South Africa is one of the world?s most unequal societies and its health sector mirrors
these inequalities. Since the first democratic elections in 1994 the government has been
under enormous pressure to diminish disparities between population groups in access to
health services. This paper documents the structural inequalities in the health sector and
discusses the strategic options that are being considered for reducing them. The overall
level of health expenditure is high, amounting to 8.5% of GDP. However, less than 40%
of expenditure is on public health services and three quarters of that is on acute care
hospitals. A more detailed analysis of public health expenditure reveals large differences
between census districts. The districts where household incomes are low tend to have
fewer public health services. Public health expenditure per capita was lower than the
estimated cost of providing basic primary health care in a fifth of districts.
The most urgent need is to improve the services likely to reduce excess mortality and
morbidity. This will involve additional funding of primary health service services,
particularly in underserved localities. Government cannot increase public health budgets
rapidly and it will have to re-allocate funding from hospitals. The paper discusses
options for achieving this, including the introduction of social health insurance. It argues
that restructuring the health sector is complex and there is a risk of failure. Governments
should base their strategies on a good understanding of the health sector and of the
likely impact of different reform options.