentioned in section 12 the legislative framework governing private healthcare provision has remained relatively unchanged in the last decade or so
Private healthcare provision continues to be heavily skewed towards the more profitable treatment of diseases as opposed to prevention Hospitals constitute the majority of health infrastructure in the private sector with a limited number of day clinics and a relative paucity of PHC facilities In terms of infrastructure development there has been relatively little activity in the recent past driven by a number of factors including amongst others
bull A reduction in the number of operating licences issued by the government (through provincial departments) to the dominant private healthcare providers This trend has been observed mainly in large cities and applies to licences for additional beds in existing facilities as well as new hospitals
bull Uncertainty over the implications of NHI
bull Uncertainty over the outcome and full impact of the HMI and
bull The weakening South African economy driving a number of companies to shift their focus towards opportunities for expansion abroad
Main hospital operators and healthcare providers anticipate limited growth in the near future For instance Life Healthcare plans to add 115 beds in 2017 compared to 121 in 2016 and 229 in 2015 Mediclinic is planning to add 54 beds by the end of the financial year 201718 compared with 78 new beds over the prior financial year However despite this limited growth prospects for Dutch companies to engage with private hospital groups on a commercial basis exist
Additionally it is worth noting that the ease of procuring contracts in the private sector facilitates cooperation with foreign firms During the course of the interviews conducted for this report a number of stakeholders expressed interest in engaging with Dutch companies on a commercial basis
While no concrete opportunities have been identified while developing this report the following plans and trends are likely to guide developments in the private health infrastructure sector going forward
41 PHC provision
The status quo creates opportunities for such partnerships going forward partnerships between the government and At present all three of the main healthcare the private sector In particular the providers emphasise growth in their PHC provision of PHC and other low-cost facilities This trend is driven by NHI healthcare services should be explored by Additionally the likely changes in the tariff private companies The implementation of structure are anticipated to render the NHI is further expected to encourage operation of hospitals less profitable
25
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
In similar vein private healthcare providers such as Life Healthcare and Netcare arelooking to expand their respective portfolios of day clinics as an alternative to full service facilities This trend has been driven by advances in medical technology which allow for a number of procedures that historically necessitated patients to be admitted into hospitals to be performed in day clinics with patients being discharged
42 Other health facilities
There is a growing need in the country for mental health facilities The private sector perceives this gap as an opportunity and an area to focus on Growth in the number of private mental health institutions is anticipated in the medium term
Other areas of emphasis in the private sector include renal care and specialised oncology treatment facilities For instance Netcare has 50 interest in National Renal
43 Energy sustainability
There is an observed trend in South Africa across numerous industries in the public and the private sectors alike to reduce and improve the consumption of energy and water This is driven by a desire to reduce the reliance on the national grid for the provision of electricity as well as to ensure efficient utilisation of water in healthcare facilities For instance Netcare has already installed renewable energy systems in
within the same day
However development of new facilities may be somewhat limited as growth in the private sector often occurs through acquisitions of smaller private health facilities Life Healthcare for instance has adopted such an approach as a way to increase its footprint in areas where it has little or no coverage
Care which itself has 13 PPPs to provide public sector patients with access to dialysis The group appears to have plans to further its presence in this area with continued upgrade of their existing dialysis units However while this trend may offer some commercial opportunities there is also a drive to pilot home-based and shared-care dialysis methods where patients take a more active role in their treatment This may limit infrastructure investment
