Image: iStock South Africa’s healthcare investment sector is at an uncomfortable but potentially powerful inflection point: the demand for care is rising, the public system remains under pressure, medical innovation is accelerating and investors are being pushed to think beyond traditional hospital bed economics.
At a recent Nedbank Corporate Investment Banking Healthcare Conference, the central question was not whether healthcare remains an investment option. It clearly does. Rather, it was where capital should go in a system in which access, affordability, regulation and social outcomes are becoming inseparable from commercial returns.
Avinash Kalkapersad, who leads investment banking origination for the healthcare sector at Nedbank, framed the challenge bluntly. South Africa spends about 8.5% of GDP on healthcare, which, on paper, compares to many middle-income economies. But this number hides a deeply unequal system.
“We still run a two-tier system in which the quality of care a person receives is determined less by the severity of their illness than by what they can afford,” Kalkapersad said.
About 84% of South Africans depend on the public healthcare system, which operates with only a fraction of the resources available in the private sector. The country’s disease burden is not only a clinical challenge. “It is, in a significant part, also a financing problem,” he said.
For banks, development finance institutions, private equity players and healthcare operators, this creates a difficult investment puzzle. The sector needs capital, but it needs investors who understand regulation, reimbursement cycles, public-private contracting, health outcomes and the unglamorous operational work of delivering care at scale.
The NHI challenge
The first major challenge is policy uncertainty, particularly around the National Health Insurance (NHI) scheme. Whatever one’s view of the design and likely implementation of NHI, it is clear that universal coverage remains the government’s goal. This will reshape procurement, infrastructure requirements, service delivery models, partnerships and healthcare economics.
For those who position themselves early, Kalkapersad described it as “a generational opportunity”. Those who wait, he warned, may find that “it’s probably going to be someone else’s deal”.
But the investment case is complicated by mistrust between the public and private sectors. Dr Stavros Nicolaou, group senior executive at Aspen Pharmacare, said one of the private sector’s biggest frustrations is a “complete lack of understanding” among some in the government that attracting investment in healthcare can expand the tax base, retain scarce skills, support technology transfer and strengthen the system overall.
His argument was not that the government should hire every doctor directly, but rather that it has an obligation to create the conditions in which healthcare businesses can invest, grow and absorb scarce skills.
“You’re obliged to create an environment where we can invest to absorb these jobs,” Nicolaou said.
In South Africa, it is not uncommon for doctors who cannot find jobs after years of study to emigrate, leave clinical medicine or move into fields such as aesthetics. Losing this capacity is an expensive absurdity in a country with long patient waiting lists.
This is where digital health and AI enter the investment conversation. Nicolaou pointed out that Africa’s healthcare systems are underfunded and understaffed, a reality exposed brutally during Covid-19.
“We know that the healthcare systems in the continent were not strong enough and resilient enough to withstand what was coming,” he said. “The biggest opportunity for me is digitalisation and AI, because there’s no quicker and easier way to strengthen the healthcare system.”
Nicolaou used patient records as an example. If a doctor spends 10 minutes searching for a patient file, it is time not spent treating patients. Digital records, integrated systems and AI-enabled tools could improve throughput, reduce duplication and prevent medical errors.
Kalkapersad identified four themes that are likely to define the next few years: NHI, technology and AI-enabled healthcare delivery, primary and preventative care infrastructure, and pan-African expansion. The next wave of healthcare returns, he said, will not come simply from adding new hospital beds. It will come from “keeping people out of those hospitals” through community healthcare, chronic disease management, maternal and child healthcare, and prevention.
This creates a potentially significant role for pharmacy-led care models, diagnostic tools, digital platforms, chronic disease management and preventive screening. Pharmacies are among the most accessible healthcare touchpoints in South Africa and could help to ease the pressure on public clinics if properly integrated into the broader system.
Innovation that should be funded
Innovation brings a second, thornier challenge: affordability. New medicines, particularly biologics, targeted cancer therapies and GLP-1 drugs for diabetes and weight management, can change disease outcomes dramatically. They can also overwhelm traditional funding models.
Nicolaou noted that medicine has moved away from one-size-fits-all chemotherapy for cancer patients to biomarker-driven therapies. They improve outcomes but fragment patient volumes, which raises the cost per treatment group.
In the past, “you would just use chemotherapy on all five patients with a particular cancer type”, he explained. Today, clinicians look at biomarkers and match patients with targeted therapies or immunotherapies. This is better medicine, but it is also more expensive medicine.
