Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl

 
Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
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 - Commissioned by the ministry of Foreign Afairs - RVO.nl
Economic
Opportunities
in the
Healthcare
Infrastructure
Sector in
South Africa
Report prepared for the Embassy of the
Kingdom of the Netherlands in South Africa
—
October, 2017
Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
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

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
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

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
1. Overview of healthcare infrastructure in South Africa

South Africa’s healthcare sector is highly polarised. While 82.6% of the population relies on
the public healthcare provision, 17.4% of individuals living in South Africa belong to private
medical schemes1. Yet, expenditure in the public and private spheres is almost at 50:50
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.

1.1 Public Sector                                 within provincial boundaries based on
The South African healthcare system is            referrals from district hospitals. Regional
based on a referral system. Primary               hospitals are level 2 hospitals and must
healthcare (PHC), which includes clinics and      provide the following specialist services:
ward based healthcare outreach teams, are         paediatric, obstetrics and gynaecology,
the first point of contact for patients. The      internal medicine, general surgery, trauma
PHC clinics refer patients to the relevant        and emergency services, short-term
specialist in a hospital in their area. Public    ventilation in an intensive care unit, and
hospitals are classified into five categories.    services in at least one of the following
                                                  specialities: orthopaedic surgery, psychiatry,
District hospitals operate 24 hours a day         anaesthetics or diagnostic radiology.
and serve a defined population within a           Regional hospitals may provide training for
given district. These facilities have general     healthcare professionals where practical.
practitioners and clinical nurse practitioners.   Regional hospitals fall within the jurisdiction
District hospitals are level 1 hospitals and      of provincial Departments of Health. A
may provide the following specialist              regional hospital typically has between 200
services:     paediatric,    obstetrics    and    and 800 beds.
gynaecology, internal medicine, general
surgery and family physician. District            Tertiary hospitals receive referrals from
                                                  regional hospitals and are not limited by
hospitals may provide training for healthcare
professionals where practical. They are           provincial boundaries. Tertiary hospitals are
owned and funded predominantly by                 level 3 hospitals and provide supervised
provincial Departments of Health, with            specialist and intensive care services.
some district hospitals under the                 Tertiary hospitals fall within the mandate of
                                                  provincial Departments of Health. These
jurisdiction of municipalities. They are          facilities may provide training for healthcare
further classified into::                         professionals. A tertiary hospital typically
• Small district hospitals: 50 -150 beds;         has between 400 and 800 beds.
• Medium district hospitals: 150 - 300
                                                  Central hospitals provide tertiary and
   beds;
• Large district hospitals: 300 - 600 beds.       central referral services, and may provide
                                                  national referral services. Central hospitals
Regional hospitals operate 24 hours a day         are level 4 hospitals and are not restricted
and serve a defined regional population           by provincial boundaries.

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
They provide highly specialised and costly       treatments. Such hospitals have a
services such as heart and lung transplants,     maximum of 600 beds. Specialised
bone marrow transplants, liver transplants       hospitals can provide services of a
or cochlear implants, and require highly         secondary, tertiary and quaternary level
skilled and scarce personnel. Central            hospital. These facilities fall predominantly
hospitals are academic hospitals and must        within    the   mandate        of   provincial
provide training for healthcare professionals    Departments of Health.
as well as conduct research. Furthermore,
they are attached to a medical school as         1.1.1 Age and state of infrastructure
they are the main teaching platform for          Many facilities fail to meet the minimum
healthcare specialists. Patients are referred    norms and standards as set by the
to central hospitals if adequate level of care   government. The majority of public hospitals
cannot be provided in a tertiary hospital.       were built decades ago with relatively little
Central hospitals are controlled by the          refurbishment done over time. The age of
National Department of Health (NDOH). A          central academic hospitals is presented in
central hospital has a maximum of 1,200          Table 1.1. A number of these hospitals were
beds.                                            built in the 1900s, with almost 50% not
Specialised hospitals focus on a specific        renovated for at least 20 years. Public
areas such as tuberculosis, rehabilitation,      health infrastructure thus remains in need
chronic psychiatric and infectious disease       of extensive refurbishment.

Table 1.1: List of central/academic hospitals

Central (academic) hospital                          Province         Year         Year
                                                                      Opened       renovated
 Mahatma Gandhi Memorial Hospital                     KwaZulu-Natal      1997          N/A
 Inkosi Albert Luthuli Central Hospital               KwaZulu-Natal      2002          N/A
 Addington Hospital                                   KwaZulu-Natal      1878         1967
 King Edward VIII Hospital                            KwaZulu-Natal      1936          N/A
 RK Khan Hospital                                     KwaZulu-Natal      1969          N/A
 Prince Mshiyeni Hospital                             KwaZulu-Natal      1987          N/A
 Nelson Mandela Academic Hospital                     Eastern Cape       2004          N/A
 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          N/A
 Groote Schuur Hospital                               Western Cape       1938         1984
 Red Cross Children's Hospital                        Western Cape       1956         2013