some of its facilities and are using energy efficient LED technologies to reduce their energy It is therefore anticipated that innovative solutions to ensure environmental sustainability (and to reduce operating costs) are to be prioritised in many health infrastructure projects offering a commercial opportunity for private companies specialising in such green energy technologies
26
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
44 ICT infrastructure
The modernisation of ICT infrastructure and existing systems also appears to be on the agenda of private health operators such as Mediclinic While this report does not focus on ICT infrastructure it should be acknowledged as a potential area for commercial opportunities for foreign companies specialising in such technologies Services and solutions that
may be sought after include electronic patient records (established as a database on a national level) or inventory management systems for better stock control This area should be further developed to allow for a comprehensive overview and assessment of potential business opportunities
27
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
5 Key considerations for foreign companies
The existing health infrastructure needs and the emerging trends identified in the previous sections result in a number of potential commercial opportunities for Dutch companies However there are a number of considerations that must be taken into account by companies wishing to enter the South African market These include the economic environment the implications of the B-BBEE Act a lack of technical expertise in certain areas technology limitations as well as the norms and standards that govern the development of healthcare facilities amongst others These need to be considered in order to ensure that Dutch companies are aware of the challenges and hence can fully assess the opportunities that exist in the sector
51 Economic environment
The countryrsquos growth has slowed down in recent years The country has a total unemployment rate of 26 and a youth (15-24 year olds) unemployment rate of a daunting 527 The adverse economic environment poses a number of challenges to infrastructure developments in the health industry
On the public side the constrained fiscal conditions limit the governmentrsquos ability to expand healthcare provision to improve the quality of existing facilities and to address the maintenance backlogs In the private domain the slowdown could potentially negatively impact medical scheme contributions as the populationrsquos
52 B-BBEE Act
In order to encourage transformation and enhance economic participation of previously disadvantaged people in South Africa the government has implemented the Broad-Based Black Economic Empowerment (B-BBEE) Act 2013 The act provides a guideline for the level of ownership and concentration of black persons across the value chain including
bull Ownership of the company which could
purchasing power decreases This in turn would have an adverse impact on the revenues of private healthcare providers and hence their ability to grow
The decreasing purchasing power of the South African Rand has seen foreign goods become relatively more expensive This has been of particular relevance for the acquisition of medical equipment which is to a large extent sourced from international suppliers It is therefore anticipated that the appetite for new large scale projects may be limited until the economic conditions improve This may limit commercial opportunities for third parties in the short to medium term
be either direct by way of shareholding indirect ownership or through employee or community shareholding schemes
bull Management and control of the company
bull Procurement and enterprise developments and
bull Investment in joint ventures with local companies
28
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
In order to promote increased localisation and to create local jobs the government has aligned its procurement policies with the B-BBEE Act The Act is therefore an important evaluation criteria in the public procurement of suppliers and contractors It has far reaching implications for the business community in the country both those already operating in South Africa and foreign businesses that wish to enter the country
Furthermore it needs to be noted that the B-BBEE score of a given company depends on its own value chain Therefore should it contract with a low-score partner its own
53 Technology limitations
At present the use of advanced technologies such as Value Driven Maintenance (VDM) or Building Information Modelling (BIM) in the design of public health facilities is limited This is primarily a result of systemic issues within the public health sector These include a general lack of modernisation of public health infrastructure and a lack of integration of processes including planning implementation management and operation of health facilities These drawbacks were confirmed by the Western Cape DOH which acknowledged that currently the processes are run in isolation preventing implementation of advanced integrated solutions