Nicolaou says the answer may lie in alternative reimbursement models: volume-based deals, risk-sharing arrangements and public-private funding mechanisms that allow expensive therapies to become more accessible at scale. This requires regulators and pricing committees to move beyond incremental fee debates and engage with new ways of funding high-cost innovation.
Nicolaou argues that the real question should be how to make biologics, or large-molecule treatments, precision medicines and bespoke therapies accessible to public sector patients.
“Those are the real debates we should be having in the country,” he said. “They should be sitting down and saying, how do we make these drugs accessible? What are the models that are going to work that are truly looking after the people?”
For entrepreneurs and industrialists, predictable demand and off-take agreements are crucial. Without a credible order book, accessing capital is far harder. Nicolaou used the example of a healthcare entrepreneur, saying they would be in a strong position when approaching a bank for funding if they could also show “an off-take agreement in the next few years of a million packs a month” or “a million units a month”.
Patients first, returns will follow
The sector also faces a philosophical challenge: how to balance financial returns with social returns. Nicolaou said patients have to come first.
“If you’re not putting your patient first, don’t get into the business,” he said. “If you do that part right, then don’t worry. Share prices will move in the right direction, and returns on investments and all the rest of it... will move in the right direction.”
This is the knife edge for healthcare investors. If healthcare is treated purely as a financial extraction game, it will eventually collide with regulation, politics and public anger. But if capital is used to widen access, support prevention, improve efficiency and fund innovation, the sector can deliver both commercial and social returns.
The best healthcare business investment options of the next decade may therefore be those that sit at the intersection of access and efficiency: pharmacy-led primary care, digital health platforms, AI-enabled diagnostics, local manufacturing, chronic disease management, affordable insurance models and public-private service delivery partnerships.
There are still large obstacles. Regulation is uncertain, the public-private trust deficit is real, new medicines are expensive, doctors are underused and the public healthcare sector is overloaded.
Healthcare capital will have to become more patient, more technically informed and more outcomes-driven. The old model of simply backing hospitals, beds and high-margin procedures is no longer enough.
NHI timeline
15 May 2024: Ramaphosa signs the National Health Insurance Bill into law.
President Cyril Ramaphosa signed the Bill into law at the Union Buildings, framing it as a corrective to South Africa’s divided health system.
16 May 2024: Act is gazetted, but not commenced
The Act is published in the Government Gazette, but is not yet operational. Almost immediately after it is signed, opposition parties, funders and healthcare sector bodies signal legal challenges.
August 2024: Government says implementation will proceed
After the election and the formation of the Government of National Unity, Ramaphosa said the government would continue with the NHI despite resistance.
2024 to early 2025: Litigation builds
By 2025, the Board of Healthcare Funders (BHF), South African Private Practitioners Forum (SAPPF), Hospital Association of South Africa, South African Medical Association (Sama) and the Health Funders Association were among the challengers.
2 April 2025: Sama launches its challenge
The association becomes one of the major challengers. Its case targets the constitutionality of the NHI Act as a whole.
6 May 2025: High court orders Ramaphosa to provide his record of decision
The North Gauteng High Court dismisses preliminary objections by the President and health minister in the Board of Healthcare Funders/SAPPF litigation. The BHF says the judgment confirms that Ramaphosa’s decision to sign the NHI Bill into law is reviewable in the high court and requires him to provide the record of his decision within 10 calendar days.
5 June 2025: Health Funders Association files its challenge
The association launches a challenge against key aspects of the Act.
August 2025: Government seeks to consolidate and stay the cases
The health ministry applies to consolidate five separate high court challenges and put them on hold pending Constitutional Court litigation.
24 February 2026: Ramaphosa agrees to delay proclamation
The Presidency announces that the President has agreed to delay proclamation or implementation of any sections of the NHI Act until the ConCourt rules on challenges related to public participation scheduled for 5 to 7 May 2026.
5-7 May 2026: Constitutional Court hears public participation challenges
The ConCourt hears challenges that have been brought by the BHF and the Western Cape government.
7 May 2026: Judgment reserved
The ConCourt reserves judgment.
18 May 2026: Sections 36 to 40 severed from the Act
The ConCourt rules that sections 36 to 40 of the National Health Act 61 of 2003 (referring to the certificate of need that healthcare providers would require to provide services) are inconsistent with the Constitution and invalid.
As of 20 May 2026: 2026: NHI signed, but not in force
The practical implication is that the NHI Act exists on paper, but its implementation is paused. No regulations regarding its implementation have been published. DM
This story first appeared in our weekly DM168 newspaper, available countrywide for R35.
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