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
Furthermore, state clinics and hospitals          while catering to a growing and ageing
tend to be concentrated in urban areas,           population5 and a high burden of disease.
which requires rural populations to travel        The National Infrastructure Plan, announced
long distance to access care. There remains       in 2012, aims to address some of the
a great need for appropriate infrastructure       aforementioned infrastructure challenges
capacity to address the existing supply           faced by the public sector. The Plan
shortage and manage increasing demand             comprises 18 Strategic Integrated Projects
going forward. However, as staff and              (SIPs),      addressing    the      country’s
operational expenses tend to consume the          infrastructure needs ranging from energy,
majority of the budget, spending on capital       transport, education and healthcare to ICT
and maintenance projects is constrained.          connectivity. SIP 12 focuses on extensive
The Government is forecast to spend               refurbishment of public health facilities,
R187.5 billion (€11.6 billion 4), ca 12% of its   including the refurbishment of hospitals,
total budget, on health provision in the          revitalisation of nursing colleges and
financial year 2017/18. The total expenditure     building or upgrading six major academic
of the NDOH over the Medium Term                  hospitals in preparation for the National
Expenditure Framework (MTEF), an annual           Health Insurance (NHI) system.
rolling three year expenditure plan, is
                                                  The bulk of the works are being financed by
anticipated at R606 billion (€37.6 billion).
                                                  the state. The six academic hospital
However, despite such high projected
                                                  refurbishment projects were to be procured
spending, the public health sector remains
                                                  and developed under a PPP framework. The
underfunded.
                                                  projects were however suspended soon
Many of the challenges faced by the South         after coming out to market (refer to section
African public healthcare sector are deeply       3.1 on PPPs). New developments suggest
rooted in its past. Today the country             that the initiative may pick up pace with the
continues to grapple with a shortage of           government reiterating its commitment to
resources including qualified medical staff       infrastructure plans and acknowledging the
and adequate infrastructure and equipment,        role and importance of the private sector.

1.2 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 (‘Netcare’),
Life Healthcare Group (‘Life Healthcare’)
and      Mediclinic       Southern    Africa
(‘Mediclinic’). The remainder of the market

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
comprises a number of smaller, upcoming              been constrained by several factors such as
groups 6, with the result that competition is        the uncertainty regarding the outcomes of
relatively low. The cost of private healthcare       the Competition Commission enquiry. The
is estimated to be one of the highest in the         government has also reduced the number
world and became the subject of the                  of operating licences being issued which
Competition Commission inquiry that                  affected the growth of the larger operators.
started in 2014 and is still ongoing.                While the smaller independent prospective
There are currently approximately 300                operators, on the other hand, have
                                                     struggled with access to capital to fund
private hospitals and clinics in the country.
                                                     infrastructure projects.
Expansion in private healthcare facilities has

Figure 1.1: Overview of the National Infrastructure Plan

SIP 9: Green Energy in support of the                             SIP 12: Revitalisation of hospitals
South African economy                                             and other health facilities
SIP 10: Electricity generation to                                 SIP 13: National schools building
support socio-economic development                                programme
SIP 12: Electricity transmission and                              SIP 14: Higher education infrastructure
distribution for all

SIP 6: Integrated
municipal infrastructure
project
                                                                               SIP 15: Expanding access
SIP 7: Integrated urban                                                        to communication
space and public                                                               technology
transport programme
                                                                               SIP 16: SKA & MeerKat
SIP 11: Agri-logistics and
rural infrastructure

SIP 1: Unlocking the Northern mineral
belt with Waterberg as the catalyst
SIP 2: Durban-Free State–Gauteng
logistics and industrial corridor                                 SIP 17: Regional Integration for African
SIP 3: South Eastern node & corridor                              cooperation and development
development                                                       SIP 18:Water and Sanitation
SIP 4: Unlocking the economic                                     Infrastructure Master Plan
opportunities in North West Province
SIP 5: Saldanha-Northern Cape
development corridor

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Economic Opportunities in the Healthcare Infrastructure Sector in South Africa - Commissioned by the ministry of Foreign Afairs - RVO.nl
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 government’s focus on
the design and legislating of the National Health Insurance. With NHI finally being gazetted
and the Competition Commission’s 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.

2.1 National Health Insurance
The NHI policy, gazetted on 28 June 2017,       reactive     treatment.      Currently,    great
aims to provide quality healthcare to all       emphasis is being placed on improving PHC
citizens and long-term residents in the         facilities to meet the required minimum
country regardless of their financial status.   standards for the NHI Fund accreditation.
                                                Furthermore, NHI dictates that PHC centres
While the theoretical merits of NHI cannot
                                                be located within specific radius of human
be disputed, the financing of NHI has been
                                                settlements. This requires that additional
a topic of national debate. The proposal is
                                                facilities be built in order to reduce distance
for the scheme to be financed through
                                                to healthcare for rural populations in
general taxation, which will necessitate
                                                particular.
significant structural reforms involving
higher taxation7.                               This approach to PHC provision should be
                                                beneficial to the public given that PHC
The white paper on NHI has also become a
                                                clinics remain the first point of contact for
focal point in the national debate around the
                                                most South Africans. In 2016 64.3% of
quality of and access to the public
                                                patients reported to first access public PHC
healthcare. NHI entails far reaching
                                                clinics, followed by private doctors (23.8%)
operational reforms designed:
                                                and public hospitals (7.1%)8.
• To improve service delivery incorporating
                                                NHI is currently being rolled out in 10 pilot
  improvements and expansion of the
                                                districts. The results of these pilots will
  facilities;
                                                inform the debate around the ability of
• To even access to healthcare in rural and     provincial and district health authorities to
  urban areas; and                              deliver the significant service improvements
• To effectively address the country’s          associated with NHI.
  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