Going forward the provincersquos view is that
rating may decrease In other words private healthcare providers in South Africa may risk lowering their own B-BBEE score by entering contracts with foreign companies that do not already have representation in South Africa or have a low B-BBEE rating This in turn may have an adverse impact on their ability to partner with the public sector
Therefore any Dutch company that is considering entering the South African health infrastructure market needs to consider the B-BBEE Act and the possible implications on its strategy
the various professional disciplines involved in the provision of healthcare facilities need to be integrated before considering advanced tools such as BIM It is reasonable to assume that the same principle would apply to the remaining provinces in the country Therefore while the use of advanced technologies would be beneficial in developing and managing healthcare infrastructure the implementation of such tools must not be seen as the primary solution to the issues facing the health infrastructure sector
Furthermore should the use of such technologies be progressed it would be subject to the outcome being aligned with the norms standards and guidelines set out in section 54
29
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
54 Norms standards and guidelines
There are a number of norms standards and guidelines designed by the government to provide a framework within which health provision is to be delivered and facilities are to be designed constructed operated and maintained
National Health Act 61 of 2003 sets out the norms and standards for the provision of healthcare in South Africa The Office of Health Care Standards was established in 2013 through the National Health Amendment Act with the key objective of protecting and promoting the health and safety of users of health services Their role includes the monitoring and enforcing compliance by health establishments public and private alike to the standards and norms approved by the Minister of Health and ensuring consideration investigation and disposal of complaints relating to non-compliance with said standards and norms Furthermore there are a number of mandatory norms and standards that guide the implementation of all infrastructure projects across the development cycle including the areas of clinical services healthcare environment support services and procurement and operation Approval is required should there be a need to deviate from these norms and standards It is important to note that the implementation of the norms and standards does not currently apply to the redevelopment andor upgrading of existing facilities
A full set of policies pertaining to the implementation of infrastructure projects is set out on the website of the Infrastructure Unit Support System This body is a
collaborative unit between the NDOH the Development Bank of Southern Africa and the Council for Scientific and Industrial Research which was established to optimise the acquisition and management of South Africas public healthcare infrastructure in line with the aforementioned health infrastructure norms standards and guidelines
30
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
6 Commercial opportunities
There are a number of concrete commercial opportunities in the South African health infrastructure sector including larger PPP and public infrastructure transactions which are expected to enter the market over the MTEF as well as smaller scale projects within the PHC sector
It is interesting to note that several stakeholders interviewed during the development of this report expressed interest in cooperating with the Netherlands in the health sector
61 PPP projects
As mentioned in section 31 of this report the NDOH is looking for alternative means of funding and progressing PPP projects for the six academic hospitals that were part of the 2011 plans There is still a need for these hospitals to be developed in the medium term Of these six hospitals the following have been prioritised with a combined budget of around R15 billion
bull Limpopo Academic Hospital (Polokwane in Limpopo)
bull Dr George Mukhari Academic Hospital (West Gauteng and North West Province)
bull Nelson Mandela Academic Hospital (Port Elizabeth in Eastern Cape) and
bull King Edward VII Academic Hospital in Ethekwini (KwaZulu-Natal)
Although it is still unknown when these PPPs will be released to market there are indications that these transactions will be progressed in the medium term It is therefore reasonable to expect that the first three projects may come to market in 2018 The estimated aggregate cost of these three projects is around R10 billion The King Edward VII Academic Hospital project is expected to follow shortly after with an estimated R5 billion cost
