Overview

Saddled with a quadruple  disease burden – communicable (HIV/AIDS, TB), rising non-communicable (diabetes, cardiovascular disease, hypertension, cancer),  trauma (interpersonal violence, such as gunshot- and stab wounds), and mental disease - South Africa’s healthcare operates on  two systems: the public system, which caters to around 85percent of the population, constituting roughly 48 percent of total healthcare expenditure with funding from the state (approximately nine percent of GDP); and private healthcare, which looks after 16  percent of the population who can afford medical insurance. Both sectors offer a range of services from primary to more specialized healthcare, but more advanced, high-tech products and elective procedures are more commonly found in the private sector.

South Africa is moving toward universal healthcare through a proposed National Health Insurance (NHI) scheme. Through NHI, the government will likely become the main procurer of health goods and services, as well as investing in the public healthcare system to improve infrastructure and access. The NHI Bill was approved by the National Council of Provinces (NCOP) and passed by parliament on December 6, 2023. The Bill will need to be signed by the President before it can begin the process of being turned into law and implemented.  Significant questions remain on how NHI will be funded and implemented, as well as whether private sector will have a role in the new health landscape.

The healthcare market in South Africa is highly complex and fragmented in terms of real purchasing power. Entry usually requires appointing a reputable and experienced distributor, in order to participate in Government issued tenders, distributors and representatives must have strong B-BBEE credentials.

The public sector is the biggest purchaser of healthcare equipment and supplies, particularly for primary healthcare.  Purchasing is devolved to each of the nine provinces that in turn publish their own tender notices, but the National Department of Health also issues tenders for national supply. Ultimately, it is Treasury that will make funding provisions available for the purchase of products. Severe funding constraints make it difficult for public hospitals to maintain or purchase health equipment and services. For now, the best prospects for advanced technology and equipment remain in the private sector. Four big hospital groups dominate – Netcare Limited, Life Healthcare Group, Mediclinic Southern Africa, and the National Hospital Network. Additionally, there are several independent private hospitals. Around 78 medical schemes are in play in South Africa, 20 of which are open and the rest restricted. Discovery Health remains the largest open medical aid scheme, with an estimated 1.3 billion members and 2.8 billion beneficiaries (Council for Medical Schemes 2019/2020).

All healthcare-related products must be registered with and evaluated by the South African Health Products Regulatory Authority (SAHPRA). All entities involved in the manufacture, distribution, import and export of healthcare products must be licensed by SAHPRA. Only authorized representatives resident in South Africa may apply for registration of products with SAHPRA.

Medical Devices

Overview

Unit: USD million

Data Source: Above figures are unofficial estimates obtained from industry sources, including Fitch Solutions.

In the near term, growth in the medical device market remains subdued due to the economic instability, which the COVID-19 pandemic has exacerbated. Whilst the value has increased in local currency, it has remained flat in dollar terms, reflecting the currency fluctuations of the South African Rand.  An increase in government spending to upgrade public health facilities and systems as part of their NHI implementation program may catalyze some growth in this sector, though the recent, significant budgetary shortfalls and cuts in the provincial and national health departments, as well as the pandemic fallout will likely negatively impact government spending. Private sector investment will grow at a slower pace due to inflation, uncertainty about NHI, and other cost pressures. The United States continues to dominate this medical device market, with other major suppliers from the EU (Germany, France, Switzerland, other EU member states) and Asia (China, India, South Korea, and Japan).

Consumables: This sector is projected to grow roughly 5 percent over the next five years and has fairly robust local manufacturing, most imports come from the United States, China and India. The EU27 is another major player, notably Germany.

Diagnostic Imaging: Germany, the United States, and China are the leading suppliers in this market. Other players include Japan, Netherlands, and the UK. This sector is forecast to grow around 6 percent, taking into account an increased share of an ageing population, as well as growth in chronic diseases. There is need for MRI and PET scanners, radiotherapy products, and other diagnostic imaging products in public facilities.  Despite the under-developed nature of the market in this sector, purchasing will be dependent on funding availability and currency fluctuations.

Orthopedics, Prosthetics and Adaptive Equipment: Most products in this sector are imported, mainly from the United States, Germany, Italy, and Switzerland. There is some local manufacturing, which is endorsed by the National Department of Health. This sector is extremely price sensitive, and high-end adaptive equipment remains unaffordable for the majority of the population, even if they have medical insurance.

Dental: Around 85 percent of equipment in this sector is imported, primarily from the United States and Germany, with smaller supply coming in from mainland China and Switzerland. The market is very small for high-end elective procedures due to the associated costs and limited insurance coverage. The majority of dental work, particularly in the public sector, focuses on extraction, fillings, and cleaning. There are some local manufacturers that supply and export dental instruments, and implants.

