Netcare CEO Dr. Richard Friedland reflects on the group’s strong financial performance despite a tough economic year, paying R1.6 billion in shareholder returns. He discusses collaboration with government on the contentious NHI Act, emphasizing that its current form is unsustainable. Friedland shares optimism about healthcare’s recovery, self-medication trends, and the next phase of Netcare’s data-driven strategy, while ensuring a smooth leadership transition.
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BizNews Reporter ___STEADY_PAYWALL___
Dr. Richard Friedland, CEO of Netcare, provided insights into the healthcare group’s latest financial performance and its perspective on pressing national healthcare issues during a recent BizNews Briefing interview with Bronwyn Nielsen. Despite the company reporting strong results, Friedland acknowledged the complex macroeconomic and industry challenges, while addressing the ongoing debate around the National Health Insurance (NHI) proposal.
Resilient Financial Performance Amid Challenges
Netcare demonstrated robust financial resilience during a challenging year. Friedland noted that the first six months saw reduced patient volumes due to seasonal factors like Easter, but the latter half of the year saw a marked recovery.
“We’ve been able to pay out an exceptional dividend—over 61% of our headline earnings per share—and returned R1.6 billion to shareholders through share buybacks and dividends. This was achieved without significantly impacting our debt levels, which increased only slightly by R278 million,” Friedland said.
He highlighted the group’s operational strength, maintaining a healthy debt-to-EBITDA ratio of 1.2, and attributed this success to strong operating leverage.
Outlook and Economic Pressures
Looking forward, Friedland acknowledged South Africa’s constrained economic environment but expressed optimism about improving sentiment. However, he emphasized the need for economic growth to positively impact the healthcare sector.
“Healthcare is a late-cycle beneficiary, and improvements in medical aid membership are directly tied to formal employment numbers. To see real growth, we need the economy to gain momentum,” Friedland explained.
National Health Insurance (NHI) Debate
The proposed NHI, a central government initiative aimed at universal healthcare, remains a contentious issue. Friedland reiterated concerns over its feasibility, legality, and financial sustainability.
“In its current form, NHI is completely unaffordable and unsustainable. We’ve reached the pinnacle of the Laffer curve—any additional taxation will paradoxically reduce revenue as people find ways to avoid it,” he stated.
Netcare and the Hospital Association of South Africa (HASA) have chosen dialogue over litigation for now. Friedland revealed that discussions with Business Unity South Africa (BUSA) have been productive, with proposals already tabled for government consideration.
“We have a binary choice: litigate and delay progress for five to ten years, or collaborate and address healthcare inequities now. We hope President Ramaphosa’s administration sees the value in private-public partnerships,” Friedland said.
He drew parallels with the UK’s National Health Service (NHS) partnership during the global financial crisis, where private-sector collaboration helped address waiting lists and improve healthcare delivery without ideological conflicts.
Industry Trends: Self-Medication and Consumer Behavior
Nielsen brought attention to the rising trend of self-medication among South Africans, which Friedland acknowledged as a factor influencing Netcare’s results.
“Self-medication, particularly in primary care, is tied to disposable income pressures. While we respect the resilience people have shown, there’s always a need for professional care from general practitioners, dentists, and other primary care providers,” he said.
Leadership Transition and Strategic Direction
Friedland, whose tenure has spanned pivotal changes in the healthcare landscape, confirmed he will remain at the helm until September 2024 to ensure a smooth leadership transition.
“The board has identified an external successor, and there will be significant overlap to manage this carefully. We’re at a strategic inflection point, focusing on digital transformation, big data analytics, and person-centered healthcare,” Friedland explained.
Netcare recently completed the first phase of its 10-year strategy, with notable advancements in digital healthcare. The next phase will emphasize data-driven solutions to improve patient outcomes and operational efficiency.
Collaboration for South Africa’s Healthcare Future
Concluding the interview, Friedland emphasized the importance of constructive engagement between the public and private sectors to address South Africa’s healthcare challenges.
“We cannot wait another decade to address healthcare inequities. The private sector has resources, expertise, and a willingness to collaborate. Together, we can develop solutions that benefit all South Africans,” he said.
As South Africa grapples with economic recovery and healthcare reform, Friedland’s insights underline the critical role of private-sector innovation and partnership in shaping a sustainable future for the nation’s health system.
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