REVISED HEALTH CHARTER FOR THE SOUTH

UNCLAS SECTION 01 OF 02 PRETORIA 004641

SIPDIS

STATE FOR S/OFFICE OF GLOBAL AIDS COORDINATOR,
MDYBUL
STATE PLEASE PASS TO USAID FOR GLOBAL HEALTH
BUREAU
HHS/PHS FOR OFFICE OF GLOBAL HEALTH AFFAIRS
WSTEIGER, MLVALDEZ
HHS/NIH/FIC HFRANCIS
CDC FOR GLOBAL HEALTH OFFICE SBLOUNT AND GLOBAL
AIDS PROGRAM DBIRX

E.O. 12948: N/A
TAGS: KHIV SOCI TBIO KSCA SF
SUBJECT: REVISED HEALTH CHARTER FOR THE SOUTH
AFRICAN HEALTH SECTOR

REF: PRETORIA 12948.

Summary:A revised draft Health Charter was released
by the South African Minister of Health on October 28,

2005. Once fully established, the Charter will set
goals for the improvement and transformation of health
services in South Africa, including requirements that
health sector enterprises become 50 percent black owned
and 30 percent women owned by 2014. End summary.

1.Many sectors of South African business (such as
Finance and Mining) have adopted charters outlining
sectoral goals, with a key focus on black economic
empowerment (BEE). In November 2004, the Minister of
Health appointed a task team to prepare a charter for
the health sector, and they released a controversial
initial draft in July 2005. The Charter is consistent
with an overall effort by the Department of Health to
overhaul the South African health sector to gain equity
of access and more diverse ownership. Generally, the
SAG would like to better integrate the well-resourced
private health care system and the under-resourced
public health care system. Consistent with objectives
in other sectors, the SAG would like to encourage
greater ownership and control of enterprises by black
South Africans and women. The July draft was roundly
rejected by the health industry, objecting most
strenuously to the requirement for rapid transformation
to 51% black ownership. Critics also were concerned
that the charter failed to differentiate between small
practices, hospital groups and foreign-owned
pharmaceutical firms.


2. As a result of numerous comments, targets have been
significantly lowered in the revised draft charter,
making them much more reasonable. Most targets have
been lowered by between fifteen and twenty percent.



3. Significant targets contained in the revised draft
include:

-Health enterprises should have 15 percent women
(all races) in senior management positions and 25
percent black in management positions by 2010,
rising to 30 percent women and 50 percent black by

2014.
-Black South Africans must have 31 percent of the
total economic interest in enterprises within the
health sector by the year 2014 and black women
must hold at least 15 percent of the share to be
held by black people by the year 2014.
-The Charter further proposes that health care
sector businesses should be at least 35 percent
nt
owned or controlled by black South Africans by

2010.
-At least 40 percent of all procurement should be
from black empowered firms or black individuals by
2010 and this quota should increase to 60 percent
by 2015.


4. In addition to the specific ownership and
management targets, the draft Charter states that the
private sector health organizations should commit to
expending a fixed proportion of their annual income on
social responsibility programs.

5.All foreign-owned health services companies also
have the option of replacement offerings to meet BEE
goals. These may include skills development within the
enterprise; funding of training and development
programs for health professionals, or active
participation in public-private initiatives. The
Charter stipulates that foreign owned companies should
demonstrate a commitment to transformation. In this
regard they should ensure that their replacement
offerings relate to the Charter requirements with
th
regard to access, quality and equity. In this way,
the health department anticipates that there will be a
direct link between the implementation of (Broad Based
Black Economic Empowerment) BBBEE and the strengthening
of the public health sector.

6.Small, medium and micro enterprises (SMMEs) also
are given some relief from the Charters strict
requirements. SMMEs constitute about 35 percent of the
South African market for medical devices. Due to their
relative size and resources, SMMEs may find it
impossible to comply with some of the targets.
Companies that can demonstrate that compliance with the
Charter scorecard will cause inherent commercial harm
to their business are exempted, especially with regard
to ownership and discretionary and non-discretionary
procurement targets.

7.Media reports indicate that the revised Charter
has been much more favorably received by the private
health sector, including the Pharmaceutical sector.
It is anticipated that the Charter will go a long way
ay
toward providing a degree of certainty to all
stakeholders on how to approach the countrys BEE goals
in the health sector. Business Day newspaper
reported that the draft has been welcomed by leading
black-owned hospital groups in the country like
Netcare. The hospital groups are reported to view the
revised draft as providing the market with the clarity
required for the implementation of BEE within a
reasoned and planned sector transformation strategy
that individual companies can respond to.


8. In a discussion with Health Officer, one of the
leading pharmaceutical companies in the country, Aspen
Pharmaceuticals, voiced concerns about the quotas in
the revised charter. Their main concern is that
leading pharmaceutical companies proposed reducing the
overall BEE percentage to 26 in their presentations to
the Charter committee (it was revised to 31 percent in
the new draft). Aspen feels that that the 31 percent
is still too high. Another concern is that the
e
Charter does not give more significant support for
local drug manufacturers. They expressed hope that
their concerns would be addressed in the final document
as they will be making a presentation to the Department
of Health before the 28th November 2005 comment
deadline.


9. The Department of Health will accept comments on
the revised draft prior to the presentation of a final
version, expected on November 28, 2005. Further
reporting on this process will follow.

TEITELBAUM
M