• Industry: Infrastructure, Government and Healthcare
  • Type: KPMG information
  • Date: 11/10/2012


KPMG’s healthcare consulting services offers audit, tax and advisory services in Africa's healthcare Sector.

Funding NHI: A spoonful of sugar? 

Can the NHI make us richer and healthier?


The recently released National Health Insurance (NHI) government Policy Paper sets out a compelling vision to tackle the South African healthcare challenges of access to care and quality service delivery. But is the NHI affordable for South Africa? This economic analysis sets out some surprising answers.


The South African healthcare system suffers from the ‘growing pains’ characteristic of many emerging economies – strong economic growth, a young population and a growing and demanding middle class. It is also challenged with poor infrastructure and resource constraints. This is in contrast to the developed economies that show the signs of ‘old age’ – sluggish to no economic growth, rapidly ageing populations and assertive voters fighting to maintain hard-won social entitlements. Both of these sets of issues place enormous pressure on healthcare expenditure.  

economic analysis NHI healthcare south Africa
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The answer to the question “Is the NHI affordable for South Africa?” may be surprising. KPMG’s Healthcare team researched whether the economic benefit of investing in healthcare outweighed the cost of increased taxes needed to fund NHI over the 14-year rollout period (2012 to 2025). We discovered that implementing the NHI could improve the health of the population, which, in turn, can increase productivity, expand the Gross Domestic Product (“GDP”) and make the country more prosperous – even after taking into account the cost of funding it.


‘Ka-ching’ – how much and from where?

Based on the cost estimates from the policy paper, KPMG calculated that the rollout of the NHI will cost an average of R10.4 billion every year, above what is currently spent on public healthcare, amounting to a total of R145 billion in real terms over the next 14 years. Using these estimates, we set out to model different tax options to fund the NHI.


To fund the NHI wholly from:

  • Personal income taxes – the average rate paid would increase 1.1 percentage points from 21.8% to 22.9%.
  • Value Added Tax (VAT) – the rate would increase by 0.8 percentage points from 14% to 14.8%.
  • Sin taxes (tax on those products that are the unhealthiest) – a bottle of wine would increase by R0.80, port by R1.47, a bottle of spirits (40% proof) by R12.82 and cigarettes by R4.47 for a box of 20.


While we are not arguing for increased taxes, the potential tax increases required are more accessible than first imagined.


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Anuschka Coovadia
Head of Healthcare Markets
Tel: +27 (0)82 719 2813