These hospitals are all major central hospitals with teaching capability They are expected to come to market seeking a full funding and services solution from a private sector driven consortium The NDOH stated that it would be important that any partnership with the private sector takes into account the full lifecycle needs of the facilities Therefore some of the separate services or activities to be provided by the private sector include
bull Overall hospital management (this excludes provision of nurses and clinicians)
bull Design and architectural services
bull Space development and utilisation
bull All equipment specialised and non-specialised
bull Information technology
bull Facilities management (security catering cleaning etc)
bull Training and academic facilities
bull Special power supplyenergy efficient solutions
This list is not exhaustive but does provide the best private sector opportunity given the wide scope of services required
31
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
62 Other large infrastructure projects
In addition to the aforementioned PPPs the National Treasury has identified the following major infrastructure projects that are currently in the planning phase (as presented in Table 61) These projects will be implemented in three provinces including the Eastern Cape and Limpopo
and will involve the replacement andor rehabilitation of existing hospital facilities Although these are not PPP projects commercial opportunities for Dutch companies may include provision of construction services or medical equipment
Table 61 Major infrastructure projects in planning over the MTEF
Project Name Implementing Agent
Capex (Rrsquobln)
Project Description
Current Status
Limpopo Elim Hospital National DoH 19 Replace hospital
Identification
Free State Dihlabeng Hospital
National DoH 20 Replace hospital
Identification
Limpopo Tshilidzini Hospital National DoH 23 Replace hospital
Feasibility
Eastern Cape Zithulele Hospital
National DoH 05 Rehabilitate hospital
Identification
Eastern Cape Bambisana Hospital
National DoH 07 Rehabilitate hospital
Identification
Source Full Budget Review 20172018
63 Low cost PHC facilities
The advent of NHI necessitates growth in the number of PHC facilities to expand access to healthcare services across South Africa Furthermore there is an emphasis on improving the quality of existing PHC infrastructure in order to meet the Ideal Clinic standards Given the scale of the initiative and the fiscal constraints faced by the government there is a need to develop low cost facilities This in turn offers an opportunity for private operators who are able to provide quality healthcare at a low cost
It is expected that individual provinces will start procuring low cost quality healthcare service providers in the next 2-5 years Additionally there is a potential for private ownership of PHC clinics and other facilities with fees being paid from the NHI Fund
The bundling of PHC clinics for scale purposes should also be considered as hundreds of such facilities are projected to be rolled out per annum In this instance an lsquounsolicited bidrsquo type approach could prove viable and opportune
32
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
An attractive proposition can be structured virtually immediately by putting a consortium together which includes EPC equipment provision small clinic spatial
64Training facilities
While there is an acknowledged need for medical professionals South Africa struggles to define the optimum training model The NDOH will retain responsibility for the training of its staff including nurses and clinicians which is primarily provided through the specific academic hospitals If the private sector can offer an innovative alternative framework proven elsewhere in
65 Alternative innovative power and water solutions
Last but not least it is anticipated that an increasing number of facilities will seek to implement alternative power and water solutions to reduce their environmental footprint and utility costs Currently there is a single PPP under procurement for the installation of tri-generation plants at Chris Hani Baragwanath Hospital in Gauteng It is expected that more such projects will reach the market going forward
optimisation as well as financing and perhaps focussed on a specific region andor period
the world such a proposal could potentially be very attractive This alternative mechanism could for instance include regional or centralised training of nurses at national level with distribution or deployment to the regional areas on a controlled basis A privately financed solution like this could be structured as an unsolicited bid
33
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
ndash
