This paper presents a South African case study as a contribution to international debates about the policy challenges posed by health sector commercialisation. It shows that the South African health system was highly commercialised before 1994, and fragmented between the private sector, serving the high-income white population and the public sector, serving the low-income, black population. By 2005 little had changed despite efforts to regulate the private sector and strengthen the public sector. Brave leadership and a stronger vision of the relative roles of public and private sectors is required to develop an integrated health system built on income-related cross-subsidies. Copyright © 2006 John Wiley & Sons, Ltd.