The R630 billion question no one can answer
Estimates from Momentum Health show that delivering comprehensive, quality healthcare to all South Africans through the NHI will carry a massive cost—a conservative estimate of R900 billion.
With the current public healthcare budget at R270 billion, there’s an estimated R630 billion gap that needs to be filled—and no one has a clue where the money will come from.
The true cost of the NHI and how to fund it remains among the biggest points of contention with the whole scheme.
According to Momentum Health chief marketing officer Damian McHugh, there is a massive imbalance between private and public sector spending on healthcare in South Africa, echoing the government’s sentiments that some form of universal healthcare is needed.
However, the government has promised “affordable, quality universal healthcare” through the NHI, committing to comprehensive healthcare for every citizen in the country—something which is ill-defined and will likely prove unaffordable.
Despite President Cyril Ramaphosa signing the NHI Act into law—setting the path for the establishment of the NHI Fund—no official costing of the scheme has been done because there is not yet any indication of what the scheme will actually cover.
No one can say for certain how much money will be needed to ensure the scheme’s lofty ambitions of “affordable, comprehensive and quality healthcare for all” can be achieved. Yet, the government wants to mobilise resources (read: funding) for the NHI as soon as 2026.
The most common figure bandied about is “R200 billion” in additional revenue needed each year to fund the scheme. However, this is dubious at best, lacking significant context.
The figure comes from the department’s 2011 NHI Green Paper and again in the 2015 and 2017 White Papers on the NHI, which projected the cost of the scheme at R256 billion by 2024/25 at 2010 prices.
However, when adjusted for inflation, this is actually closer to R470 billion in additional funding (in 2022 prices)—far more than the allocated government health budget of R270 billion for 2024/25.
Getting to R900 billion
Current spending on non-medical aid healthcare in South Africa is approximately R400 per month per person (R4,800 a year).
Discovery CEO Adrian Gore noted in December 2023 that to cover the basics—government-mandated prescribed minimum benefits—it would require over R1,000 a month (R12,000 a year) per person.
At best, this equates to an additional R530 billion required each year for the country’s 44 million-plus adult population (pushed across the entire population, this would be a heftier R756 billion).
Added to the R270 billion already spent on public healthcare, the cost of the NHI would already be approaching R800 billion—just for the basics.
Momentum’s McHugh noted that the private sector spends an average of R1,750 a month (R21,000 a year) on 9 million medical scheme beneficiaries. Discovery estimates this is higher, at about R2,250 a month (R27,000 a year).
To provide equal levels of private-quality coverage universally—to South Africa’s 63 million people—it would cost the country over R1.3 trillion “for the same level of quality and accessibility as the private healthcare system”, he said.
“Obviously, there are savings to be made here—(medical aid) tax credits would reduce the amount. But you can see the quantity of money that we would need as a marketplace if we wanted a similar set of outcomes that the current private healthcare system provides.”
McHugh said that taking cost savings and other revenue measures into account could bring this to a more conservative estimate of R900 billion—but even this would still put the money needed far outside what the public and private healthcare spending has available (R500 billion combined).
Put another way, even if the government somehow managed to combine the public and private sector spending on healthcare, it would still require an additional R400 billion in revenue a year to fund the NHI.
Realistically, however, even if it shuts down medical aids, the government is unlikely to convince the public to simply surrender their after-tax spending on private healthcare to the public sector—so the additional funding required would actually be closer to R630 billion (R400 billion + R230 billion private sector spend).
Unfortunately, no one has any idea where this will come from.
The big tax question
One source of funding that is frequently pointed to is taxes.
The NHI Act currently states that the scheme will be funded in four ways—three of which are individual tax-related:
- Shifting of funds from government departments and agencies and provincial budgets and conditional grants as part of general tax revenue;
- The removal and reallocation of funding for medical aid tax credits;
- Payroll taxes on employers and employees and;
- Surcharges on income tax through a Money Bill by the National Treasury.
With increased budgetary demands from every department each year—including the need for investment into infrastructure and demands for increased social spending through a basic income grant—the room to “find” and move around an extra R630 billion in the budget is extremely limited, if not impossible.
At the same time, if the additional costs were to be funded by the country’s 7.1 million individual taxpayers, every single one would have to pay an extra R88,700 a year – or R7,400 a month to achieve this.
Data shows that South Africa’s taxpayers are already over-extended, and tax measures being implemented to boost revenue are having the opposite effect—so additional tax measures simply won’t work.
The Department of Health has also previously dismissed massive tax hikes as the source of NHI funding, saying that only “small taxes” will be implemented – such as a 2% payroll tax and a 2% surcharge on personal income tax.
Using these estimates, a South African earning an average salary of R26,000 a month would have to pay an additional R1,040 a month to fund the NHI. This would be higher for those who earn more—but it still wouldn’t be close to enough.
As a whole, South Africa’s individual taxpayers, with a taxable income of R2.1 trillion in 2023, would raise close to R90 billion with a combined 4% in additional taxes.
The removal of the R364 per month medical aid tax credit is expected to add a further R30 billion to the NHI pot.
Combined, this would only be R120 billion in additional revenue from tax measures, leaving the question of where the remaining funding (up to R510 billion) would come from.
Even on the government’s own outdated estimates, an additional R130 billion would have to be found.
Mitigating the cost
According to Momentum, this position could be mitigated if the NHI drops its ambitions of providing “comprehensive” universal healthcare and focuses on quality primary healthcare.
Momentum’s data shows that most medical aid spending goes to two things: specialists and hospitalisation.
By excluding these and looking at primary healthcare, such as dentists, GPs, and medicine dispensing, the cost factor could be reduced to R360 billion—only an additional R90 billion over the R270 billion already spent in the public sector.
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