7 Key stakeholders in the health sector in South Africa
71 Public sector
Each level of government has a distinctive mandate including decision making and discretionary spending powers The responsibilities and powers of the three levels of government are set out in Figure 71
Each provincial government has an Executive Council which is equivalent to a cabinet in the national government The Executive Council consists of the Premier and a number of MECs including the MEC responsible for health
Figure 71 Key stakeholders in the public sector
National Department of Health Responsible for setting health policy on the national level including
policies and initiatives impacting public health infrastructure such as the Ideal Clinic Framework
Key decision makers and budget holders re infrastructure plans relating to centralacademic hospitals that fall within the NDOHrsquos mandate
National Treasury Sets the national budget and allocation of funds to national and
provincial departments as well as municipalities The PPP Unit within Government Technical Advisory Centre (GTAC)
an agency of the National Treasury supports national departments with the procurement of PPP projects
Provincial Departments of Health Responsible for setting health policy on the provincial level and the
provision of healthcare Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The provincial budgets comprise contributions from National Treasury
primarily through the Health Facility Revitalisation Grant and respective Provincial Treasuries
Key decision makers and budgets holders re infrastructure plans relating to regional and district hospitals as well as PHC facilities
Municipalities Responsible for the provision of PHC in collaboration with provincial
Departments of Health Responsible for developing own plans and budgets These need to be
in line with national policies and regulations The local level budgets are a mixture of income from the national
government and the municipalities
National Department of
Health
9 Provincial Departments of
Health
National Treasury amp Government
Technical Advisory Centre PPP Unit
52 Districts comprising 257 Municipalities
Provincial Treasuries
Responsible for the PHC facilities together with respective provincial Departments of Health
Nat
ion
al
Pro
vin
cial
Lo
cal
The provincial Departments of Health are managed by Heads of Departments Furthermore there are a number of stakeholders within each provincial Department of Health that are involved in the development and implementation of infrastructure plans Below some of the key stakeholders and decision makers are listed
34
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Table 71 National level key stakeholders
Department Name Role Contact details National Department of Health
Dr Aaron Motswaledi
Minister of Health
Address Civitas Building Cnr Thabo Sehume and Struben Streets Pretoria Phone +27 12 395 8086 Website wwwhealthgovza
Dr Joe Phaahla Deputy Minister of Health
Ms Malebona Precious Matsoso
Director General
Dr Massoud Shaker
Head of Infrastructure
National Treasury (GTAC)
Tumi Moleke Head of PPP Unit
Address 16th Floor 240 Madiba Street (Cnr Andries amp Madiba Street) Pretoria Phone +27 12 315 5176 5525 5869 Email infogtacgovza Website wwwgtacgovza
Table 72 Provincial level key stakeholders
Department Name Gauteng DOH
Dr Gwendoline Malegwale Ramokgopa Dr Ernest Kenoshi
Ms Tshilidzi Ramanyimi Mr T Gwebindlala
Contact details Role MEC for Health Address
23 rd Floor Bank of Lisbon
Acting Head of 37 Cnr Sauer and Market Street Department Johannesburg Head Phone +27 11 355 3503 3000 of Infrastructure Website wwwhealthgpggovza
Gauteng Jacob Mamabolo MEC for Department Infrastructure of Development Infrastructure Mamello Masitha Head of Development Department
Richard Makhumisani
Chief Director Health Infrastructure and Technical Services
Chief Director Infrastructure
Address Corner House Building Sauer and Commissioner Street Private Bag X 8 Marshalltown 2017 Telephone +27 11 355 5000 Website wwwdidgpggovza
35
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Department Name Role Contact details Western Cape DOH
Professor Nomafrench Mbombo
MEC for Health Address Room T20-06 4 Dorp Street Cape Town Phone +27 (0)21 483 4473 Website wwwwesterncapegovzadepthe alth
Dr Beth Engelbrecht
Head of Department
Dr Laura Angeletti-Du Toit
Chief Director Infrastructure amp Technical Management
KZN DOH Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
MEC for Health Address Natalia 330 Langalibalele (Longmarket) Street Pietermaritzburg 3201 Telephone +27 33 395 2111 Website httpwwwkznhealthgovzahealt hasp
Dr Sifiso Mtshali Head of Department
Mr Bongi Gcaba Chief Director Infrastructure Development
Limpopo DOH
Dr Phophi Constance Ramathuba
MEC for Health Address Fidel Castro Ruz House 18 College Street Polokwane Phone (Office of the MEC) +27 15 293 6005 6006 Website wwwdohlimpopogovza
