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Bad aid

World Bank private financing scheme bleeds Lesotho's health system dry

9 May 2014 | Comment

Lesotho is a small mountainous country with enormous health challenges. It has the world‘s third highest burden of HIV and AIDS (23per cent), life expectancy has fallen from 60 years in 1990 to just 50 years in 2011, and infant and maternal mortality rates are rising. More than half of the Basotho people, Lesotho’s largest ethnic group, live below the poverty line.

The Consumers Protection Association published a joint report with Oxfam in April that shows how a health public–private partnership (PPP) is draining the budget of the Ministry of Health and diverting scarce resources away from primary health care services in rural areas, where death rates are rising and where three-quarters of the population live.

The Queen ‘Mamohato Memorial Hospital, which opened in October 2011, was built to replace Lesotho’s old main public hospital, the Queen Elizabeth II hospital, in the capital Maseru. It is the first of its kind in Africa – and in any low-income country – because all the facilities were designed, built, financed, and operated under a PPP that includes delivery of all clinical services.

I would not recommend relying on the advice of the IFC, which in this case has not worked in the best interests of our nation. The World Bank Group should stop promoting this project as a success and something to be replicated across Africa.

From the outset it was claimed that the PPP would provide vastly improved, high-quality health care services for the same annual cost as the old public hospital. This PPP has been promoted as a flagship model for other countries to follow but in reality Lesotho’s experience provides powerful lessons in what not to do.

The PPP was developed under the advice of the International Finance Corporation (IFC), the private sector arm of the World Bank Group. An 18-year contract was awarded to Tsepong Ltd – a consortium led by the South African private health care company Netcare. Tsepong (Pty) is contracted to treat all patients presenting themselves at the Queen ‘Mamohato Memorial Hospital, up to a maximum of 20,000 inpatients and 310,000 outpatients annually. The government pays an annual fee to Tsepong to treat these patients and any additional patients are charged on top.

The costs for the government of Lesotho have escalated rapidly. In 2013/14 the PPP cost the government $67 million – consuming 51 per cent of the total government health budget. This is up from 41 per cent the year before. The hospital is being run at nearly two and a half times the amount that was agreed as affordable between the government of Lesotho and the IFC before the contract was awarded. The contract seems to have worked for the benefit of the private company (who are set to enjoy a 25 per cent return on equity) rather than for the government or people of Lesotho.

Many of the features of the PPP are alarming. Of course there is no doubt that Lesotho, like any country, needs a national referral hospital that can provide highly specialised services. However, given that most Basotho live in rural areas, the priority should be to develop a comprehensive network of primary and secondary health care services. Improving access to quality health care, especially in remote mountainous areas where people sometimes have to travel for hours on horseback to reach their nearest clinic, is the surest way to accelerate progress towards improving the health of the nation.  However the ability to do so is being undermined by one hospital, which takes up the lion’s share of the health budget.

Lesotho health budget and cost of PPP, 2007 -2013

Lesotho health budget and cost of PPP, 2007 -2013

During the World Bank spring meetings the Bank president Jim Yong Kim said that he would be taking a personal interest in the case. The Lesotho prime minister and minister of health also publicly expressed their concerns about the project in reaction to our report. South Africa’s Minister of Health even went on record saying that he expressed concerns at the time the hospital was opened and warned it would not work. Disappointingly, the IFC has yet to provide a comprehensive response to our critique of the PPP.

Given our experience in Lesotho, I would not recommend relying on the advice of the IFC, which in this case has not worked in the best interests of our nation. The World Bank Group should stop promoting this project as a success and something to be replicated across Africa. As a first step they should remove all misleading marketing materials on the Lesotho PPP from their website. My advice to other countries is don’t copy us. Rather study our example carefully and demand concrete evidence of the effectiveness and efficiency of PPPs before even considering this option.

On behalf of the many civil society organisations I work with, I call on the World Bank Group to finance a fully independent and transparent expert financial audit and broader review of the Lesotho health PPP, in partnership with the government of Lesotho. This should include a presentation of the full range of options available to the government to mitigate the negative impact this partnership is having on Lesotho’s wider health system.

Patients’ voices need to be represented in crafting a way forward. There has been virtually no participation of citizens in monitoring the PPP agreement. Privatisation of health care and other essential services should be discouraged. Advocates of PPPs should take a look at this case and realise that their interventions could undermine the role of state. Instead, the World Bank should work with local experts in order to have people who can protect the national interest. The World Bank should stop experimenting with new and complex initiatives that put poor countries on the brink of collapse, as this project has done in Lesotho.


by Lehlohonolo Chefa, Lesotho Consumer Protection Association  (LCPA)

This article is an edited version of Lehlohonolo Chefa’s post for Oxfam’s From Poverty to Power blog on 17 April 2014