Dedicate Sin Tax to Healthcare

Sounds unlikely, doesn’t it, yet if one considers the realities of the South African healthcare market, it isn’t a bad suggestion. In providing the service of healthcare, there is a constant tension between critical needs and economics. This places health care practitioners under immense pressure particularly when economics are low, or tend to decline; the exact case in the South African environment. In most countries, a mix of private and public services have developed and are all subject to the same key uncertainties. These key uncertainties are (A) Medical inflation, which has resulted in many of our population being unable to afford humane medical care. (B) Skills and talent, the lack of which has resulted in a shortage of professional and trained medical personnel. (C) Epidemic/s, which are increasing in reach, severity and frequency. These epidemics now also include lifestyle diseases which impact population health. (D) Consumer behavior, which compounds the pressure on healthcare facilities. (E) Technology, which is developing rapidly and can be costly if not cleverly managed and maintained. (F) Corruption, which undermines every aspect of healthcare that aims to prosper. (G) Equitable affordability, which infers that in an ideal world no matter what one can pay, everyone should have the same basic healthcare. Assessing both the impact of each, and the predictability of its occurrence, these uncertainties are mapped on the following predictability impact chart.

There are a number of factors that cannot be predicted, these are the unknown unknowns. Where possible, these should be considered and managed. The known unknowns are the very uncertainties that should be planned for and managed. They are the more likely scenarios. It is this insight that makes scenario planning such a fundamental tool for business. Within South Africa, there are two of the above key uncertainties which are having a deep and lasting effect on healthcare. Number one, the lack of healthcare talent and the inability to attract enough good people into the profession, and two, the ever increasing advancement of life style epidemics, of which HIV/Aids is just one. Taking these two principals, the first largely within the country’s control (talent) and the other to a large extent outside of the country’s control (epidemics), a 2×2 matrix or scenario game board can be created as shown in the picture below.

Most countries would like to see their attraction of skills and talent increase, while the likelihood of epidemics decrease, thus moving in the north easterly direction on the board. Attracting skills and talent requires business acumen and finance. Furthermore, if one considers that, most epidemics are in fact lifestyle based and are predominantly health conditions borne of lifestyle choices, one can see that in truth the most pressing epidemics in the country result from choices around alcohol, drugs, smoking and diets. Surely then, the cause could finance the effect. The effect of which uses a large portion of the healthcare budget. According to the national treasury R15.1bn has been allocated to healthcare in the 2008/09 budget. The national treasury estimate that sin tax should raise approximately R19.5bn within the same period. If this made up 80% of the health budget then the total would be R24.4bn. Is this not a good match and more importantly, a direct link between the two major problems facing the healthcare industry at present?

South Africa and its Electricity Crisis

Taking two principal variables affecting the country, one within the country’s control, the growth in electricity supply relative to demand, and one to a large extent outside of the country’s control, economic growth, a 2×2 matrix or scenario game board can be constructed. This matrix presents a best-case scenario, a worst-case scenario, as well as two intermediate scenarios. Here is the picture with South Africa positioned on this scenario game board.

How does South Africa move on the game board? Hopefully most South Africans including the governing leadership would like to see the economy grow and the electricity supply growth exceed the demand for electricity. This would then move South Africa in a North East direction on the game board, as indicated by the red arrow. The options that can be realistically done within the country’s control are listed below. It is believed that these options will take the negative scenarios as far as possible out of play and enable the country to thrive in the good ones;

  • Increase the capacity, and the effective and efficient operation of current generation plants
  • Increase the current efficiency of transmission and substation transformation
  • Deregulate the electricity supply industry and facilitate trade
  • Reduce the ‘red tape’ and speed up the development of generating capacity
  • Creative self sustaining electricity generating solutions at the nodes of demand
  • Incentive schemes for domestic, commercial and industrial demand side solutions
  • Import assistance and technology to build decentralised naturally driven generation