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AfroCentric INTEGRATED ANNUAL REPORT 2016
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Our Leadership
and prescriptive approach by government to the
implementation of B-BBEE. We are delighted to have
retained our Level 2 B-BBEE rating, considering the
enhanced rigour of the eligibility scorecard against which
our renewal was measured. I would like to thank the
Transformation Committee and all who worked on the
successful submission for the renewal of our rating.
AfroCentric’s willing compliance with the new codes
reaffirms our commitment to transformation, to securing
new contracts, and to the retention of current clients. The
Group and our stakeholders benefit from the diversity of our
workforce; our skills development initiatives which build the
capacity of our employees to continuously improve customer
service; and our development of new industry entrants as a
result of our ED and SED programmes.
CONSOLIDATION
Rising healthcare costs create the right conditions for market
consolidation. Currently, the medical scheme sector is highly
fragmented, with many small players. The Group is the largest
manager of medical schemes through Medscheme in terms
of number of lives covered and is ideally placed to lead the
consolidation necessary to drive costs down, particularly non-
administration and health risk management costs.
Key components of the healthcare value chain are
unregulated, such as medical consumables and surgical
devices. This has resulted in significant price variance and
high mark-ups. Ultimately, it is the schemes and scheme
members who suffer the effects of this uncontrolled pricing
through increased healthcare inflation. The Group leverages
its clinical, actuarial, data analytics and health intelligence
capability to identify pockets of inefficiency and so creates
value though negotiating fairer prices of these items in order
to make healthcare more affordable. We want to see more
of each healthcare Rand being spent on patients care; and
improving the effectiveness of the system will mean more
value created for members.
Medscheme is the largest manager of medical schemes with
approximately 3.7 million lives under our management.
NATIONAL HEALTH INSURANCE
The NHI system, currently being piloted by the National
Department of Health, is discussed throughout this report.
It features prominently in our future plans. We are aware
that the 3.7 million lives we look after represent a small
proportion of the South African population, most of whom
do not currently enjoy the quality of healthcare found in
the private sector. The aim of the NHI is universal access to
quality care. This is a goal we support.
The White Paper on the NHI was released in December
2015 and states clearly that the private sector is expected
to co-operate in the development and implementation of
the new system. Declining to participate is not an option.
We welcome the opportunities presented by the NHI, and
believe we can use the experience gained through
44 years in the private sector to assist the government in
the design and provision of services. Pharmacy Direct is our
courier pharmacy subsidiary and is already providing chronic
medicines to patients in NHI pilot districts.
We administer the Government Employees Medical Scheme
(“GEMS”) and Polmed. We envisage that our experience in
working with government will stand us in good stead to be a
major contributor to the NHI.
HEALTH MARKET INQUIRY
The Group awaits the outcome at the end of 2016 of the
Competition Commission’s health market inquiry into
private healthcare costing. We support the investigation
and made a detailed submission to the Commission. We
share the concerns informing the inquiry: healthcare costs
are escalating in excess of the rate of inflation in this country
and private hospital costs compare unfavourably to other
Organisation for Economic Co-operation and Development
(“OECD”) countries, even for wealthier countries.
Young, healthy people are withdrawing from schemes or
opting for insurance-only cover due to current healthcare
costs. This is increasing the actuarial risk profile of various
schemes and making them more expensive. We believe
all industry players must work together to make medical
schemes more affordable for young people and for all
scheme members. This will ensure diversification of the
risk pool and greater access to quality healthcare. We
look forward to the recommendations of the inquiry, in
anticipation of a more level playing field for the industry and
a more accessible market for all.
CORPORATE GOVERNANCE
In a year of transition in the business and investment in
the future, the Board supported major initiatives such
as the development of the next generation IT system,
Fusion. This will enhance and support all our administrative
activities. Capital investment decisions of this scale are
not taken lightly. However, the Board has faith in the
management team’s capacity to successfully implement these
advancements.