Health shocks and household poverty :evidence from South Africa

Abstract

Although South Africa is classified as an upper middle income country, over 50% of its population live under the poverty line. Together with very low level of medical insurance penetration rate, this implies that there are probably over 80 percent of South Africans who are likely to be affected negatively by a sudden health shock. It is therefore important to study the relationship between health shocks and poverty in the South African context. Using food expenditure shock as an indicator for poverty incidence, the study utilises non-linear econometric models to assess the association between households’ heads experiencing health shock and food poverty shock. The main finding of the study is that households in the upper quintile are observed to sacrifice food consumption to access healthcare highlighting their vulnerability to health shocks in the absence of medical insurance. In contrast, the results show that lower income households may forgo healthcare, as they potentially cannot trade off their already constrained food consumption for medical expenses. The results indicate that healthcare is a privilege in South Africa, available to the minority of the population. The vast majority of population in SA is vulnerable due to lack of healthcare insurance underlining the need for a National Health Insurance that would enable universal access to health care in the country.