Attracting greater foreign direct investment (FDI) may indeed be the key to South Africa’s future economic growth, but it is certainly no easy task.
As recently noted by Elsabe Loots of the South African Economic Society and echoed at the World Economic Forum in Maputo, FDI decisions are often driven by regional perceptions of risk and instability, which inevitably hinge on the performance of the “lowest common denominator”. For South Africans, this means being judged by what goes on in Zimbabwe, whose internal difficulties have cast doubt over investment decisions for the entire sub-Saharan area.
But there may be hope. Consider the success of India, which has managed to transform its once agrarian economy into a target of outsourcing for the United States and Europe, despite near-nuclear conflicts with Pakistan.
Though drawing parallels with South Africa would be risky, it is heartening to see this developing world country grow into a global leader in computer and information technologies.
India’s recipe for success is an instance of Adam Smith’s classical economics at its best: comparative advantage, which for India means an army of highly-educated, forward-thinking entrepreneurs and workers ready to outprice and outperform their competitors in the West.
Does South Africa have a similar comparative advantage? The answer again lies in its reserves of human capital, the most striking examples of which are members of the country’s highly trained medical community. In an era of burgeoning health-care expenses, coupled with tightening supplies of physicians in Western nations, South Africa is well positioned to become a leading destination for outsourced medical services, in much the same way as India has largely captured the software programming and call-centre market.
Rather than training physicians only to watch them leave for higher paying jobs outside the country, there is now scope for meeting certain foreign medical demands — particularly diagnostics — in South Africa. Combining high-speed data communications with advanced digital image processing, it is now possible to transfer common radiological exams, such as X-rays and CAT scans, securely over the Internet. Hospitals in the US have used this technology to outsource the radiologist’s job of interpreting the images to doctors outside the country — again, most often to India.
The result has been cheaper provision of medical services in the US, and, most importantly, increased demand for radiologists providing expertise in India.
As the use of online teleconferencing spreads and medical care becomes increasingly computer-based in the US and elsewhere, this demand will inevitably grow, with a wider range of clinical activities being executed by physicians abroad.
A similar outsourcing model should be pursued vigorously in South Africa, which has comparable if not superior medical resources underpinned by a sufficiently elastic supply of physicians and medical students.
Attracting FDI becomes easier as most of the requisite infrastructure —primarily hospitals and other healthcare facilities — are already in place, leaving much of the investment demands relegated to cosmetic upgrades in communication technologies and preparation for a new way of doing medicine.
Given the large number of South African-trained physicians already working in the US and Europe, ample opportunity exists to coax the entrepreneurship necessary to capture a large part of this developing international market while simultaneously giving a much needed boost to the domestic medical sector.
Conversely, forging deeper economic connections between South Africa and the US and Europe via medical outsourcing improves access to Western medical care, facilitating the activities of public health officials, NGOs, and others dedicated to health-care delivery in under-served populations.
The future of medical institutions in South Africa and the rest of the developing world may soon resemble a network of highly dispersed Internet café-style hospitals, rather than the familiar images of overcrowded, understaffed medical centres.
Medical outsourcing may thus be the call for FDI that investors are willing to answer, building on existing human capital resources in the country and meeting a growing foreign demand for cost-conscious medical care.
Just as importantly, it may also become a substantial engine of growth in an increasingly borderless world economy, helping South Africa break free from the region-specific apprehensions that have slowed its performance.
The rebirth of medicine in South Africa could be just what the doctor ordered.
Jason Lott is a Marshall Scholar at Oxford University