Dr NP Kgaphole Head of Department
Mr Pandelani Jeremiah Ramawa
General Manager Infrastructure
Eastern Cape DOH
Dr Pumza Patricia Dyantyi
MEC for Health Address Dukumbana Building Independance Avenue Bhisho5605 Phone +27 40 608 0000 Website wwwechealthgovza
Dr Thobile Mbengashe
Head of Department
36
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
72 Private sector
The private sector is independent in the planning and implementation of infrastructure projects where the approval of major capital projects is within the mandate of the health groupsrsquo respective boards However projects are still dependent on the government for operating licences Key stakeholders in the main private care operators in South Africa are presented in Table 73
National Hospital Network (NHN) is a network of private healthcare providers that includes hospitals day clinics psychiatric facilities ophthalmology facilities sub-acute facilities and rehabilitation facilities NHN is
headed by a board of directors under the leadership of Kurt Worrall-Clare
As at July 2017 NHN had 209 members with demographic footprint that includes the major urban areas of Johannesburg Pretoria Bloemfontein Cape Town Port Elizabeth and Durban The role of NHN is to coordinate and provide resources to members so as to assist them particularly in achieving efficient and effectively managed patient servicing and input costs that are competitive in the marketplace The full list of the 209 members in the NHN network is included on their website (httpsnhncoza)
Table 73 Main private sector operators key stakeholders
Company Name Role
Mediclinic Health Group
Jurgens Myburg CFO Mediclinic International
Steve Drinkrow Infrastructure Executive
Life Healthcare Group
PP van der Westhuizen
CFO and Acting Group CEO
Janette Joubert Support Service Executive
PF Theron CFO SA
Braam Joubert CFO Mediclinic South Africa
Annelia General Manager Bezuidenhout Procurement
James Herbert Group Procurement Executive
Contact details
Address 25 Du Toit Street Stellenbosch 7600 Postal address PO Box 456 Stellenbosch 7599 Phone +27 21 809 6500 E-mail medimailmedicliniccoza Website wwwmedicliniccoza
Address Oxford Manor 21 Chaplin Road Illovo 2196 Phone + 27 11 219 9000 Website wwwlifehealthcarecoza
37
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Company Name Role Contact details Netcare Group
RH (Richard) Friedland
Group CEO Address 76 Maude Street Corner West Street Sandton 2196 Phone +27 11 301 0000 Website wwwnetcarecoza
KN (Keith) Gibson Group Chief Financial Officer
JM (Jill) Watts Chief Executive Officer ndash General Healthcare Group
Mark Bishop Commercial Director
Advanced Health Ltd
Carl Grillenberger Chief Executive Officer
Address Walker Creek Office Park Building 2 90 Florence Ribeiro Avenue Muckleneuk Pretoria Phone +27 12 346 5020 Website wwwadvancedhealthcoza
Erik Hawkins Procurement
Lenmed Investments Ltd
Mr P Devchand Chairman and Chief Executive Officer
Address Fountain view building 9 2nd floor Corner 14th Avenue and Hendrik Potgieter Street Johannesburg Phone +27 11 213 2078 Website wwwlenmedhealthcom
Origin 6 Healthcare
Tanya Venter Spokesperson Address 205-209 Cape Road Mill Park Port Elizabeth 6001 South Africa Phone +27 41 373 0682
38
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
8 Conclusion
The public sector grapples with a shortage of resources including finances qualified medical staff and adequate infrastructure and equipment The need for additional infrastructure capacity to expand the provision of care and increase the number of medical professionals trained in the country therefore remains
On the private side the forthcoming regulatory changes on the back of NHI and MHI are expected to shift the delivery of healthcare from an expensive reactive to a more efficient preventive model In this new model PHC will play a more prominent role These developments will likely result in a number of commercial opportunities for the private sector including foreign companies
In the public sector there are a number of large infrastructure projects either under procurement or in planning including four academic hospital PPPs expected to be released to market over the MTEF Low cost PHC facilities is another area where much activity is expected to expand and improve the enabling infrastructure
Furthermore it is expected that commercial opportunities will arise in the area of alternative and innovative power and water solutions An increasing number of stakeholders and institutions acknowledge the need for such solutions to reduce the reliance on the national electricity grid as well as to increase the efficiency of water use and treatment
Additionally the implementation of electronic systems and solutions to improve the management of patient records inventory and facilities may result in economic opportunities for businesses specialising in such technologies