                                                                                              8
2.1.1 Ideal Clinic framework                         2.1.2 Impact on the private sector
PHC clinics will have to meet the minimum            In the white paper on NHI, the government
quality standards to be accredited for NHI.          indicated its intention to involve the private
These standards are outlined in the Ideal            sector in the administration and provision of
Clinic framework, which was launched in              public healthcare in the future.
July 2013.                                           • Administration: there is expectation,
To date, the Ideal Clinic programme has                particularly amongst large administrators,
assessed all PHC facilities in the country.            that existing private sector administrators
Initially, none of the government’s 3,477              may be chosen to manage the entire NHI
clinics were compliant with the Ideal Clinic           Fund. This expectation was created by
standards. However, within the first year              the need to draw upon “existing
more than 190 have reached ideal levels of             expertise in the area of administration
functioning, with 106 of these facilities              and management of insurance funds”,
located inside NHI pilot districts. By                 expressed in the white paper on NHI.
2015/16, 322 facilities qualified as Ideal           • Provision: it is anticipated that private
Clinics, with the number increasing to an              sector operators will receive payments
estimated 750 in 2016/17. The NDOH’s plan              from the NHI Fund to provide publicly
is for 1000 clinics in total to qualify as Ideal       funded healthcare.
Clinics by the end of 2017/18, 1,500 by the
end of 2018/19 and 2,823 by the end of               However, at this stage it remains uncertain
2019/209.                                            how the government intends to contract

Figure 2.1: National Health Insurance - anticipated impact

                                    National Health Insurance

                     PHC facilities                                    Training facilities

                                                              Academic                   Other
          Quantity                   Quality                  hospitals                facilities

                                                                                                    9
with the private sector and what types of        decrease in demand for private healthcare
services the government sees as priorities.      provision once NHI is fully implemented.
This uncertainty has been one of the main
                                                 It is likely that the private sector will need to
reasons behind a relative lack of activity in
                                                 reorganise significantly to reduce its
the private health infrastructure market.
                                                 emphasis on inpatient treatment in favour
It is also anticipated that the population’s     of PHC provision through NHI. Moreover, it
ability to afford private medical schemes        is expected that the focus will be on low
will    decrease     as   mandatory       NHI    cost PHC facilities as the NHI rates are
contributions through payroll tax are            anticipated to be much lower than those
introduced10. This may potentially result in a   currently paid by medical schemes.

2.1.3 Training facilities for medical staff
The expansion of access to healthcare            This is an unpopular decision with many
envisioned by NHI will require significant       provincial health departments, though,
increases in the number of healthcare            which may face significant resistance.
professionals in the country. To date smaller    Another possibility is that restrictions on
initiatives have been put forward, such as       training doctors, nurses and specialists
easing the licensing process for foreign-        currently imposed on the private sector will
trained doctors working in South Africa.         be lifted. Some of the large private
However, given the scale of the shortage of      healthcare        groups,   including   Life
medical staff, the country will need to          Healthcare, have expressed interest in
increase the number of domestic                  training medical staff12. This might require
professionals it trains.                         developing new infrastructure as currently
The training of medical staff falls within the   private hospital groups have limited nurse
mandate of the NDOH. Central hospitals,          training facilities only.
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:
• Refurbishment     of   existing   academic
  hospitals;
• Refurbishment of other public training
  facilities; and
• Development of new infrastructure to
  facilitate training.
The NHI envisages that the NDOH will
assume control of tertiary care facilities.

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2.2 Health Market Inquiry
As mentioned in section 1.2, the                   The fee-for-service payment system is
Competition Commission has launched the            another area that currently encourages
Health Market Inquiry (HMI) to investigate         providers to produce volume rather than
the root causes of the high costs of               quality and increase costs. It also prevents
healthcare provision in the private sector.        cooperation between providers. It is
The investigation intends to provide               anticipated that this system will be replaced
transparency into the system and the               with a range of new contracting methods
incentives which exist in the private              where providers are paid based on the
healthcare sector as a whole - and the             value they add. For instance, should
private hospital market specifically. The          payments for treatment be set per
inquiry started in January 2014 and took           population      rather     than     individual
submissions from the sector in 2015 and            procedures, it may be more profitable for
again in 2016. The findings of the inquiry are     private healthcare providers to focus on
intended to be released in Q4 2017.                disease prevention to reduce the cost of
The Competition Commission has reasons             treatment otherwise borne by providers.
to believe that there are features of the          In summary, with regulations in the health
market that prevent, distort or restrict           sector rapidly being aligned with the needs
competition. The initial hypothesis was that       of NHI and the anticipated results of the
there was an excessive concentration in the        HMI, private sector players have already
health system, with three large private            begun to position themselves to adapt to
healthcare providers having 75% of the             and take advantage of the expected
market, and three medical scheme                   changes. It is anticipated that the three
administrators claiming around 90% of the          groups that currently dominate the private
market.                                            healthcare market will potentially not
However, public submissions have pointed           increase the numbers of hospital facilities
to a different challenge, i.e. ineffective and     they own but rather focus on developing
inadequate regulation. As such, it is              clinics and innovative home-care services.
anticipated that the HMI will trigger              Furthermore, it is also expected that smaller
regulatory reforms which will be aligned           groups and/or outside investors will enter
with NHI and other global trends. For              the market by developing new facilities in
instance, at present tariffs are negotiated        areas that the dominant players do not
individually between healthcare providers          cover. This would create more competition
and medical schemes. This creates                  in the sector and increase coverage to
enormous complications and heavily favours         unreached areas.
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.