Patient Aids:  Approximately 85 percent of this market is imported. Portable and therapeutic aids are sourced mainly from China, with smaller suppliers from the United States, Germany, and Switzerland. This sector is likely to grow due to an ageing demographics.

South Africa engages in some local manufacturing, which is mostly confined to assembly and lower end products (there are exceptions). There are government incentives in place to encourage local growth in this sector. South African exports are mainly to other countries in Sub-Saharan Africa.

Pharmaceuticals

Overview

Unit: USD billion

Above figures are unofficial estimates and from Fitch Solutions

South Africa remains the largest pharmaceutical market in Sub-Saharan Africa.

Should the National Health Insurance plan materialize, it is highly likely that there will be rising demand for prescription generic drugs, improved healthcare infrastructure and access, as well as increased local pharmaceutical production of generics. Demand and spend in this sector, particularly as it relates to high value medicines, will likely be tempered by challenging economic conditions. There will continue to be emphasis placed on HIV/AIDS and TB treatment, but over the long-term, focus will a shift towards the growing chronic disease burden – diabetes, cardiovascular disease, hypertension, and cancer treatments.

The COVID pandemic highlighted the gaps and weaknesses of meeting vaccine and drug demand, and to this end, there is growing interest in developing a strong pharmaceutical and biotech production hub in the country to prepare adequately for the next pandemic. Partnerships between U.S. pharma manufacturers and local producers have taken place, focusing on technology transfer to ramp up local production for the continent. In April 2023, WHO officially launched its mRNA vaccine technology hub in Cape Town to improve access to vaccines across markets throughout the continent.

Most innovator drugs are imported with primary supply from India, Germany, United States, and France. These will experience modest growth (approximately four percent), particularly newer drugs as many may not be on the Essential Medicines List. By contrast, generic drugs can expect stronger growth, both in terms of volume and spend, due to high demand and purchasing preferences (public sector), but also because of increased local production driven by government incentives and policies favoring local content. Ultimately, however, the South African government’s purchasing decision is driven by price.

All medicines, regardless of category (including dietary supplements), are subject to registration and evaluation by the South African Health Products Regulatory Authority (SAHPRA) which is guided by the Medicines and Related Substances Act, 1965:  https://www.sahpra.org.za/wp-content/uploads/2020/02/Government_Gazette_Medicines_and_Devices_Act_Jun_2017-1.pdf . Labeling compliance is also addressed in the Act.

Digital Health

The South African government has indicated that digital healthcare technologies will form an integral part of NHI in that it will strengthen healthcare systems, provide better access for patients, and improve health outcomes. To this end, they have published a National Digital Health Strategy for South Africa 2019-2024, prioritizing:

• The development of a complete electronic record for patients (some form of this already exists)
• Digitization of healthcare systems business processes
• An integrated platform and architecture (open source/open architecture) for health sector information to ensure interoperability of existing patient-based information systems
• Growing health to promote coverage for target population groups.
• Developing and growing digital health knowledge for implementers and users

High data costs, low connectivity density and inadequate ICT infrastructure will need to be improved significantly for the successful implementation of the strategy. Adequate funding for this initiative will be key to its proper and timely implementation., as well as improved access, particularly in peri-urban and rural areas.

Opportunities 

The underdeveloped market offers potential for growth but faces considerable restraints including serious funding issues, poor infrastructure, staff shortages (particularly in the public sector), and difficulties in accessing the market due to the considerable delay in SAHPRA’s approval process. The COVID-19 pandemic and prevailing economic recession have only exacerbated these obstacles.  Opportunities will exist for:

• Cost effective and innovative detection and treatment for cancer and other non-communicable diseases (NCD)
• Cost effective and innovative surgical equipment
• Advanced surgical technologies, robot-assisted surgeries to improve outcomes and address skills shortage (likely more in the private sector)
• Developing local manufacturing for medical devices and medicines (Public- Private Partnerships)
• Vertical integration of larger healthcare providers to control costs of their supply chain by owning more of it (mergers, acquisitions, partnerships) and using technology: IoMT (Internet of Medical Things), SaMD (Software as Medical Device), cybersecurity, data analytics, digitization, and compliance

Resources                                                                                

• National Department of Health (NDoH)
• South Africa Health Products Regulatory Authority (SAPHRA)
• South African Medical Devices Industry Association (SAMED)
• Radiological Society of South Africa
• South African Orthopedic Association
• South African Spine Society

Major Shows

Africa Health, Gallagher Estate, Johannesburg

October 17-19, 2023

www.africahealthexhibition.com

This show is also collocated with MedLab Africa

For more information, the U.S. Commercial Service in Cape Town, South Africa, can be contacted via e-mail at:

Felicity Nagel, Commercial Specialist

Felicity.Nagel@trade.gov

Phone: +27 21 702 7363

https://www.trade.gov/south-africa/