Nonchalant destruction is the easy part

John Kane-Berman on the ANC's decision to take a wrecking-ball to private healthcare

Last week Cyril Ramaphosa told a World Economic Forum meeting in Cape Town that his government had set itself the goal of climbing from 82nd in the World Bank's "ease of doing business index" to somewhere in the top 50.

This would be a spectacular achievement, but it would not make up for lost ground. Our ranking in 2008 was 32nd out of 181. Our descent to 82nd out of 190 is the result of policies implemented by the African National Congress and the South African Communist Party, some of them at the behest of their trade union allies (and many with the connivance of big business and support of the press).

Yet President Ramaphosa has done little to reverse these policies. And even if he succeeds in cleaning up the state, the damage done by threats of expropriation of various kinds of assets and other interventionist policies may see his first term of office end with the country worse off economically than when he started.

Mr Ramaphosa has stated that the National Health Insurance (NHI) system will be implemented "like it or not". NHI is likely not only to destroy large parts of the private health sector, but also to damage the business environment. It will do so by causing skilled professionals to emigrate while also discouraging immigration by such people. Professionals who leave South Africa or are discouraged from coming here will not be confined to the medical sector. All sorts of others will also be put off by a country whose private health sector is in decline.

Last month the finance minister, Tito Mboweni, published an economic strategy document, drawn up in the National Treasury, which argued for the "easing" of immigration regulations so as to attract individuals with tertiary qualifications. Even if this proposal is put into practice, imposition of NHI will counteract it.

Deterring immigration will also deter foreign direct investment. Would-be investors will change their minds about investing here when they find that staff do not want to be transferred to a country whose private health sector is under attack. Potential tourists may also be put off.     

The Treasury document stressed the importance of fiscal sustainability. NHI will undermine that, as numerous commentators have already pointed out.

Mr Mboweni's document further underlined the importance of competition, of creating an environment in which both large and small businesses can "thrive", and of getting rid of some of the red tape strangling small business. NHI will undermine all of these. By setting up a single buyer of health care it will undermine competition, not accidentally but deliberately. Although the ANC claims to be opposed to monopolies, NHI is designed to be a state monopoly. Inter alia, it is designed to cripple the medical aid industry.

The Treasury document observed that burdensome regulations were a "significant hurdle" to the growth of small businesses. It urged the revival of legislation requiring government departments to reduce red tape by 25% over the next five years. It also advocated a "red tape impact assessment" before new legislation is introduced. South Africa has thousands of small businesses in the form of pharmacies and private medical practices. NHI will subject them all to much more red tape. It will further undermine medical professionals by determining the fees they can charge.

The Treasury also referred to continuing complaints by small businesses about late payments by government departments. Yet the thousands of family-business pharmacies and private medical practices which now receive payments directly from patients or from medical aid schemes will become dependent on the state for most if not all of their income. Many of them will be forced into bankruptcy. Some pharmacies will be taken over by retail giants.

It takes years to establish a small business or professional practice. One of the worst aspects of NHI – and of Mr Ramaphosa's "like it or not" attitude – is the nonchalance and insouciance with which his party and government are embarking on their destructive course. They will destroy private medical businesses with no more concern for the consequences than was shown by the people who destroyed little shops in last week's violent attacks.

Another telling aspect is their lack of self-awareness. Even though they are finding it immensely difficult to fix Eskom, and all the other institutions they have destroyed, among them large chunks of the public health sector, they think that this time around they can create something that works. Either that or they are so blinded by their hostility to the private sector and so bent on extending state control, that they do not care.

In this context, it is absurd for a bunch of so-called global "elders", among them Gro Brundtland, a former prime minister of Norway and one-time boss of the World Health Organisation, to jet into town and proclaim that the introduction of NHI is affordable and will contribute to economic growth. Clearly, colonialist attitudes, no matter how ignorant, are by no means a thing of the past, not even in Norway.       

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom. Readers are invited to take a stand with the IRR by clicking here or sending an SMS with your name to 32823. Each SMS costs R1. Ts and Cs apply.