39
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Annotations
1 STATS SA National Household Survey 2016 2 Who Owns Whom Human Health Activities June 2016 3 STATS SA National Household Survey 2016 4 EURZAR exchange rate of 1615 (as of 24 October 2017) 5 STATS SA estimated the population in October 1996 at 4058 million The current estimate is 5652 million This represents an increase of 393 over 21 years The data also estimates that 81 of the total population (46 million people) are over the age of 60 6 Most of the smaller private healthcare providers are part of the National Hospital Network which assists its members by coordinating and providing resources to facilitate efficient healthcare provision 7 In order to enable the implementation of NHI a number of changes to existing legislation are expected The list of legislation that is anticipated to change is included in Appendix 3 The full extent to which these Acts will be affected is to be seen over time as the implementation of NHI progresses 8 STATS SA National Household Survey 2016 9 National Department of Health Annual Performance Plan 201718 10 Netcare Group Annual Report 2016 11 The NHI envisages that the NDOH will assume control of tertiary care facilities This is an unpopular decision with many provincial health departments though which may face significant resistance 12 Life Healthcare Group Integrated Report 2016 13 National Treasury Budget Review February 2017 14 The production of electricity heat and cooling in a single process Typically this involves a gas fired generator producing electricity and heat with the exhaust heat going to an absorption chiller which produces chilled water and hot water for air conditioning 15 Health Facility Revitalisation Grant is a direct grant allocated to provincial Departments of Health to fund the construction and maintenance of hospitals health infrastructure and nursing colleges and schools The allocation over the MTEF is as follows 201718 R56 billion 201819 R59 billion and 201920 R62 billion 16 Infrastructure Delivery Management System (IDMS) is a Government Management System for planning budgeting procurement delivery maintenance operation monitoring and evaluation of infrastructure This system defines the status of projects in 9 stages where Stage 1 is infrastructure planning and Stage 9 is project close-out 17 KPMG Economic Snapshots South Africa August 2017
40
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
References
Board of Healthcare Funders of Southern Africa Conference Presentation 2017
BMI Research South Africa Pharmaceuticals amp Healthcare Report
Eastern Cape Department of Health Annual Performance Plan 201718 March 2017
Gauteng Department of Health Annual Performance Plan 201617-201819 February 2016
Gauteng Department of Health Regulatory requirements on licensing and registration of health establishment 26 May 2016
Gauteng Department of Health Submission to the Health Market Inquiry 8 March 2016
Gauteng Department of Infrastructure Development Annual Performance Plan for 201718 Financial Year 28 February 2017
Infrastructure News Bridge City to attract R10b investment 14 March 2017 at wwwinfrastructurenews20170314bridge-city-to-attract-r10b-investment
Infrastructure Unit Support System Online at httpwwwiussonlinecoza
KPMG Economic Snapshots South Africa August 2017
Kwa-Zulu Natal Department of Health Annual Performance Plan 201718 ndash 201920 March 2017
Leads to Business New Limpopo Academic Hospital Project Details at httpswwwl2bcozaProjectNew-Limpopo-Academic-Hospital7745
Life Healthcare Group Integrated Report 2016 19 December 2016
Limpopo Department of Health Annual Performance Plan 201718
Mediclinic International Annual Report and Financial Statements 31 March 2017
National Department of Healht NHI at httpwwwhealthgovzaindexphpnhi
National Department of Health Annual Performance Plan 201718
National Department of Health Ideal Clinic definitions components and checklists Version 17 8 May 2017
National Health Act 2003 Regulations relating to categories of hospitals
National Treasury Full Budget Review 201718 22 February 2017
Netcare Group Annual Integrated Report 2016
Office of Health Standards Compliance Mandate at wwwohscorgzaindexphpwho-we-aremandate
Public Healht News Limpopo gets new medical school hospital 31 March 2017 at wwwbizcommunitycomArticle196330159896html
41
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Statistics South Africa General Household Survey 2016
Statistics South Africa Population Census 1996 at httpsappsstatssagovzacensus01Census96HTMLdefaulthtm
Western Cape Department of Health Annual Performance Plan 2017 - 2018
Who Owns Whom Human Health Activities June 2016
42
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Appendices
Appendix 1 Stakeholders interviewed
