US embassy cable - 05PRETORIA4641

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