SA GDP can expect an ROI of 11- 20-fold from billions spent on funding COVID-19 vaccines

  • Research by Discovery Health’s Health Policy Unit, B4SA and PwC, shows the significant return on investment (ROI) that South Africa’s economy stands to gain from funding the national COVID-19 vaccine rollout.
  • The speed at which we can roll out vaccines links directly to the speed of our economic recovery.

Successful vaccine rollout has major upside for SA’s economic recovery

When it comes to the local mass vaccination rollout, there is strong alignment between saving lives and saving livelihoods – two inseparable priorities,” says Dr Ryan Noach, CEO of Discovery Health.

“Both the pandemic and necessary lockdowns have dealt a massive blow to South Africa’s economy, and to economies the world over. Despite these financial pressures, there is a critical and urgent need to procure vaccines,” adds Dr Noach.  “Our national target is to vaccinate 41.7 million members of the population in total, to reach population immunity and overcoming the spread of infection.”

The total cost of vaccines for South Africa is expected to be in the region of R10.3 billion to R13.5 billion.

“These are significant sums. However, what really moves the dial on the pace of our economic recovery is the speed at which the country can secure sufficient vaccine supply and achieve a successful vaccine rollout.”

ROI of between 11- and 20-fold: Three possible paths for economic recovery from now to 2025

Research by Discovery Health’s Health Policy Unit, B4SA and PwC has resulted in three possible paths for economic recovery from now to 2025 with a parallel ROI of between 11- and 20-fold on the billions spent on vaccines.

  • This analysis looks at government-induced lockdown levels, fiscal and monetary policy interventions as well as other external shocks such as the COVID-19 Temporary Employee Relief Scheme (TERS) payments (positive) and ESKOM load shedding (negative) to estimate paths for the South African economy in 2021 and beyond.

PwC’s three scenarios for South African economy’s growth in 2021 range from 0.8% to 5.2% with greatest weight to the likelihood of their baseline scenario unfolding (which forecasts growth of 3% in 2021). It is too soon to rule out the downside scenario, which takes into account a perfect storm of negative factors that significantly suppress economic growth of 0.8%. As the year progresses this growth range will become easier to define. For now, growth of between 0.8% to 5.2% remains valid and is also echoed by forecasters and economists in the market at large.

Overall, the analysis projects that economic recovery to 2019 levels (i.e., the size of the economy in real terms) could follow any of three scenarios:

  1. Baseline scenario (moderate third wave and population immunity by mid-2022)

Load shedding is at levels similar to those seen in 2019. The implementation of some government economic reforms results in higher consumer and business confidence, and investor sentiment. We reach population immunity by mid-2022. We experience a moderate third wave of infections during winter 2021.

  • We return to pre-COVID-19 levels in three years with economic growth tracking at 3% in 2021 and 2.5% from 2022 to 2025.
  • Ignoring the economic costs associated with load shedding, the total cost of 56.5 million vaccine doses at R11.6 billion results in a 16.6-fold (R192 728 billion) economic benefit to South Africa’s GDP in 2021.
  1. Upside scenario (short-lived third wave and population immunity by end 2021)

A fast-paced vaccine rollout allows the country to reach population immunity by December 2021. We experience a mild or short-lived third wave during this winter. There are fewer episodes of load shedding and implementation of government economic reforms is efficient and effective. Collectively these dynamics result in significantly higher consumer and business confidence and investor sentiment.

  • We return to pre-COVID-19 levels in two years with economic growth tracking at 5.2% in 2021 and 3% each year from 2022 to 2025.
  • The total cost of 56.5 million vaccine doses at R13.1 billion (higher due to the vaccine mix)results in a 20-fold (R261 731 billion) economic benefit to South Africa’s GDP in 2021. In this scenario vaccine uptake is highest with the most doses rolled out to the adult population.
  1. Downside scenario (severe third wave and population immunity delayed beyond mid-2022)

Load shedding is at levels similar to those seen in 2020. A slow implementation of government economic reforms results in lower consumer and business confidence and investor sentiment. We reach population immunity after mid-2022 and, in line with a slower vaccine rollout, we experience a severe third wave of COVID-19 infection during winter 2021.