During the execution of this project we interviewed various stakeholders in the health sector These included the following individuals
National Department of Health
bull Minister of Health Dr Aaron Motsoaledi
bull Head of Infrastructure Dr Massoud Shaker
National Treasury
bull Head of the PPP unit Tumi Moleke
Western Cape Department of Health
bull Chief Director Infrastructure amp Technical Management Dr Laura Angeletti-DuToit
Kwa-Zulu Natal Department of Health
bull MEC for Health Dr (Brig Gen) Sibongiseni Maxwell Dhlomo
bull Head of NHI Mr Zungu
Mediclinic Health Group
bull Jurgens Myburg CFO Mediclinic International
bull Braam Joubert CFO Mediclinic South Africa
43
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
-
Appendix 2 Health PPP projects closed before September 2017
Project Name
Government Institution
Type Date of Close
Dura tion
Financing Structure
Project Value (Rrsquom)
Form of Payment
Inkosi Albert KwaZulu- DFBOT Dec-2001 15 Debt 70 4 500 Unitary Luthuli Natal Years Equity payment Hospital DOH 20
Govt 10 Universitas and Pelonomi Hospitals co location
Free State DFBOT Nov-2002 165 Equity 81 User DOH years 100 charges
State Vaccine Institute
NDOH Equity partnership
Apr-2003 4 years
Equity 100
75 Once-off equity contribution
Humansdorp District Hospital
Eastern Cape DFBOT Jun-2003 20 Equity 49 Unitary DOH years 90 payment
Debt 10 Phalaborwa Limpopo DFBOT Jul-2005 15 Equity 90 User Hospital DOH and
Social Development
years 100 charges
Western Cape Rehabilitatio n Centre and Lentegeur Hospital
Western Facilities Nov-2006 12 Equity 334 Unitary Cape DOH management years 100 payment
Polokwane Limpopo DBOT Dec-2006 10 Equity 88 Unitary Hospital DOH and years 100 payment renal dialysis Social
Development Port Alfred and Settlers Hospital
Eastern Cape DFBOT May- 17 Equity 169 Unitary DOH 2007 years 90 payment
Debt 10 Source National Treasury Full Budget Review 20172018
44
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Appendix 3 Legislation expected to change with the implementation of NHI
bull The National Health Act
bull The Mental Health Care Act
bull The Occupational Diseases in Mines and Works Act
bull The Health Professions Act
bull The Traditional Health Practitioners Act
bull The Allied Health Professions Act
bull The Dental Technicians Act
bull The Medical Schemes Act
bull Medicines and Related Substances Act
bull The Provincial Health Acts ndash many of the provinces have enacted their own legislation
bull Various ambulance legislation which falls under the exclusive legislative competence of the provinces in terms of the Constitution
bull The Nursing Act
45
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
Document Classification KPMG Confidential
kpmgcomsocialmedia kpmgcomapp
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
copy 2017 KPMG Services Proprietary Limited a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved
The KPMG name and logo are registered trademarks or trademarks of KPMG International
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
This is a publication of
Netherlands Enterprise Agency
Prinses Beatrixlaan 2
PO Box 93144 | 2509 AC The Hague
T +31 (0) 88 042 42 42
E klantcontactrvonl
wwwrvonl
This publication was commissioned by the ministry of Foreign Afairs
copy Netherlands Enterprise Agency | December 2017
Publication number RVO-184-1701RP-INT
NL Enterprise Agency is a department of the Dutch ministry of Economic Afairs and
Climate Policy that implements government policy for Agricultural sustainability
innovation and international business and cooperation NL Enterprise Agency is the
contact point for businesses educational institutions and government bodies for
information and advice fnancing networking and regulatory maters
Netherlands Enterprise Agency is part of the ministry of Economic Afairs and
Climate Policy
- Economic Opportunities in the Healthcare Infrastructure Sector in South Africa
- Contents
- Abbreviations
- 1 Overview of healthcare infrastructure in South Africa
- Slide Number 5
- Slide Number 6
- Slide Number 7
- 2 Healthcare infrastructure trends plans and policies
- Slide Number 9
- Slide Number 10
- Slide Number 11
- Slide Number 12
- 3 Healthcare infrastructure plans and trends public sector
- Slide Number 14
- Slide Number 15
- Slide Number 16
- Slide Number 17
- Slide Number 18
- Slide Number 19
- Slide Number 20
- Slide Number 21
- Slide Number 22
- Slide Number 23
- Slide Number 24
- Slide Number 25
- Slide Number 26
- Slide Number 27
- Slide Number 28
- Slide Number 29
- Slide Number 30
- Slide Number 31
- Slide Number 32
- Slide Number 33
- Slide Number 34
- Slide Number 35
- Slide Number 36
- Slide Number 37
- Slide Number 38
- Slide Number 39
- Slide Number 40
- Slide Number 41
- Slide Number 42
- Slide Number 43
- Slide Number 44
- Slide Number 45
- Slide Number 46
-
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