OPINION | Funding future health: The case for private capital

By Avinash Kalkapersad

South Africa has already shown that disciplined public-private partnership can mobilise private capital for the public good. Healthcare should be next.

South Africa’s healthcare challenge is often described as a public sector problem, a private sector problem, or a policy problem. In truth, it is all of these. But it is also a capital problem. Demand for care is rising faster than public budgets can respond. Infrastructure is ageing, equipment cycles are shorter and more expensive, and skills are scarce. Patients judge the system not by ideology, but by whether care is available, timely and dignified.

For funders of healthcare, this is not an abstract debate. It is a question of how a country funds essential capacity in a sector that sits at the centre of productivity, social stability and long-term economic growth.

A population that cannot access reliable care carries hidden costs across the economy: absenteeism, delayed diagnoses, lost household income, and pressure on already stretched public services. Healthcare is therefore not only a social priority – it is economic infrastructure.

For context, South Africa’s public health system spends approximately R5 500 per person per year, significantly below the levels seen in comparable upper-middle-income economies, where annual healthcare expenditure typically ranges between R8 000 and R11 000 per capita. Even if South Africa were to target the lower end of this benchmark range, the gap would amount to roughly R2 500 per person each year. Applied across the approximately 54 million South Africans who rely on the public healthcare system, this translates into an annual funding shortfall of around R135 billion – nearly half of the current public healthcare budget of approximately R300 billion.

However, the finance conversation must move beyond the tired binary of public versus private. The more useful question is how South Africa brings together the state’s mandate, the private sector’s execution capability and the financial industry’s ability to mobilise long-dated capital. Banks, institutional investors, and development finance institutions are built to evaluate risk, fund infrastructure, structure repayment mechanisms, and hold projects accountable. That capability is underused in healthcare.

South Africa does not need to invent this model from scratch. The renewable energy programme showed that private money will fund national priorities when the conditions are credible. In energy, the government provided policy direction, transparent procurement and standardised, bankable contracts; developers competed; lenders assessed the revenue streams; and investors gained confidence over time. The result was significant private investment in public-purpose assets, without the state surrendering oversight.

This is not to suggest that health is the same as energy; healthcare is personal, clinical and ethically complex. Quality, access and patient outcomes matter in ways that cannot be reduced to an output metric alone. But the financing logic is familiar: capital follows predictability, lenders need defined revenue streams, operators need clarity on performance responsibilities, government needs transparent procurement and value for money, and patients need services that actually work. A well-designed public-private partnership can align those interests.

Primary care and digital health offer the greatest long-term opportunity. The most sustainable health system is one that prevents avoidable costly admissions, manages chronic disease earlier, and connects patients to services before illness becomes acute. Financing community-level infrastructure, screening models, data platforms, and integrated referral systems can shift the system from expensive late-stage treatment towards earlier intervention. This is precisely where financial institutions can add value, not merely by lending money, but also by helping design scalable, accountable models that can attract repeat capital.

Hospital infrastructure is the most visible opportunity. Many public facilities require refurbishment, new capacity or better maintenance. Private capital can fund construction, equipment and life cycle management where contracts define availability standards, quality obligations, and payment mechanisms. This does not require the sale of public assets. It requires careful allocation of risk, with payment linked to performance.

Diagnostics, oncology and laboratory services are equally compelling. These are capital-intensive areas where technology changes quickly, and underinvestment has immediate human consequences. Imaging machines, radiotherapy equipment, pathology platforms, and specialised digital systems require upfront capital and ongoing renewal. A partnership model can place capacity closer to public patients while giving operators the volume certainty required to invest. Done properly, this can reduce waiting times and improve early detection.

For these partnerships to work, three conditions are non-negotiable. First, policy consistency: healthcare infrastructure requires investment horizons of 15 to 20 years; capital will not commit if the rules are unstable or if projects are vulnerable to shifting political interpretation. Second, transparent procurement: competition protects the public, disciplines pricing, and gives credible operators a fair route to market. Third, bankable contracts: a project that cannot be financed remains an aspiration, no matter how worthy the policy objective.

The financial industry also has a role broader than balance sheet funding. It can bring structuring expertise, credit discipline, advisory capability, governance frameworks, and an understanding of how to crowd in multiple pools of capital. Domestic banks can fund and coordinate. Pension funds and insurers can support long-dated infrastructure exposure. Development finance institutions can help de-risk early initiatives and anchor social outcomes. Private operators can contribute expertise. The government remains the steward of the public interest. The opportunity lies in making those roles clear and mutually reinforcing.

This is not a call for investors to treat healthcare as just another asset class; nor is it a call for the government to step back from healthcare. It is a call for stakeholders to use all available national capabilities to deliver healthcare more effectively. Financial return and public value should not be seen as opposing forces. With the right design, durable returns are earned precisely because essential services are delivered reliably.

Avinash Kalkapersa is an Investment Banking Originator at Nedbank Corporate and Investment Banking (CIB).