  • We return to pre-COVID-19 levels in seven years with economic growth tracking at 0.8% in 2021, and 1.5% thereafter.
  • Ignoring the economic costs associated with load shedding and monetary and fiscal benefits, the total cost of 56.5 million vaccine doses at R11.2 billion results in a 10.9-fold (R122 382 billion) economic benefit to South Africa’s GDP in 2021.

“The immediate and long-term economic benefit of paying for the vaccine programme in full, as well as the ROI gained, far outweigh costs incurred – even in case of the costliest vaccine basket – in the upside scenario,” adds Dr Noach.

Why does it make sense for medical schemes to fund COVID-19 vaccines?

Discovery Health has conducted an in-depth analysis into funding COVID-19 vaccines for the members of the 19 schemes that DH administers. Assumptions are based on scheme members’ actual experience of COVID-19 illness from March 2020 to February 2021 and estimates of vaccine cost (to the private sector), efficacy and uptake.

  • At present, Discovery Health projects that funding the rollout of vaccines to members of all administered schemes will cost around R1.2 billion to R1.4 billion (based on the Department of Health’s pricing per dose and depending on take-up rates and vaccine mix i.e., a weighted average of single and double-dose vaccines). These costs could reduce as global supply improves. Funding for COVID-19 vaccinations falls under Prescribed Minimum Benefits and so vaccines must be covered in full, for all medical scheme members. Nevertheless, incurring these costs, far outweigh the costs of treating COVID-19 in the member base.

It is important to compare these costs with the costs of funding of care for a medical scheme member who contracts COVID-19 – currently averaging between R11 500 and R70 000 per episode, per age group. Costs are highest in scheme members above the age of 60 and in those under the age of 60 who have chronic conditions.

“Based on vaccine efficacy data, we assume that those scheme members who are vaccinated against COVID-19 will experience a reduction in infections and serious illness in line with published evidence,” adds Dr Noach. “Further, given that the number of scheme members who contract COVID-19 is known for the historic period considered, we can calculate the savings in respect of those scheme members who are vaccinated against COVID-19 on the basis that they should experience up to a 94% drop in the risk of experiencing severe disease requiring hospitalisation, as well as a close to 70% reduction in out-of-hospital costs.

“These improvements are expected to yield net cost savings (after allowing for the cost of vaccines for schemes administered by Discovery Health) of around R2 billion, depending on the ultimate cost per vaccine dose administered. All in all, savings far outweigh the costs of treating COVID-19 in the member base let alone the extensive societal and economic benefits associated with the vaccine programme.”

Dr Ryan Noach has written a LinkedIn post titled, “South Africa can expect an ROI of between 11 to 20 times the cost of COVID-19 vaccines” in which he explores the above-mentioned data in more detail.

Encouraging global data shows sharp infection rates decline at around 60% vaccine penetration

Global scientifically documented evidence shows that, in countries with high vaccination rates – such as Israel, the United Kingdom and United States of America – vaccines are having a profound impact in reducing both morbidity and mortality.

By June, just over 60% of the Israeli population had been vaccinated. “Israel has recently begun to document a dramatic reduction in new COVID-19 infections (to rates seen at the start of the pandemic) and the first days of zero COVID-19 mortality. The data also points towards the possibility of vaccination also mitigating person-to-person spread,” adds Dr Noach. “The United Kingdom and United States of America have seen similar trajectories at just under 60% of their populations vaccinated (despite a small, recent resurgence in UK infections in recent weeks linked to the delta variant – a variant “of concern” globally).

COVID-19 vaccines are proving to have varying real-world effectiveness. “A mix of the Moderna, Pfizer-BioNtech, AstraZeneca and Johnson & Johnson vaccines has been employed in Europe and America. In contrast, countries such as Chile, the Seychelle and Bahrain, have used the Chinese Sinopharm vaccine. Early data show that even at 60% vaccine penetration rates there isn’t a substantial decline in infection rates, though there is some evidence of a decline in mortality rates.”

It is crucial to remain diligent with precautionary behaviour, whether post-recovery from a Covid-19 infection or post-vaccination

Our actions as individuals hold the key to the success of our country’s national vaccine rollout, to overcoming the spread of infections and to reigniting our economy.

“Let’s continue to adhere to all non-pharmaceutical interventions, including hygiene and social distancing guidelines and, importantly, do all we can to avoid attending super-spreader events that will catalyse a surge of new infections and amplify the third wave of infection currently underway,” concludes Dr Noach.

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