                                                                                              11
2.3 Energy and water: environmental and          consumption of municipal water. Such
cost implications                                solutions could potentially include extraction
The primary source of electricity in South       of borehole water and/or identification and
                                                 implementation of water consumption
Africa is from the national grid, which is
                                                 optimisation projects.
owned and operated by Eskom, the national
electricity producer. The majority of Eskom’s    Netcare, for instance, recently undertook a
electricity is generated from coal-fired         water extraction feasibility study as well as
power plants, which is increasingly              training of facility managers in identifying
becoming a subject of national debate due        and     implementing      opportunities   for
to the adverse environmental impact of           optimisation of water consumption.
fossil fuel combustion. Additionally, a drive
                                                 In the public sector, the Western Cape DOH
to reduce reliance on the national grid has
                                                 has committed to implementing green
been triggered by concerns over the
                                                 strategies across healthcare facilities. Their
security of supply and affordability of
                                                 current approach, called the “5L” strategy,
electricity distributed by Eskom. A trend is
                                                 focusses on all areas impacting the
therefore fast developing amongst public
                                                 environment with specific emphasis on
and private institutions alike, to employ
                                                 water and energy. Such initiatives are likely
alternative power generation solutions such
                                                 to become more common over time, as
as photovoltaic panels. Given the country’s
                                                 limited water resources increasingly
conducive climate, solar energy has gained
                                                 become a concern for the country.
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

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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.

3.1 Private Public Partnerships
PPPs in South Africa gained momentum in            billion (€366 million) by 2019/20. This is
the early 2000s with 28 projects closed in         expected to be facilitated by improvements
the first decade. However, since 2010 the          in the PPP implementation processes. The
number of PPP transactions has decreased           National Treasury is currently considering
dramatically, with only 3 projects reaching        ways to reduce the time it takes to plan
financial close. The total number of closed        projects as well as streamlining the
PPP projects in the health sector to date is       implementation of such partnerships. The
8, with the last one reaching financial close      National Treasury has also teamed up with
in May 2007. Refer to Appendix 2 for a full        both local and international development
list of closed PPPs.                               finance institutions to explore alternative
                                                   financing mechanisms while diversifying
Since 2011/12 the value of PPP transactions
                                                   sources of funding to encourage private
across all sectors, including health,
                                                   sector participation. This is expected to
decreased from an estimated R10.7 billion
                                                   increase the pool of funds available and
(€663 million) to R4.8 billion (€298 million) in
                                                   help decrease project costs13.
2016/17. This was reported to be mainly a
result of delays and cancelled projects in         In the 2011 State of the Nation address, the
the health and security sectors, driven by         President prioritised the PPP Health
concerns over affordability of such projects.      Flagship Programme. This programme
However, going forward the government              comprised       the     development       or
anticipates that the value of PPP projects         redevelopment of six central academic
will gradually increase to an estimated R5.9       hospitals as presented in Table 3.1.

Table 3.1: PPP Health Flagship Programme: list of central/academic 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                    may also be considered by the relevant
to market and transaction advisors                              authorities for procurement under the PPP
procured. The entire programme was                              framework. These facilities are also in a dire
however subsequently suspended. One of                          need of refurbishment of physical
the key reasons for the suspension of the                       infrastructure and related services, such as
programme was the perception that PPPs                          facilities management. The implementation
did not offer value for money, but benefited                    of PPPs would be subject to affordability
the private sector instead. This resulted in                    and value for money criteria amongst
the government having to reconsider the                         others. However, there is currently no
way PPP transactions had been structured.                       indication of such transactions being
                                                                actively pursued.
The NDOH is anticipated to release these
projects back into the market. The following                    At present, there are only two health PPP
four of the six hospitals have been                             projects confirmed as under procurement,
prioritised and should return to market over                    as presented in Table 3.2. These are:
the MTEF. The combined capital value for                        • The installation of tri-generation14 plants
the four projects is R15 billion:
                                                                  at Chris Hani Baragwanath Hospital in
• Limpopo Academic Hospital;                                      Gauteng to reduce dependence on the
• Dr George Mukhari Academic Hospital;                            national grid. This is in line with a general
                                                                  trend observed nationwide; and
• Nelson Mandela Academic Hospital; and
                                                                • The     refurbishment,     staffing    and
• King Edward VII Academic Hospital.                              equipping of renal dialysis units in three
Out of the above four hospitals, the                              hospitals in the Northern Cape province.
Limpopo Academic Hospital project has                           There are more opportunities for such
been the furthest advanced.                                     projects to be rolled out in other public
Lower tier regional and district hospitals                      hospitals and facilities.

Table 3.2: Pipeline of PPP projects under review

 Project             Implementing             Capex          Project Description               Current
 Name                Agent                                                                     Status
 Chris Hani          Gauteng                  N/A            Installation of tri-generation    Procurement
 Baragwanath         Department of                           plants to reduce dependence
 Hospital            Infrastructure                          on the national grid
                     Development
 Northern            Northern Cape            N/A            Refurbishment, staffing and       Procurement
 Cape Renal          DOH                                     equipping hospitals in
 Dialysis                                                    Kimberley, Upington and
                                                             Springbok with renal dialysis
                                                             units
 Source:   National Treasury, Full Budget Review 2017/2018

                                                                                                            14
Table 3.3: Major infrastructure projects under way

 Project Name            Implementing             Capex        Project Description            Current
                         Agent                    (R’bln)                                     Status
 Health Facility         Provincial                 17.8       Construction, maintenance,     Work in
 Revitalisation          departments                           upgrading and rehabilitation   progress
 Grant15                                                       of new and existing
                                                               infrastructure
 National Health         NDOH                        3.0       Accelerate construction,       Work in
 Insurance                                                     maintenance, upgrading         progress
 Indirect Grant                                                and rehabilitation of new
                                                               and existing infrastructure
 Limpopo: Siloam         NDOH                         1.6      Replace hospital               Under
 Hospital                                                                                     construction
 Dr Pixley ka            KwaZulu-Natal               2.7       Replace hospital               Under
 Seme Hospital           DOH                                                                  construction
 Ngwelezane              KwaZulu-Natal                1.0      Construct hospital complex     Under
 Hospital                DOH                                                                  construction
 and Lower
 Umfolozi War
 Memorial
 Hospital
 Complex
 King George V           KwaZulu-Natal                1.2      Upgrade and add to existing Under
                         DOH                                   hospital                     construction
 Boitumelo               Free State                  0.6       Revitalise existing hospital Practical
 Hospital                DOH                                                                completion

