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State Seeks Hefty Slice of Health-Sector Profits
Tamar Kahn, Business Day
2006-06-15
Negotiators on the draft health-care charter are gearing up for tough talks this week on a new government proposal to get the private sector to hand over 2,5% of after-tax profit to a special fund to improve public health.
The draft charter, a copy of which has been seen by Business Day, also proposes companies set aside 5% of pretax profit for enterprise development, 3% of their payroll for skills development, and 1,5% of after-tax profit for corporate social investment.
That's a lot of money, said Val Beaumont, chairman of Innovative Medicines SA, which represents multinational pharmaceutical firms in SA.
Broad-based black economic empowerment will be stillborn if the targets are too high, she said.
The latest draft of the charter suggests introducing a Public Health Enhancement Fund, which would finance projects that improve service delivery, bolster the quality of health information available in SA, and provide education, training and bursaries.
While health-care firms supported the notion of the fund, they were worried about its financing requirements, said a source close to the negotiations who asked not to be named.
Health Minister Manto Tshabalala-Msimang initiated the health-care charter process in 2004, aiming to increase the share of health-care businesses in black hands, improve patients' access to services, and narrow the gap between what the public and private sectors offer patients.
The state presently spends R33,2bn on health care for 38-million people, while the private sector spends R43bn on 7-million people, according to the charter.
Victor Litlhankanyane, head of transformation for SA's biggest private hospital group, Netcare, said the company was not worried about the proposed targets.
For us it's not scary at all, he said. We've spent a lot of time with the health department and understand the issues, he said.
The health department's deputy director-general for service delivery, Dr Kamy Chetty, who is responsible for co-ordinating talks on the health-care charter, declined yesterday to comment, saying that to do so would prejudice negotiations. Talks are set to resume on Thursday.
The first draft of the health-care charter, released last July, shocked industry by suggesting black ownership targets that were more than double those of the mining and financial services charters -- 51% of the assets were to be in black investors's hands by 2014. Industry also complained that the team hand-picked by the minister to craft the document had failed to elicit sufficient input from key interest groups.
The second draft of the charter, released for public comment last October, softened the black ownership target considerably, saying health-care companies would have to sell only 31% of their businesses to black shareholders by 2014.
The latest draft has moved into line with the trade and industry department's draft codes on broad based black economic empowerment, and says 25,1% of health-care companies should become black-owned by 2014.
An industry source said the tense relationship between government and the private sector had eased since the charter's first draft, as the health department had moved to bring in representatives from seven stakeholder groups within the health-care sector: private hospitals, medical schemes, pharmaceutical companies, medical device manufacturers, health professionals, unions, and civil society organisations.
The charter's working group now consists of about 40 people.
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