South Africa's NHI has Major Ramifications for Private Healthcare: Frost & Sullivan

CAPE TOWN, South Africa, January 25 - The proposal for a National Health Insurance (NHI) was without doubt the
most significant development in South Africa's healthcare sector in 2010. The
aim of the NHI is to create universal healthcare coverage for all the
country's citizens.

(Logo: www.newscom.com/cgi-bin/prnh/20081117/FSLOGO)

The government has stated that the NHI would benefit everyone in the
country by improving the public healthcare system and giving all citizens
access to the level of care currently reserved for those able to afford
private treatment. However, the impact on the country's private healthcare
industry promises to be immense.

"The mention of the NHI has led to uncertainty in the industry," says
Frost & Sullivan healthcare analyst Lizelle Wentzel. "A lack of transparency
as to how the system will work has caused speculation and assumptions being
made by various role players in order to forecast the impact of the changes
on their businesses."

Wentzel believes that the NHI will have a significant effect on the
fortunes of most players in the South African market, including hospital
groups, medical schemes and medical device vendors. It is however difficult
to forecast what the effects will be, as the structure of the NHI and the
potential role of each of these players has not been clarified.

"Frost & Sullivan believes that the private hospital groups will be
co-opted into the NHI in one way or another, which implies that they will see
more patients through their doors," she says. "However, we also expect the
NHI to add further pressure on prices, so margins will be squeezed."

Pharmaceutical companies, particularly local producers, will in all
likelihood benefit from the proposed changes. This is because increased
funding in the healthcare system will lead to greater uptake of drugs,
particularly locally-produced generics.

"Medical aids are the most likely to be negatively affected," Wentzel
adds. "There is already significant rationalisation amongst schemes and the
NHI will certainly accelerate this."

Overall, Wentzel believes that the opportunities created by the NHI are
likely to be in the fields of Infrastructure improvement and human capital
development. For instance, private players could play a role in upgrading
hospitals and training nurses.

In this scenario, public private partnerships (PPPs) are likely to become
a key feature of the South African healthcare landscape. For instance, the
government may become involved in supporting skills development, using the
private sector as the base.

"One example is Netcare, which is already highly active in the PPP
market," Wentzel notes. "Through a number of initiatives it is finding ways
to increase its number of beds and support revenue generation. Netcare
established a 91-bed hospital together with Nalithemba in Port Alfred in
February last year and opened a hospital in Grahamstown in June."

There is however also a very real danger that private healthcare
providers will mitigate the challenges in the local market by seeking growth
opportunities elsewhere. Frost & Sullivan believes that the longer
uncertainty around the NHI persists, the more pressure they will feel to seek
revenues in more certain international environments.

If you are interested in more information on Frost & Sullivan's analysis
of the South African healthcare industry, then send an e-mail to Patrick
Cairns, Corporate Communications, at patrick.cairns@frost.com, with your full
name, company name, title, telephone number, company e-mail address, company
website and country.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to
accelerate growth and achieve best-in-class positions in growth, innovation
and leadership. The company's Growth Partnership Service provides the CEO and
the CEO's Growth Team with disciplined research and best-practice models to
drive the generation, evaluation, and implementation of powerful growth
strategies. Frost & Sullivan leverages over 45 years of experience in
partnering with Global 1000 companies, emerging businesses and the investment
community from 40 offices on six continents. To join our Growth Partnership,
please visit www.frost.com.

    Contact:
    Patrick Cairns
    Corporate Communications
    Frost & Sullivan
    P: +27-18-464-2402
    E: patrick.cairns@frost.com

www.frost.com

Patrick Cairns, Corporate Communications of Frost & Sullivan, +27-18-464-2402, patrick.cairns at frost.com