South African hospital operators were expected to benefit from increased demand for health care services during the Covid-19 pandemic.
Instead, they have ended up suffering, according to Old Mutual Wealth Private Client Securities.
Updates from Netcare Ltd., Mediclinic International Plc. and Life Healthcare Group Holdings Ltd. show “significant loss of revenue” during the crisis, placing further financial pressure on the industry and damping chances that it will emerge in a stronger position, Victor Mupunga, a research analyst, said in a note.
“Patient volumes weakened further as elective procedures deemed non-essential were canceled,” he said. “Patients tended to avoid hospitals out of fear of infection, and there were reports of a notable reduction of emergency admissions due to the ban on travel and alcohol consumption.”
South Africa had identified 48,285 cases of Covid-19 as of Sunday, with 998 deaths. The government imposed a lockdown on March 27 that brought the economy to a near standstill. Most businesses have reopened this month, even as the rate of new infections climbs.
Several of the companies’ hospitals closed after employees contracted the virus, while offers to take in Covid-19 patients from state hospitals at cost placed further pressure on margins, Mupunga said.
“Netcare stands to lose the most because all its operations are in South Africa, although it has a stronger balance sheet and liquidity position,” he said.
Life Healthcare’s U.K. operations and Mediclinic’s Swiss hospitals have supported earnings as the rand weakened. Both are also expected to benefit from the provision of critical care for Covid-19 patients outsourced by the state, Mupunga said.
An index of South African health care companies has dropped 6.6% this year, with Netcare down 25%, Life Healthcare dropping 24%, and Mediclinic falling 17%.