Netcare, South Africa’s largest private hospital network operator, reported a nearly 50% increase in profits for the six months ending in March. The company continues to benefit from a post-Covid-19 recovery, with paid-patient days reaching 98.5% of 2019 levels in March. Netcare, on the other hand, has expressed concern about a worsening shortage of nurses in South Africa.
Net profit increased by nearly 49% to R666 million in the first half of the year, prompting the company to increase its dividend by 50% to 30 cents per share. Netcare operates over 50 hospitals across the country and has a market capitalization of approximately R22 billion on the Johannesburg Stock Exchange. The pandemic has increased the company’s costs while also causing delays in non-urgent surgeries. Despite these obstacles, acute hospital occupancies reached their highest level since the pandemic’s inception in March, and paid-patient days increased by more than 11% over the six-month period, reaching more than 95% of pre-pandemic levels.
CEO Richard Friedland expressed satisfaction with the strong results achieved following the Covid-19 period during an investor presentation, emphasizing the company’s commitment to further improvement. However, Netcare issued a warning about a forthcoming structural constraint that the entire South African healthcare sector will face in the coming years.
One major concern raised by Netcare is the country’s nursing staff shortage. The government has placed restrictions on new nurse training, which has contributed to the current shortage. According to Friedland, the nursing issue is the most serious threat to healthcare provision in South Africa, affecting both the public and private sectors. Based on data verified by the Health Department, the company estimates a shortage of between 26,000 and 62,000 nurses in the country. Despite high unemployment and a high demand for skills, the government has been opposed to encouraging the private sector to expand nursing training capacity. Netcare currently has the capacity to train more than 3,500 nursing staff per year, but the South African Nursing Council limits it to only about 360 nursing students per year. Over 9,000 inquiries were received from prospective students looking to start nursing school in 2023. Netcare has trained nearly 50,000 nurses in the last 24 years, with an average of just under 2,100 nursing students per year.
Friedland compared nursing training restrictions to the load-shedding crisis caused by insufficient electricity generation capacity from aging power plants. Netcare has significantly reduced its reliance on Eskom for electricity supply to its hospitals and healthcare facilities but at a high cost to the company, which is ultimately passed on to patients through higher service charges.
The cost of using emergency generators exceeds the cost of electricity by more than three times. Electricity costs account for 5% of Netcare’s overhead costs, and the company spent R67 million on diesel in the first half of the year, up from R9 million the previous year. Netcare anticipates a significant increase in electricity costs as load shedding intensifies in the coming years.
The majority of Netcare’s acute hospitals are capable of operating independently of the national power grid. To support all of its facilities, the company has implemented uninterrupted power supply systems and maintains a fleet of 200 backup diesel generators. Over the last decade, Netcare has installed solar panels at 72 facilities, capable of generating up to 20 GW of electricity and ensuring uninterrupted care during load shedding.
Netcare has invested R589 million in electricity generation infrastructure to date, which has resulted in significant solar panel capacity. However, the company anticipates that the cost of keeping its hospitals powered will rise significantly as load shedding becomes more common.
Netcare spent R430 million on capital expenditure during the reporting period, with R81 million allocated to expansionary projects, including the completion of a new 72-bed facility in Gqeberha, Eastern Cape.
Netcare’s shares fell slightly more than 1% in afternoon trading on Monday, but they have gained nearly 2% in the past year.