 Chris Hani              Gauteng DOH                 0.8       Construct pharmacy, x-ray      Completed
 Baragwanath                                                   and outpatient departments
 Rob Ferreira            Mpumalanga                   1.5      Upgrade and additions of       Under
 Hospital                DOH                                   the existing hospitals         construction
 Cecilia                 Eastern Cape                 1.3      Construct main hospital        Under
 Makiwane                DOH                                   (phase 4)                      construction
 Hospital
 Bophelong               North West                   1.1      Construct new hospital         Under
 Hospital                DOH                                                                  construction
 St Elizabeth's          Eastern Cape                0.7       Upgrade existing facility      Under
 Hospital                DOH                                                                  construction
 Source:     National Treasury, Full Budget Review 2017/2018

                                                                                                         15
3.2 Other infrastructure plans
The national government has budgeted                     equipment, is set out in more detail in Table
approximately R606 billion for health                    3.3, which indicates major infrastructure
provision over the MTEF. Out of this budget              projects under way (note that the project
R23 billion has been allocated to ‘building              costs presented below are not limited to
and other fixed fixture’ and R12.6 billion to            the MTEF, therefore the total amount
‘machinery and equipment’. The budgeted                  exceeds the R23 billion in the budget
expenditure on infrastructure, including                 allocated to infrastructure).

Table 3.4: Major infrastructure projects in planning over the MTEF

                                          Implementing      Capex      Project        Current
 Project Name
                                          Agent             (R’bln)    Description    Status
                                                                       Replace
 Limpopo: Elim Hospital                   National DoH         1.9                    Identification
                                                                       hospital
 Free State: Dihlabeng                                                 Replace
                                          National DoH         2.0                    Identification
 Hospital                                                              hospital
                                                                       Replace
 Limpopo: Tshilidzini Hospital            National DoH         2.3                    Feasibility
                                                                       hospital
 Eastern Cape: Zithulele                                               Rehabilitate
                                          National DoH         0.5                    Identification
 Hospital                                                              hospital
 Eastern Cape: Bambisana                                               Rehabilitate
                                          National DoH         0.7                    Identification
 Hospital                                                              hospital
 Source:   Full Budget Review 2017/2018

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 3.4). These

                                                                                                    16
3.3 Provincial Departments of Health
Annual Performance Plans (APP) provide             departments’ APPs include new and
detail of key priorities and projects to be        replacement     assets,     upgrades     and
undertaken towards achieving the MTSF.             additions, rehabilitation, renovations and
The plans include expected capital costs of        refurbishments, and non-Infrastructure. The
individual projects. The most recent 2017/18       total value of planned spending on capital
APPs cover projects that are planned for           projects by each of the five provinces under
the financial years 2017/18 to 2019/20. The        review is presented in Graph 3.2.
projects included in the           provincial

Graph 3.1 Provincial Departments of Health: Planned capital projects

        1 800
        1 600
        1 400
        1 200
 (Rm)

        1 000
         800
         600
         400
         200
            -
                 KZN          Western Cape        Limpopo          Gauteng       Eastern Cape

                         2017/18               2018/19                 2019/20

3.3.1 Gauteng DOH
The total combined budget of the Gauteng
DOH for infrastructure development and
refurbishment over the MTEF is R4.32
billion, with 118 projects identified. The five
largest projects, in monetary terms, are set
out in Table 3.5.

                  Gauteng

                                                                                                17
In addition to the provincial facilities                        • R30 million for the procurement of
indicated above, the City of Johannesburg                         Health Information System to improve
proposed the following health infrastructure                      health services; and
plans over the fiscal year 2017/18:                             • R1 million to begin work on the new
• R22.2 million for the Ebony Park Clinic                         Naledi Clinic (R31 million allocated over
  renewal;                                                        three years).
• R22.2 million for New Florida Clinic;

Table 3.5: List of top 5 projects based on budget allocated: Gauteng

 Name of                Project                        Project Status (IDSM)16                                    MTEF
 Hospital               Description                                                                               Capex
                                                                                                                  (R’m)
                        Construct new                  Project status: detailed design (February
                        district hospital              2017). Construction was expected to
 Lillian Ngoyi
                        adjacent to existing           start in February 2017. Completion                         1,102
 Hospital
                        community health               expected in February 2020.
                        centre
                                           Project status: tender was awarded
 Johannesburg           Construct new
                                           prior to February 2016. Completion                                      165
 FPS Mortuary           mortuary
                                           expected in October 2019.
                                           Project status: design (February 2017).
 Hillbrow               Convert community
                                           Construction was expected to start in
 District               health centre into                                                                         150
                                           December 2017. Completion expected in
 Hospital               district hospital
                                           December 2020.
                                           Project status: detailed design (February
 Discoverers            Convert community
                                           2017). Construction was expected to
 Community              health centre into                                                                         120
                                           start in June 2017. Completion expected
 Health Centre          district hospital
                                           in July 2020.
                                           Project status: design development
 Daveyton                                  (February 2017). Construction was
                        New Hospital                                                                               114
 Hospital                                  expected to start in April 2017.
                                           Completion expected in March 2020.
 Source:   Gauteng Department of Infrastructure Development, Annual Performance Plan for 2017/18 Financial Year

                                                                                                                         18
3.3.2 KwaZulu-Natal DOH
The total combined budget of the KwaZulu-
Natal DOH for infrastructure development
and refurbishment over the MTEF is R1.15
billion, with 113 projects identified. Five
largest project, in monetary terms, are set
out in Table 3.6.

