STRATEGY
AfroCentric Investment Corporation Limited provides efficient healthcare services. These services contribute to the provision of best possible health outcomes for beneficiaries and best quality of care at an affordable cost.
INTRODUCTION
AfroCentric’s purpose is, believing that every person, regardless of their circumstances, should have the opportunity to improve and protect their health. The Group’s strategy and initiatives are developed to support the achievement of this purpose.
Group executive management reports to the Board on matters that can potentially have a material impact on strategic execution. These matters are regularly assessed and the appropriateness and effectiveness of the strategy is reviewed against the risks and opportunities of the external environment.
The Group strategy was reviewed and refined in 2016. It is designed to assist the Group in its aim to make a difference in healthcare and achieve its objectives in a subdued economic environment.
Our objectives are as follows:
| • | Enhance shareholder value |
| • | Maximise growth opportunities |
| • | Improve efficiencies through cost consciousness |
| • | Promote transformation |
| • | Diversify revenue sources |
| • | Deliver exceptional client service |
The business model outlines how the Group makes use of a range of business capitals and transforms them through the activities of the operating companies to enable our objective of the provision of quality and affordable healthcare. Each business and their activities actively supports the delivery of the strategy.
PROGRESS COMPARED TO STRATEGY
AfroCentric has made great strides to aligning its activities to its strategy. The following are notable achievements:
− Enhanced shareholder value by increasing dividends by 20% per share
− Awarded the Polmed contract effective 1 January 2016
− Raised cost consciousness across the Group while maintaining efficiencies
− Achieved a Level 2 B-BBEE status on the revised codes
− Finalised the WAD acquisition
− Concluded the Sanlam transaction
− Increased the client base to approximately 3.7 million lives by winning new business as a result of client satisfaction
ENHANCE SHAREHOLDER VALUE
One of the Group’s key objectives is the creation of sustainable value for shareholders. Prospects for organic growth are limited as it is unlikely that further income can be derived from current members or funds. (Refer to page 39 for commentary on the external environment.) There is, therefore, a need to increase the client base through acquisitions and business development. This will ensure enhanced shareholder value into the future. AfroCentric has a high fixed cost component, including IT systems and health risk management specialists. We aim to enhance value through improving efficiency and maximising capacity.
| Key performance indicators | Action plan and targets | |
| − Cash-generating capabilities (cash flow) | − Monitor non-performing contracts | |
| − Dividend yield | − Grow client base and new schemes to administer | |
| − Return on equity (“RoE”) | − Capital management and capital procurement | |
| − Return on capital employed (“RoCE”) | ||
| − Return on assets (“RoA”) |
COST CONSCIOUSNESS
A key pillar of the business model is access to quality and affordable healthcare. The Group cultivated a culture of cost consciousness in the business and as a result, reduced healthcare costs for clients and their beneficiaries. The Group actively pursued process optimisation and transitioned to an ideology of ‘fit for purpose’ in support of this initiative.
| Key performance indicators | Action plan and targets | |
| − Reduction in cost base | − Expand our supplier base to ensure best attainable prices | |
| − Percentage of operating expenses | − Lowering healthcare cost delivery through technology and process improvements | |
| − Gross profit percentage | ||
| − Percentage of profit after tax |
GROWTH
The Group aims to extract value from revenue diversification, acquisitions and strategic transactions as well as through growth of the client base. The focus will be on inorganic growth, including public sector involvement, in the next three to five years.
The escalating costs in healthcare make certain smaller schemes unviable on their own and there is likely to be a consolidation of schemes in the South African market. AfroCentric is well positioned to capitalise on these opportunities and increase the number of lives in its care.
The Group will continue to seek opportunities in Southern Africa. Potential new ventures outside South Africa will be analysed for strategic value creation. There will also be a focus on niche markets, differentiation through innovation and the development of alternative offerings to medical administration. The prospects for complementary insurance products and the Sanlam Reality loyalty programme will enhance the attractiveness of medical schemes, benefiting retention and membership growth.
The Group will also actively seek ways to support the government’s efforts to introduce a National Health Insurance (“NHI”).
| Key performance indicators | Action plan and targets | ||||||||
| A. Grow customer base |
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| B. Consolidation of the South African market | |||||||||
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TRANSFORMATION
AfroCentric was founded on the philosophy of transformation and empowerment. Empowerment is linked to its brand and reputation and supports the ability to grow through winning tenders based on credentials. Being an empowered company enables the recruitment and retention of skilled employees who are aligned with the Group’s vision. The Group maintained a Level 2 B-BBEE status based on the revised codes and will continue to drive transformation as a key initiative.
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DIVERSIFYING REVENUE SOURCES
AfroCentric regularly seeks opportunities to diversify its revenue sources, particularly in the non-health administration and health risk management market. The WAD acquisition ensures entry into the healthcare supply value chain; and the partnership with Sanlam allows a more integrated offering to clients.
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CLIENT SERVICE
The Group focuses on a partnership with clients and business partners. AfroCentric integrates its businesses and creates a culture of focus, placing the customer at the heart of the value proposition.
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OUTLOOK
LOOKING FORWARD
Key pillars of implementing the strategy include driving efficiencies throughout the healthcare value chain and pursuing ambitions for growth, from a strong financial base. In the short term, our culture of cost consciousness will enhance profitability. There is also value to be extracted from the Sanlam partnership. In the short to medium term (2017 – 2021), the Group supports the Government in its commitment to transform the delivery of healthcare in South Africa and seeks opportunities in the inevitable servicing requirements of the NHI. New revenue sources are constantly being sought, and further expansion in Africa offers prospects for growth in the medium and long term.