Leonard Gentle
The JSE’s August slump and the recent poor share performance of the medical companies have been added to the weaponry of those who oppose universal access to healthcare. But what makes share prices on the JSE rise and fall? And should these fluctuations be the key determinant in helping us to decide whether the National Health Insurance Bill is a good thing or not?
In recent weeks the tabling of the National Health Insurance (NHI) Bill has seen new rounds of contestation on all media platforms in the battle for public opinion. Across the spectrum of political opinion we have been regaled with views on the government’s latest version of the NHI as a vehicle for universal access to healthcare – from those who, on the one side, criticise government’s meekness and shifts away from some of the more comprehensive initial plans (including limiting the medical aid industry and regulating drug prices), to those who, under the guise of issues of “affordability” would have us reject universal access completely, on the other.
A new entrant in this battle for public opinion in August was the spread in the business media that there had been a decline in the share price of health stock companies. Billed as the consequence of the hardy refrain of “policy uncertainty” financial journalists asserted that this run on health company share prices on the JSE was the verdict of the “markets” on the NHI.
South Africans are a skittish bunch and we have become hostage to the idea that our “economy” must grow and that the performance of the JSE is a major indicator of our economic well-being. But this is not true… Prior to the August share price slump on the JSE, it has been one of the best performing stock exchanges in the world, even our livelihoods hv been getting worse. Throughout our periods of severe unemployment and inequality the JSE has been booming. So a fall in share prices on the JSE is not necessarily an indicator of our well-being.
But what does the health evidence tell us about South Africa?
Classically, what is called by health scientists the “epidemiological transition of disease” is a shift in what people die from as countries evolve over time. In earlier periods people in most countries largely died of infectious diseases and conditions related to malnutrition and childbirth. But when countries undergo social, economic and demographic changes, there is a shift to non-communicable diseases such as obesity, heart attacks, diabetes, strokes and cancer in the advanced stages of the transition. This shift allowed health scientists to study the evolution of societies.
Until recently it was accepted that deaths shifted from communicable diseases in poor countries to non-communicable diseases in richer countries. However, based on the experience of many “middle income” countries, a number of health scientists are now spotting what they call a “protracted bipolar transition” – the coexistence of both types of conditions for extended time periods. This they put down to inequality, where we have both the very rich and the very poor in the same country.
The classical developmental paradigm claims that countries develop along paths set by what the protagonists of this paradigm call the “developed countries”. So, the language we tend to use divides the world into “developed” and “developing” countries. The measures for making such a classification are largely economic – Gross Domestic Product (GDP) and GDP per capita being the most common. And these measures have shifted over the years.
Also, countries use different currencies and these fluctuate on a daily basis against the US dollar as the world’s currency of international trade and the world’s reserve currency. Today the main international banks use Purchasing Power Parity as the measure to classify countries.
Now there is a long history of critical attacks by analysts of everything within these categories and the language of the above paradigm. Left theorists and progressive governments have pointed out that countries are not travelling on some path of “development” whereby they eventually get to be “developed”. Instead there is a world of unequal power in which the rich countries “under-develop” the poor and pass their ecological debt onto poor countries.
Theorists and activists have also challenged these economic categories and argued that GDP as a sum total of economic exchanges in a country includes destructive businesses such as weapons manufacture and exclude forms of productive human activities such as the household care-giving activities of women.
Recent studies conducted by the South African Medical Research Council’s Burden of Disease Unit shows a perverse trend in regard to patterns of morbidity and mortality in South Africa. We exhibit the very “protracted bipolar transition” which health scientists have discovered as a significant index of growing inequality. As a trend, South Africans die both of diseases of scarcity and poverty as well as of abundance. The evidence suggests that we need to do something about inequality in South Africa as a priority.
So, what about the JSE’s August slump? And, what about the poor share performance of the medical companies? And should these fluctuations be the key determinant in helping us to decide whether the NHI is a good thing or not?
At the most general level stock exchange prices are about investors – people and institutions with lots of money – betting on the future share prices of stocks and bonds (debt). If the investors get their gamble right they can make a lot more money – either by using the newly-priced shares to make new deals or by selling the higher-priced shares.
For most of the last century investors bet on companies which could be considered to be making good operating profits. So, share prices tracked company performance.
But this has all changed. For one, investors now trade more in bonds (debt) and different forms of repackaged financial vehicles than company shares. For another, they care less about company operating performance and bet on share prices which can work in their favour whether they go up or down – as long as they get their predictions right.
Globally we are in the period of Trump and his “trade wars” with China. This battle between the two biggest economies in the world really does cause “uncertainty” and as a result we see a spike in the price of gold. Then there are the shifts from investment in stocks to investment in bonds.
For a long while now, since the 2008 crash, central bankers and governments in the USA, Britain, Japan and the European Union cut interest rates to near zero and offered money to private banks. International investors and wealthy South Africans could borrow cheap dollars and buy bonds in what was called “emerging markets” (including South Africa) where interest rates were higher. This was called the Carry Trade and meant that stock markets in countries such as South Africa were booming.
Over the last 5 years however the US Federal Reserve has been raising interest rates and cutting down on the gift of printing easy money for private banks – what it called Quantitative Easing.
Now Trump’s trade wars with China has seen investors scared off “emerging markets” and moving back into the USA. The sudden run on share prices and bonds on the JSE has everything to do with these global shifts and little to do with South Africa’s policies, let alone the NHI.
Meanwhile domestically, the NHI Bill tabled does bring the initiative – in all its inadequacies and retreats from its original vision – nearer. And while its stated commitment towards universal healthcare and a single-payer system is completely necessary to address our medical apartheid, from a private business perspective of future profits there are conflicting possibilities.
A single-paying system of all people using the NHI to procure health care from either private or public healthcare can mean massive new growth opportunities for the private hospital and other medical companies, particularly if there isn’t a major upgrade of the public healthcare system. So, they could be beneficiaries of the NHI. On the other hand, any proposed confining of the medical aid system to a category of medical services above an essential core will mean some inroads into the profitability of the medical aids industry. The industry will certainly fight back against this as well as the findings of the Competition Commission into medical costs. Investors betting on the JSE don’t like the odds at present. And their spokespersons and commentators in the media are raising the clamour to influence public opinion and put further pressure on government.
The authorities should simply toughen it out and listen to the health evidence.
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