                           KwaZulu-Natal

Table 3.6: List of top 5 projects based on budget allocated: KwaZulu-Natal

 Name of                Name of Project               Project Status (IDMS)                      Capex
 Hospital                                                                                        (R’m)
                        Develop new 8-                Project status: Infrastructure Planning
                        theatre block, new            (Stage 1). Project completion appears to
 Ngwelezane             entrance, parking             be beyond the current MTEF.
                                                                                                  400
 Hospital               and upgrade of
                        sewer/water
                        services
 Prince                                               Project status: Package Definition
 Mshiyeni               Upgrade fire                  (Stage 4). Project completion appears to
                                                                                                  140
 Memorial               protection system             be beyond the current MTEF.
 Hospital
                                                      Project status: Package Preparation
 Umphumulo              Develop new core
                                                      (Stage 3). Project completion appears to    120
 Hospital               block
                                                      be beyond the current MTEF.
                                                      Storm water unblocking project status:
                                                      Under Construction (Stage 7);
                        Storm water
 King Edward                                          Completion date not stated.
                        unblocking and                                                            111
 VIII Hospital                                        Upgrading nursery project status:
                        nursery upgrade
                                                      Design Development (Stage 5);
                                                      Completion date not stated.
                        Repairs and                   Project status: Design Development
 Osindisweni
                        renovations to TB             (Stage 5). Completion date not stated.      100
 Hospital
                        ward
 Source:   Kwa-Zulu Natal Department of Health, Annual Performance Plan 2017/18 – 2019/20

                                                                                                        19
3.3.3 Western Cape DOH
The total combined budget of the Western            considering the application of open source
Cape DOH for infrastructure development             maintenance management systems for the
and refurbishment over the MTEF is R1.97            maintenance of healthcare facilities and
billion, with 233 projects identified. The five     medical equipment (Pragma is currently
largest projects, in monetary terms, are set        employed in 6 facilities as the maintenance
out in Table 3.7. In terms of strategic             management platform).
direction, Western Cape DOH’s priority is           It is interesting to note that the Western
the maintenance of existing health                  Cape provincial government has adopted an
infrastructure. The province is currently           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 3.7: List of top 5 projects based on budget allocated: Western Cape

 Name of            Nature of Project        Project Status (IDMS)                     Capex
 Hospital                                                                              (R’m)
                                             Project status: infrastructure planning
 Tygerberg                                   (Stage1). Start date expected in August
                    Construction of a
 Regional                                    2018, with construction potentially       2,400
                    new hospital
 Hospital                                    starting in 2021/22 and planned
                                             completion in March 2026.
                                             Construction budget: R275 million
                                             Health technology budget: R45 million
 Observatory        Replacement of           Project status: production information
 Forensic           forensic pathology       (Stage 6A). Tender for the construction
                                                                                        320
 Pathology          laboratory and           contractors issued in November 2016.
 Laboratory         Health Technology        Completion expected in November
                                             2020. Health technology expected to be
                                             implemented in May 2019 - May 2021.

                                                                                              20
Name of               Nature of Project             Project Status (IDMS)                      Capex
Hospital                                                                                       (R’m)
                                                    Non-infrastructure health technology
                                                    refurbishment project. Commenced in
Tygerberg             Health Technology
                                                    October 2016, implemented in stages,        300
Hospital              refurbishment
                                                    with scheduled for completion in March
                                                    2030.
                                                    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
                      A number of
Groote Schuur                                       project: Infrastructure Planning (Stage
                      smaller upgrade                                                           237
Hospital                                            1). Project to commence in April 2018,
                      projects
                                                    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.
                                                    Project status: Preparation and Briefing
Bloekombos
                      New community                 (Stage 3). Project commenced in May
Community                                                                                       100
                      day centre                    2017 with an expected completion in
Day Centre
                                                    April 2022.
Source:     Western Cape Department of Health, Annual Performance Plan 2017 - 2018

3.3.4 Eastern Cape DOH
The total budget of the Eastern Cape DOH
for capital projects over the MTEF is R4.54
billion, set out in detail in Table 3.8. A
breakdown of the specific projects planned
has not been provided in the provincial
department’s APP.

               Eastern Cape

                                                                                                      21
Table 3.8: Planned infrastructure spending: Eastern Cape DOH

 Expenditure Type                                  2017/2018         2018/2019 2019/2020       Total
                                                     (R’m)             (R’m)     (R’m)         (R’m)
 Maintenance and Repairs                                436               497      473         1,405
 Upgrades and Additions                                 122               181      229         531
 Refurbishment and Rehabilitation                       335               326      485         1,146
 New Infrastructure Assets                              552               501      401         1,454
 Total                                                 1,445             1,506     1,587       4,537
 Source:    Eastern Cape Department of Health, Annual Performance Plan 2017/2018

3.3.5 Limpopo DOH
The total combined budget of the Limpopo
DOH for health infrastructure development
and refurbishment over the MTEF is R1.25
billion, with 265 projects identified. Five of
the largest project, in monetary terms, are
set out in Table 3.9.

