The Institute for Race Relations (IRR) has warned that placing South Africa’s entire health care system under government control is likely to accelerate middle-class emigration, triggering a calamitous decline in tax revenue.
The warning comes as President Cyril Ramaphosa is expected to sign into law the controversial National Health Insurance Bill on Wednesday, as announced earlier this week.
Under the NHI system, South Africa’s entire health care system will be brought under the control of the government. This means that private health care, too, will in time be controlled by the government.
“South Africans have seen what happens when the ANC controls critical institutions. They anticipate that health care will collapse, just as has happened with the supply of water and electricity, education, law enforcement and municipal services, to name some examples,” the IRR said in a statement.
“While middle-class citizens have been able to protect themselves from many of the worst consequences of ANC misgovernance by paying for functioning private services, they will not easily be able to avoid the harm a wholly state-controlled health system does to them and their families.”
According to the IRR, citizens most affected by the introduction of the NHI will be the approximately 1.9 million taxpayers earning more than R500,000 per year. This is assuming that almost all of them are voluntarily paying for private health care in addition to the deficient public health care they are compelled to fund through their taxes.
“These 1.9m taxpayers play a disproportionate role in funding the state. Together, they pay 76.6% of all personal income tax in South Africa, according to National Treasury estimates for 2024/25. The R565 billion they contribute makes up over a quarter − 27.7% − of the total revenue the government expects to collect in 2024/25. It also helps pay for social grants for the poor and a raft of other state-provided services,” the IRR noted.
As business owners, entrepreneurs or skilled employees, these taxpayers play a key role in the economy. Many have above-average work experience, job skills, education levels and business networks.
“Those are precisely the attributes that give them the competitive edge in international job markets. To escape the harm they foresee from an ANC-controlled health system, they will be sharpening their pencils to apply for overseas jobs before the ink is dry on the NHI Bill,” the IRR said.
“The departure of those taxpayers will have dramatic effects on South Africa’s public finances.”
If half of these individuals left the country, the fiscus would lose around 14% of its total revenue from the decline in personal income tax alone – probably more, because higher-income earners are more likely to leave. And at the same time as suffering a steep decline in revenue, the IRR warned, the fiscus would have to fund a health system costing hundreds of billions of rands.
“Corporate income tax would also drop as some of the country’s most productive employees leave and companies are deprived of their skills. Value-added tax would similarly decline as the middle class and the wealthy emigrate and start spending their money outside the country,” the IRR said.
IRR chief executive John Endres said the NHI concept was “badly flawed” and “poses a grave threat” to public finances and the economy.
“That the Ramaphosa administration is now pushing ahead with it, while ignoring the constructive criticism and warnings it has received over recent years, is extremely concerning,” said Endres.
“The decision speaks to economic recklessness and a lack of foresight that will impose a high cost on South Africa. The IRR has written extensively about the threats posed by the NHI, including in parliamentary submissions that highlight the unconstitutional aspects of the Bill,” he said.
“We will continue opposing the NHI while defending the right of South Africans to choose the health care they want. Donors with an appetite for litigation are invited to get in touch with my office directly.”
