The healthcare sector is expected to deliver strong performance in 2025, even as concern surrounding the National Health Insurance (NHI) Act persists.
This is according to Foord Asset Management, which argues that private hospitals remain a compelling investment opportunity, with significant growth potential in the year ahead.
Nick Balkin, chief investment officer at Foord, believes that delays in the full implementation of the NHI will sustain the relevance of private hospitals.
Private hospitals, he said, would continue to play a critical role in healthcare as they would not only cater to private medical insurance holders but also collaborate with the government in delivering healthcare services.
“NHI is a complex and costly concept, and significant delays are inevitable. Even conservatively, it will be more than six years before NHI is fully established, and that’s assuming that no further legal or logistical challenges arise,” he said.
“Netcare, for example, has invested significantly in IT systems and infrastructure, which is driving cost efficiencies and supporting robust earnings growth. Hospitals are therefore well positioned to deliver healthy returns in 2025.”
Netcare began the year on a positive note, with a market capitalisation of R21.6bn and a share price of R15.28 on Wednesday morning. Over the past month, its share price rose 3.24%, while the month-to-date gain was 2.24%. Over the past year, Netcare posted 9% gains in its share price.
In 2024, the group reported a 6.3% growth in group revenue, with normalised operating profit rising 12.6% driven by digitisation and cost-saving initiatives. Shareholder returns were boosted by a R1.04bn share buyback programme and a dividend of 70c per share, a 7.7% increase from 2023. The group also achieved a return on invested capital of 11.7% and a net debt-to- ebitda (earnings before interest, tax, depreciation and amortisation) ratio of 1.2 times.
In contrast, Life Healthcare faced a more challenging year. The company, which has a market capitalisation of R24.9bn and a share price of R17, saw its share price decline by 2.4% over the past month, though it recorded a 3.85% gain month to date.
Over the past year, however, the share price dropped by 8.1%. Despite this, Life Healthcare achieved 7.7% revenue growth in Southern Africa, reaching R23.7bn in 2024, driven by increased hospital utilisation and a 1.6% rise in patient day volumes. However, ebitda remained flat at R3.7bn.
The NHI Act, signed into law in May 2024, aims to establish a fund that provides South Africans with free healthcare services. The system will be rolled out in two phases, with full implementation targeted for 2028. Despite its intent to address healthcare inequalities, the act has sparked mixed reactions, with private healthcare stakeholders and several political parties expressing concern about its feasibility.
Netcare has positioned itself as a constructive participant in the healthcare reform process, advocating for practical alternatives to the NHI while emphasising the need for collaboration between the private sector and the government.
“In the interim, we continue to focus on immediate opportunities for private sector collaboration with the government to help address critical healthcare gaps and improve access to quality care for all South Africans. It is worth noting that the early successes of the GNU [government of national unity] have demonstrated that collaboration between public and private sectors, even across ideological divides, is not only possible but the only way to improve SA’s socioeconomic destiny, which must be founded on a sustainable healthcare sector,” Netcare CEO Richard Friedland said.
Life Healthcare echoed similar sentiments, acknowledging the potential of the NHI to enhance access to private healthcare but raising concern about its funding and operational sustainability.
“Healthcare reform is imperative to address the stark inequalities in access to high-quality healthcare in SA. While the NHI is meant as a solution, it faces financial and operational challenges that threaten the long-term viability of healthcare in SA. It is crucial to identify practical and sustainable alternatives that provide wider healthcare access without destabilising the healthcare system,” it said.
“Life Healthcare has consistently supported the NHI’s goal of equitable, quality healthcare for all. However, the passing of the NHI Bill without addressing the concerns raised by industry, business and consumer bodies represented a missed opportunity for meaningful reform.”
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