                Limpopo

Table 3.9: List of top 5 projects based on budget allocated: Limpopo

 Name of              Name of Project               Project Status (IDMS)                       MTEF
 Hospital                                                                                       Capex
                                                                                                (R’m)
                      Replacement of                Project anticipated to start in 2017/18.
                      hospital on a new             Expenditure projected over 2017/18,
                      site: malaria centre          2018/19 and 2019/20.
 Musina               emergency
                                                                                                 148
 Hospital             services, mother
                      lodge, nursing
                      education institute,
                      equipment

                                                                                                       22
Name of              Name of Project               Project Status (IDMS)                      MTEF
 Hospital                                                                                      Capex
                                                                                               (R’m)
                      Replacement of the            Project anticipated to start in 2017/18.
 Dr MMM               nursing school at             Expenditure projected over 2017/18 and
                                                                                                77
 Nursing School       the Thabamoopo                2018/19 suggesting scheduled
                      Hospital site                 completion in 2018/19.
                      Upgrade health                Project anticipated to start in 2017/18.
                      support maternity             Expenditure projected over 2017/18 and
 FH Odendaal          complex,                      2018/19 suggesting scheduled
                                                                                                60
 Hospital             reorganisation of             completion in 2018/19.
                      casualty and out-
                      patient department
                      Upgrade maternity             Project anticipated to start in 2017/18.
 Sekororo             complex and                   Expenditure projected over 2017/18 and
                                                                                                53
 Hospital             medical gas plant             2018/19 suggesting scheduled
                      room                          completion in 2018/19.
                      Replacement of                Project anticipated to start in 2017/18.
                      existing clinic on            Expenditure projected over 2017/18,
 Mahale Clinic        the same site,                2018/19 and 2019/20.                        40
                      including furniture
                      & equipment.
 Source:    Limpopo Department of Health, Annual Performance Plan 2017/18

3.4 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
3.5 ICT infrastructure
The modernisation of operational systems        • Electronic patient records established on
within the various hospitals and other public     a national database;
health facilities has been acknowledged as      • Inventory management for better stock
vital for the efficient management of             control;
patients and the facilities themselves. While
ICT infrastructure is outside the scope of      • Automated ward planning tools for
this study, it is an area that is worth           effective  management  of nursing
exploring by foreign companies with               resources.
capability in electronic management             Dutch companies interested in commercial
systems. The implementation of the              opportunities in the health ICT infrastructure
following systems, amongst others, has          should conduct further research and
been identified as crucial to improve the       analysis of the South African market.
operational management of public health
facilities and patient records going forward:

                                                                                           24
4. Healthcare infrastructure plans and trends: private sector

As mentioned in section 1.2, 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:
• 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;
• Uncertainty over the implications of NHI;
• Uncertainty over the outcome and full impact of the HMI; and
• 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
2017/18, 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.

4.1 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,   within the same day.
such as Life Healthcare and Netcare,
                                                 However, development of new facilities
arelooking to expand their respective
                                                 may be somewhat limited, as growth in the
portfolios of day clinics as an alternative to
                                                 private sector often occurs through
full service facilities. This trend has been
                                                 acquisitions of smaller private health
driven by advances in medical technology,
                                                 facilities. Life Healthcare, for instance, has
which allow for a number of procedures
                                                 adopted such an approach as a way to
that historically necessitated patients to be
                                                 increase its footprint in areas where it has
admitted into hospitals, to be performed in
                                                 little or no coverage.
day clinics with patients being discharged

4.2 Other health facilities
There is a growing need in the country for       Care, which itself has 13 PPPs to provide
mental health facilities. The private sector     public sector patients with access to
perceives this gap as an opportunity and an      dialysis. The group appears to have plans to
area to focus on. Growth in the number of        further its presence in this area with
private mental health institutions is            continued upgrade of their existing dialysis
anticipated in the medium term.                  units. However, while this trend may offer
Other areas of emphasis in the private           some commercial opportunities, there is
sector include renal care and specialised        also a drive to pilot home-based and shared-
oncology treatment facilities. For instance,     care dialysis methods, where patients take
Netcare has 50% interest in National Renal       a more active role in their treatment. This
                                                 may limit infrastructure investment.

4.3 Energy sustainability
There is an observed trend in South Africa,       some of its facilities and are using energy
across numerous industries in the public         efficient LED technologies to reduce their
and the private sectors alike, to reduce and     energy. It is therefore anticipated that
improve the consumption of energy and            innovative     solutions       to     ensure
water. This is driven by a desire to reduce      environmental sustainability (and to reduce
the reliance on the national grid for the        operating costs) are to be prioritised in
provision of electricity, as well as to ensure   many health infrastructure projects, offering
efficient utilisation of water in healthcare     a commercial opportunity for private
facilities. For instance Netcare has already     companies specialising in such green
installed renewable energy systems in            energy technologies.

                                                                                            26
4.4 ICT infrastructure
The modernisation of ICT infrastructure and    may be sought after include electronic
existing systems also appears to be on the     patient records (established as a database
agenda of private health operators, such as    on a national level) or inventory
Mediclinic. While this report does not focus   management systems for better stock
on ICT infrastructure, it should be            control. This area should be further
acknowledged as a potential area for           developed to allow for a comprehensive
commercial opportunities for foreign           overview and assessment of potential
companies       specialising     in     such   business opportunities.
technologies. Services and solutions that

                                                                                       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.

5.1 Economic environment
The country’s growth has slowed down in          purchasing power decreases. This in turn
recent years. The country has a total            would have an adverse impact on the
unemployment rate of 26% and a youth (15-        revenues of private healthcare providers
24 year olds) unemployment rate of a             and hence their ability to grow.
daunting 52.7%. The adverse economic
                                                 The decreasing purchasing power of the
environment poses a number of challenges
                                                 South African Rand has seen foreign goods
to infrastructure developments in the health
                                                 become relatively more expensive. This has
industry.
                                                 been of particular relevance for the
On the public side the constrained fiscal        acquisition of medical equipment which is
conditions limit the government’s ability to     to a large extent sourced from international
expand healthcare provision, to improve the      suppliers. It is therefore anticipated that the
quality of existing facilities and to address    appetite for new large scale projects may
the maintenance backlogs. In the private         be limited until the economic conditions
domain the slowdown could potentially            improve. This may limit commercial
negatively     impact      medical    scheme     opportunities for third parties in the short to
contributions,     as      the    population’s   medium term.

