Nationalising healthcare is not the best medicine for South Africa - Daily Maverick

3 May 2020 - Applying first-world solutions to South Africa, a poor and extremely poorly administered, corrupt country is not just naïve, it is dangerous. For the proposal of nationalising the private health sector to come on top of the horrors of the Covid-19 pandemic and the maladministered recession we suffered even before the pandemic, is sickening.

Gabriel Crouse

The frontline of South Africa’s new struggle is healthcare provision, which has been shielded from the worst possible stresses so far by shuttering most of the economy, transport and public drinking. As the lockdown relaxes, should the health system be nationalised?

During the lockdown, there have been several calls to nationalise South Africa’s private healthcare, as the Republic of Ireland and Spain have done during the Covid-19 crisis. Consider this Daily Maverick piece, “It is urgent to integrate SA’s private and public healthcare systems now” by Lydia Cairncross, Louis Reynolds, Russell Rensburg and Leslie London, four leading healthcare experts. They call for a “National Department of Health” (NDOH) that will put an end to “profit-making during the crisis” in healthcare, citing Ireland and Spain as examples of how to go about this.

The Republic of Ireland is probably doing the exact right thing by nationalising its healthcare, and it is important to understand what position that country is in to see why. Ireland was subjected to brutal forms of colonialism for centuries, but the south gained some autonomy after the Irish War of Independence from 1919 to 1922.

Progress and regress followed in lockstep until the “Irish Troubles”, a war between Catholics and Protestants, unionists and separatists, primarily in Northern Ireland (part of the UK), but spilling over into the republic, and which claimed thousands of lives directly, scared investors away and throttled value-add productivity for four decades. The Troubles officially ended in 1998 under the Good Friday Agreement, but by then, the republic was already poised to pounce. Along came the “Celtic Tiger”.

Ireland has enjoyed the strongest growth in productivity in Europe in the last quarter-century. In 1994, its GDP was $57-billion, in 2018, it was $382-billion. In inflation-adjusted terms, according to the World Bank, Ireland’s economy grew by 381% (nearly a factor of four), in that period, twice the rate of South Africa’s.

How did Ireland do this? In a word, austerity.

First, consider general government final expenditure as a portion of GDP. On this measure, Ireland and South Africa were in similar positions in 1994 and until 2007, as both countries’ governments worked hard to keep spending and tax rates down. Ireland had more success at this. 

The Global Financial Crisis (GFC) of 2008 hit both countries hard, though Ireland was hit first and much harder. Ireland doubled down on austerity after that, while South Africa drifted even further towards big-government largesse. The strategies on shrinking or growing government departed radically in the last decade.

Another way to think about Irish austerity is in terms of public debt. Between 1994 and 2007, there were 10 years in which the Irish government collected more in taxes than it spent, posting 10 budget surpluses, compared to South Africa, which, under Trevor Manuel, posted budget surpluses twice. After GFC, Ireland fought tenaciously to return pay-down debts and curtail spending, posting budget deficits of less than 1% by 2016 and budget surpluses by 2018. South Africa, by contrast, spent more and borrowed more, year after year, with the main difference between Jacob Zuma’s and Cyril Ramaphosa’s administrations being the latter’s willingness to accumulate debt even faster.

Ireland’s repeated execution of austerity measures is the primary reason that, despite having a similar debt-to-GDP ratio to South Africa, it has a higher credit rating. By Standard & Poor’s estimation of creditworthiness, Ireland is eight categories higher (AA-) than South Africa (BB, which is two categories below investment grade). That is why in new times of trouble, Ireland can borrow money almost for free. South Africa, by contrast, was geared to spend more on debt repayments than public healthcare, before Covid-19.

And yet the authors listed above who call for an end to “profit-making” in health have this to say about why South Africa’s healthcare system is now in dire straits: “Most of South Africa’s healthcare workers currently work in the private sector. The reasons for this include the underlying drivers of privatisation of health in South Africa, including the deliberate contraction of the public health system during two decades of austerity budgets.”

