Covid 3Rd Wave


Covid third wave

There has been a significant acceleration in the rate of new Covid-19 infections in South Africa in the last month. The Daily new infection rates in late June are close to the 21 000 new case per day peak in early January 2021. The highest rate of new infections is in Gauteng. The positive result to total Covid test ratio is increasing as is the hospitalisation to new infection rate. This is resulting in a worsening capacity crisis in Gauteng’s hospitals. Hospital admission in Gauteng have risen from around 1 750 in weeks 12, 13 and 14 to 6 051 in week 23, 7 095 in week 24 and 6 742 in week 25. The ratio of ICU admissions to hospital admissions is also increasing placing severe pressure on Gauteng’s hospital resources. The vaccination rate has picked up but remains low at around 115 000 per day with total of 2.685 million vaccinations (equivalent to 7.2% of the adult population) to date where 480 000 people have been fully vaccinated.

Government raised the lockdown restrictions to Alert Level 4 effective 28 June 2021 initially for 14 days. The restrictions reduce social contact and reduce mobility. There is also a ban on alcohol sales and restricted movement across Gauteng’s borders. Generally better than expected macroeconomic data recently does not take account of the latest surge in new infections and the lockdown. This restriction to economic activity is likely to see a pull-back in these macroeconomic indicators. The recent real GDP forecast by the SARB at 4.2% growth in 2021 now looks too high resulting in a slower than previously expected economic recovery.


National Health Insurance underway

The parliamentary Health Committee resumed its public hearing on the proposed NHI bill on 18 May 2021. In May 2021, the Council for Medical Schemes (CMS) reported that government planned the full development of the NHI and was scheduled to move to phase 3 from next year. In its 2021/2022 annual performance plan, the CMS indicated that phase 3 will include mandatory pre-payment of the new scheme, contracting for accredited private hospital and specialist services, and finalisation and implementation of the NHI Act. The NHI was scheduled to be implemented in three phases each of five years. Phase 1 piloted various health system strengthening interventions focused on the primary health care and was completed in 2017. Phase 2 of NHI, from 2017 to 2022, was planned to focus on ensuring the NHI Fund is fully functional and has the required management and governance structures so that the purchase of services and population registration can begin. The completion of this phase was delayed by the fiscal crisis and pandemic. Phase 3 of NHI, from 2022 through 2026, was planned to introduce the mandatory prepayment system and a system for contracting accredited private hospital and specialist services as well as the finalisation of the Medical Schemes Amendment Act.

To promulgate the NHI bill much needs to be done to clarify objectives, the roadmap, the processes, and legalities required between now and the end of 2021 to make room for the NHI. What is clear is that NHI bill requires that all healthcare procurement comply with the Broad-Based Black Economic Empowerment Act of 2003 and the Preferential Procurement Policy Framework Act of 2000. The funding of the NHI will be a mixture of general taxes, reallocation of medical scheme tax benefits, payroll tax and surcharge on personal income. No exact cost of the NHI scheme has been presented by government but estimates vary from R256bn to above R460bn per annum.

The private sector medical aids are in the direct firing line of the proposed NHI Fund. It is difficult to see how the NHI bill can be brought into force effectively in 2022 given the fiscal crisis and pandemic which government is facing.

About the Author

Mike Haworth
Sasfin Wealth, Investment Strategist

Mike is an Investment Strategist for Sasfin Wealth and is responsible for creating and maintaining Sasfin Wealth’s international and domestic macro-economic themes on a monthly basis. Mike adapts Sasfin’s macroeconomic themes into investment themes, which drive the sector and style rotation within the global equity model portfolios.

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