Private hospital group Netcare has warned investors it expects to see a dip in patient numbers after South Africa’s biggest medical scheme for public servants unexpectedly redesigned its benefits earlier in 2026.
The Government Employees Medical Scheme (GEMS) has moved to cut costs after bowing to union pressure to lower premiums, a development that will see its monthly revenue fall by about R100m per month.
The changes at GEMS include tighter managed care protocols and limiting private hospital care for members of its popular Tanzanite One option to conditions classed as prescribed minimum benefits.
As a result, Netcare has revised its guidance to investors for its expected growth in total paid patient days (PPD) for the year to September 30 to 1.1%-1.8%, down from November’s 1.8%-2.4%. Revenue growth has been trimmed to 4%-4.8%, down slightly on the previous guidance of 4%-5%.
Netcare CEO Richard Friedland sounded a note of caution about the effect of the US-Iran war. In addition to the immediate cost pressures caused by rising fuel prices, the conflict in the Middle East poses broader economic risks, he said.
“The effect that we’re most concerned about is a slowdown in the global economy and potentially an inflationary environment. That would affect the whole business,” he told Business Day shortly after the company announced its interim results for the six months to March 31.
The group expects to spend an additional R9m on fuel in the next six months as a result of higher prices, he said.
Netcare reported a 12% increase in first-half profit, saying demand for private health-care services had remained resilient.
Group revenue grew 4.8% to R13.3bn for the period under review, driven by operational efficiencies and returns on its digital and AI investments. Operating profit rose 7.4% to R1.78bn.
Profit for the period increased 11.9% to R924m and adjusted HEPS increased 21.9% to 71.7c. An interim dividend of 44c per share was declared, up 22.2% on a year ago.
The group said the strong performance came against the backdrop of a competitive operating environment and a fluid medical schemes landscape.
Total PPD increased by 0.7%, comprising a 0.4% increase in acute PPD and a 3.4% increase in mental health PPD.
Netcare’s ecosystem and extensive national footprint, supported by our digital, data and AI strategy, ensures the group remains well positioned to deliver quality patient care and continued improvements in operational and financial performance in FY2026 and beyond
— Netcare
In line with Netcare’s capital allocation strategy of returning excess cash to shareholders, the group continued with its share buyback programme. A total of 21.6-million shares were acquired in the market between October 1 2025 and the end of March at an average price of 1,618c per share.
A further 11.1-million ordinary shares have been purchased since the end of March. For the financial year up to May 11, R542m has been spent on share repurchases.
“We are encouraged by the gradual improvement in certain South African macroeconomic indicators and the confirmation medical tax credits will continue to increase broadly in line with inflation, which will provide ongoing relief to medical scheme members,” the group said.
Underlying demand for private health care remains resilient, supported by structural drivers such as an ageing insured population and the rising burden of disease, it said.
“Netcare’s ecosystem and extensive national footprint ― supported by our digital, data and AI strategy ― ensures the group remains well positioned to deliver quality patient care and continued improvements in operational and financial performance in full year 2026 and beyond,” it said.
It will continue to focus on strategic innovation, streamlining processes to reduce costs and investing in technology that enhances patient care and service delivery.
Increased activity levels and continued operational efficiencies are expected to contribute to further earnings before interest, taxes, depreciation, and amortisation (ebitda) margin expansion, increased earnings and enhanced returns on invested capital, it said.
It plans to spend about R1.9bn, including R566m on expansionary capex, this year.
• This article has been updated with new information.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.