By now it should be clear that “austerity budgets” is a misleading description of the South African government’s spending plans over the last 20 years. Austerity typically means having the option to borrow more to fuel higher spending and refusing to take that option. We have not run austerity budgets since Manuel, borrowing to the hilt instead. That is not to say public healthcare has been over-budgeted. It is to say that lack of resources in public health have not been driven by austerity, they have been driven by poverty. That poverty in turn has been frozen in place by the country’s “lost decade” at the hands of bad-faith administrators.

It is strange that so many elite South Africans fail to realise that ours is a poor country, totally out of Ireland’s league by now – but perhaps that is because our elite has repeatedly demonstrated a willingness to (rhetorically) vilify wealth accumulation in a way that Ireland does not.

Ireland not only has one of the world’s most pro-business governments but also one of the world’s most eager property-accumulating citizenries, with gentrification projects eagerly mushrooming across the nation. The luck of the Irish turns out to be a pretty frank willingness to allow and celebrate the rich getting richer. Moreover, Ireland has largely turned its back on revanchist policies and quotas as a means to heal wounds from its bloody sectarian conflict.

South African elites, by contrast, not only speak out against wealth accumulation, “white monopoly capital”, and the evil “edifice” of property rights; such anti-accumulation policies have been practised on a wide scale. Our government has failed to allow property accumulation by denying title deeds to more than 10 million citizens, by making this an increasingly difficult country in which to do business, and by presiding over some of the world’s worst property violation (crime) rates.

The upshot is that Ireland was 4.5 times more productive than South Africa, per person, in 1994 and is now 12.5 times more productive. Critics of Ireland’s austerity claim that it is merely a tax haven with no real economic growth outside of multinationals nominally headquartering themselves in Dublin to avoid paying taxes. But that too is misleading and outdated – see here for an analysis of Ireland’s genuine, highly impressive, real economy.

The Irish government has insisted that its nationalisation of public health will be on a strictly “temporary basis”, and given its track record on limited government, there is good reason to take this promise seriously. By contrast, our Health Minister, Dr Zweli Mkhize, repeatedly called to nationalise our health system even before Covid-19, a proposal endorsed by the ANC and its leader, Ramaphosa. Ramaphosa has added that the Covid-19 pandemic is “putting the building blocks in place” for a permanent nationalised healthcare system.

Even if the government now promised to nationalise public health and then allow the “evils” of “profit-making” to reenter the system after Covid-19, who could possibly believe them, given their long-held desire to drive “profit” away?

In a further difference, Ireland is ranked as one of the least corrupt countries in the world. No Daily Maverick reader needs to be lectured on how deeply corrupt this country’s government is, as this publication has exposed many of the most shocking abuses of power on a daily basis in South Africa.

But what about Spain? Spain remains one of the richest countries, relative to its income, on Earth and still its nationalisation project has delivered worrying outcomes. Consider the retrenchment of 3,500 healthcare workers in Madrid in late April 2020, with reports that as many as 10,000 will be dismissed in total. Who would like to see that – the dismissal of healthcare workers during a pandemic – here?

All countries need three things to nationalise healthcare temporarily, and successfully, during the pandemic: 1) the financial resources; 2) the political capital to give “temporary basis” a proper guarantee; and 3) the administrative capacity (read low levels of corruption), needed to administer all life-saving resources efficiently. South Africa lacks all three.

At this stage, it is worth remembering what damage one can do by applying a good idea outside of its relevant context. Sunlight soap kills Covid-19. That is a very good reason to wash your hands and surfaces outside the body with soap or detergent. But that does not mean it is a good idea to inject detergent into a human’s body, which is a very different environment to the kitchen sink. In fact, using the right idea in the wrong context like that would be lethal.

Applying first-world solutions to South Africa, a poor and extremely poorly administered, corrupt country is not just naïve, it is dangerous. For the proposal of nationalising the private health sector to come on top of the horrors of the Covid-19 pandemic and the maladministered recession we suffered even before the pandemic, is sickening.

The authors mentioned in the first paragraph have many good recommendations, on the more granular practical scale, that echo those detailed in the Institute of Race Relations report, Friends in Need – Covid-19: How SA can save #LivesAndLivelihoods.

But diagnosing this country as suffering from “two decades of austerity budgets”, and prescribing an end to “profit-making” amounts to recommending the right medicine for the wrong body-politic; a potentially lethal case of policy malpractice that cannot go unchecked.