Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the...

48
Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign Afairs

Transcript of Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the...

Page 1: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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

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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
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Page 2: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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

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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
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Page 3: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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

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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
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Page 4: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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

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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
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Page 5: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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
Page 6: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 7: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 8: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

-

-

-

-

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
Page 9: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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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
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  • Slide Number 27
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  • Slide Number 30
  • Slide Number 31
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  • Slide Number 33
  • Slide Number 34
  • Slide Number 35
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  • Slide Number 37
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  • Slide Number 46
Page 10: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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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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
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  • Slide Number 25
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  • Slide Number 27
  • Slide Number 28
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  • Slide Number 30
  • Slide Number 31
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  • Slide Number 33
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  • Slide Number 35
  • Slide Number 36
  • Slide Number 37
  • Slide Number 38
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Page 11: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 12: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 13: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 14: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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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
Page 15: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 16: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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PO Box 93144 | 2509 AC The Hague

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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

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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
Page 17: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 18: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 19: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 20: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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

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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
Page 21: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 22: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 23: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 24: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 25: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 26: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 27: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 28: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 29: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 30: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 31: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 32: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 33: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
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Page 34: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 35: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 36: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 37: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 38: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 39: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 40: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 41: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 42: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 43: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 44: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 45: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

-

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
Page 46: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 47: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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
Page 48: Economic Opportunities in the Healthcare Infrastructure ... · Economic Opportunities in the Healthcare Infrastructure Sector in South Africa Commissioned by the ministry of Foreign

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