5.2 B-BBEE Act
In order to encourage transformation and           be either direct, by way of shareholding,
enhance     economic      participation    of      indirect ownership, or through employee
previously disadvantaged people in South           or community shareholding schemes;
Africa, the government has implemented
                                                 • Management and control of the
the     Broad-Based     Black      Economic
                                                   company;
Empowerment (B-BBEE) Act, 2013. The act
provides a guideline for the level of            • Procurement and enterprise
ownership and concentration of black               developments; and
persons across the value chain, including:       • Investment in joint ventures with local
• Ownership of the company, which could            companies.

                                                                                             28
In order to promote increased localisation          rating may decrease. In other words, private
and to create local jobs, the government            healthcare providers in South Africa may
has aligned its procurement policies with           risk lowering their own B-BBEE score by
the B-BBEE Act. The Act is therefore an             entering contracts with foreign companies
important evaluation criteria in the public         that do not already have representation in
procurement of suppliers and contractors. It        South Africa or have a low B-BBEE rating.
has far reaching implications for the               This, in turn, may have an adverse impact
business community in the country, both             on their ability to partner with the public
those already operating in South Africa and         sector.
foreign businesses that wish to enter the           Therefore, any Dutch company that is
country.
                                                    considering entering the South African
Furthermore, it needs to be noted that the          health infrastructure market needs to
B-BBEE score of a given company depends             consider the B-BBEE Act and the possible
on its own value chain. Therefore, should it        implications on its strategy.
contract with a low-score partner, its own

5.3 Technology limitations
At present the use of advanced                      the various professional disciplines involved
technologies such as Value Driven                   in the provision of healthcare facilities need
Maintenance (VDM) or Building Information           to be integrated before considering
Modelling (BIM) in the design of public             advanced tools such as BIM. It is
health facilities is limited. This is primarily a   reasonable to assume that the same
result of systemic issues within the public         principle would apply to the remaining
health sector. These include a general lack         provinces in the country. Therefore, while
of    modernisation        of   public    health    the use of advanced technologies would be
infrastructure and a lack of integration of         beneficial in developing and managing
processes            including         planning,    healthcare          infrastructure,        the
implementation,          management          and    implementation of such tools must not be
operation of health facilities. These               seen as the primary solution to the issues
drawbacks were confirmed by the Western             facing the health infrastructure sector.
Cape DOH, which acknowledged that
                                                    Furthermore, should the use of such
currently the processes are run in isolation,
                                                    technologies be progressed, it would be
preventing implementation of advanced
                                                    subject to the outcome being aligned with
integrated solutions.
                                                    the norms, standards and guidelines set out
Going forward, the province’s view is that          in section 5.4.

                                                                                               29
5.4 Norms, standards and guidelines
There are a number of norms, standards            collaborative unit between the NDOH, the
and guidelines designed by the government         Development Bank of Southern Africa and
to provide a framework within which health        the Council for Scientific and Industrial
provision is to be delivered and facilities are   Research, which was established to
to be designed, constructed, operated and         optimise the acquisition and management
maintained.                                       of South Africa's public healthcare
National Health Act, 61 of 2003 sets out the      infrastructure    in    line    with     the
norms and standards for the provision of          aforementioned       health   infrastructure
healthcare in South Africa. The Office of         norms, standards and guidelines.
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 and/or 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

                                                                                           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.

6.1 PPP projects
As mentioned in section 3.1 of this report,     These hospitals are all major central
the NDOH is looking for alternative means       hospitals with teaching capability. They are
of funding and progressing PPP projects for     expected to come to market seeking a full
the six academic hospitals that were part of    funding and services solution from a private
the 2011 plans. There is still a need for       sector driven consortium. The NDOH stated
these hospitals to be developed in the          that it would be important that any
medium term. Of these six hospitals, the        partnership with the private sector takes
following have been prioritised with a          into account the full lifecycle needs of the
combined budget of around R15 billion.          facilities. Therefore, some of the separate
• Limpopo Academic Hospital (Polokwane          services or activities to be provided by the
  in Limpopo);                                  private sector include:

• Dr George Mukhari Academic Hospital           • Overall hospital management (this
  (West Gauteng and North West                    excludes provision of nurses and
  Province);                                      clinicians);

• Nelson Mandela Academic Hospital (Port        • Design and architectural services;
  Elizabeth in Eastern Cape); and               • Space development and utilisation;
• King Edward VII Academic Hospital in          • All equipment, specialised and non-
  Ethekwini (KwaZulu-Natal).                      specialised;
Although it is still unknown when these         • Information technology;
PPPs will be released to market, there are
                                                • Facilities management (security, catering,
indications that these transactions will be
                                                  cleaning etc.);
progressed in the medium term. It is
therefore reasonable to expect that the first   • Training and academic facilities;
three projects may come to market in 2018.      • Special power supply/energy efficient
The estimated aggregate cost of these             solutions.
three projects is around R10 billion. The
King Edward VII Academic Hospital project       This list is not exhaustive but does provide
is expected to follow shortly after with an     the best private sector opportunity given
estimated R5 billion cost.                      the wide scope of services required.

                                                                                          31
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