Africa-Press – South-Africa. Renowned economist Dawie Roodt says that the National Health Insurance (NHI) scheme will be a disaster for taxpayers and the national fiscus—something that the National Treasury is all too aware of.
Speaking to Sakeliga executive director Russell Lamberti about the state of South Africa’s economy, Roodt said that taxpayers are spent and the country has moved well past the top of the Laffer Curve.
The Laffer Curve represents the “optimal tax” point where the state can collect maximum revenue.
Higher taxes beyond this point may disincentivise work, entrepreneurship, and investment or lead to immorality and non-compliance, effectively reducing the overall tax base and revenues.
In South Africa’s case, when looking at the main sources of tax, Personal Income, Corporate Income and Value Added Tax, every measure has shot past this optimal point.
According to Roodt, the government’s push for schemes like the NHI will impose even more taxes on taxpayers and potentially break the system.
“We don’t think the NHI is a realistic possibility, and one of the reasons is that it would require enormous tax increases—massive amounts,” he said.
“Our own estimates, which are more on the conservative side, we’ve looked at the NHI costing somewhere between R800 billion and R900 billion a year—but it could actually be a lot higher than that.”
Some estimates for the cost of the NHI have pushed as high as R1.5 trillion a year, based on different assumptions.
The health department has repeatedly rejected the notion that the NHI will cost R1 trillion a year—an estimate based on providing the same level of healthcare afforded to medical aid members, extrapolated onto every person in the country.
However, the Health Department has also not published any official costing of the scheme, nor detailed what it will actually cover, leaving most estimates down to best-guesswork.
Regardless, Roodt said that any additional funding allocated to taxpayers won’t work.
He said that the funding for the NHI can only come from either increased taxes or increased borrowing—neither of which is something the country can afford.
The oft-touted solution of “printing more money” would be an abject disaster, he said. “So really, it’s a tax story, and there’s no space to increase taxes.”
National Treasury isn’t biting
Health Minister, Aaron Motsoaledi
One of the more telling signs that the NHI is heading for disaster is that the National Treasury isn’t diverting resources to it.
Roodt said that, at face value, South Africa is spending around R20 billion a year on the NHI, but this is not direct financing for the scheme.
However, in the broader context, the budget does not allocate or provision much for the NHI, which is the Treasury’s way of saying that money could be better spent elsewhere.
One of the key sources of planned funding for the NHI—the removal of medical aid tax credits—has also been broadly rejected by the finance minister, who described it as an attack on taxpayers.
“If I read between the lines, the finance minister is telling the Department of Health, ‘forget about it, there’s no money for it,’” Roodt said.
“They’re not saying it totally explicitly, but if you look at the medium-term budget forecast for healthcare spending, there’s no provisioning for NHI spending.”
Roodt said that the government is likely to “keep on trying”, but the NHI is not going to become a reality because we just do not have the money.
He added that litigation is also mounting up against the scheme, and it is substantial. There are seven or eight major cases against the scheme, and it has become a significant litigation process.
However, while there is a “legal angle” to the NHI not happening, the “reality angle” is that the NHI cannot be funded without a taxpayer disaster.
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