GROUP CEO'S REPORT
We continue to explore opportunities to enhance shareholder value by improving the Group's efficiency, pursuing growth through acquisitions and consolidation to ensure shareholder value over the long term.
INTRODUCTION
In the past year, the Group's direction has become more defined. We are committed to ensuring the overall sustainability of the healthcare industry through optimising the value of every customer's healthcare Rand.
Subdued economic circumstances and medical inflation have made private healthcare unaffordable for consumers. This has affected schemes' ability to grow organically. Despite population growth over the years, medical inflation has drawn consumers to insurance products, rather than medical schemes, and the healthcare sector has experienced slow growth.
AfroCentric is well positioned to capitalise on scheme consolidation and make private healthcare affordable again, by uplifting our people, reducing the cost of healthcare, delivering exceptional client service, diversifying our revenue streams and optimising the healthcare value chain.
The amalgamation of Bonitas and LMS Medical Fund ("Liberty") was concluded in October 2016, increasing Bonitas' client base to 349 220. The Group had positive outcomes from the POLMED scheme tender, and the integration between Fedhealth and Sanlam is starting to gain traction. These mergers and acquisitions support our growth strategy, position us to optimise the healthcare value chain and illustrate the consolidation opportunities of the industry.
In January 2017, our contract with the Road Accident Fund came to an end, and we welcome any future contracts that might become available.
We are exploring and investigating methods to integrate our IT systems onto one platform across the Group. This will increase the efficiency of our service and decrease the cost of healthcare across the value chain.
IMPROVE EFFICIENCIES THROUGH COST CONSCIOUSNESS
Managing our resources effectively remains a high priority. Management and employees share a responsibility to consider possible efficiencies to optimise the use of company assets.
DELIVER EXCEPTIONAL CLIENT SERVICE
We recognise that cost efficiency alone is not sufficient for client retention. AfroCentric has adopted a client-centric value proposition and we are dedicated to delivering operational efficiency and exceptional service. Our structure was revised to improve our service efficiency. We constantly engage with our clients to establish unique solutions tailored to each of our clients' respective needs.
AfroCentric is actively pursuing integration opportunities within the Group to provide wellness, preventive care and health promotion initiatives to our members and beneficiaries.
AfroCentric is also committed to retaining the highest levels of skills within the Group. The Group has implemented a long- term incentive plan to attract and retain the best skills.
DIVERSIFY OUR REVENUE SOURCES
The Group has the capacity to grow, but doing so organically, through growing scheme membership, is proving difficult. We will focus on niche markets, differentiation through innovation and the development of alternative offerings to medical administration particularly, in the non-health administration and health risk management market.
The Sanlam investment into AfroCentric Healthcare Assets is gaining traction and we remain confident of the value that we can realise from the partnership.
Our collaboration with Sanlam has been helpful in providing key insights into emerging markets. We are in advanced negotiations to finalise collaborative entry strategies into Africa and other emerging markets.
MAXIMISE GROWTH OPPORTUNITIES
Following the amalgamation of Bonitas and LMS Medical Fund ("Liberty"), including winning the POLMED admin and managed care contract, we now have 3.6 million lives across all Living Standards Measure groups that are associated with the Group. The middle class is currently our main focus, and we are planning more acquisitions and initiatives to support value chain optimisation.
To diversify and find alternative income sources, AfroCentric is exploring the potential of new ventures outside South Africa. The economic growth rate in some parts of Africa is far more positive than in South Africa but affordability and access continue to be major challenges in these markets. Hence, partnerships and joint ventures will bring down the cost of care and have a positive effect on membership volumes.
AfroCentric is awaiting the recommendations of the health market inquiry and seeking an outcome which balances the competition in the industry and enhances accessibility for scheme members. Increased affordability will enable us to ensure the diversification of the risk pool between younger and older members.
To further improve our service offering to our members, we acquired Wellness Odyssey and The Cheese Has Moved ("TCHM") in 2017.
With more than 50 years of collective experience in the health and wellness industry and a national footprint throughout South Africa, Wellness Odyssey has the wellness and managed care capabilities to improve health offerings to scheme members.
TCHM is AfroCentric's in-house advertising, design, digital, marketing and social media specialist agency, and is well versed in creating marketing strategies that stretch the imagination and open new horizons.
REDUCING THE COST OF HEALTHCARE
Through value chain optimisation and an ideology of "fit for purpose", we are cultivating a culture of cost consciousness across the Group.
The Group, through Medscheme, recognises that combating the increasing effect of chronic illnesses requires a coordinated response between empowered primary care providers and activated patients. A small network of doctors associated with a high volume of high-risk beneficiaries has been contracted for phase 1 of the ICCM project. These doctors are contracted specifically to manage high-risk chronically diseased beneficiaries.
Through consolidation, AfroCentric is able to remove the isolated, cost-adding fragments of the healthcare value chain, and, in doing so, disrupt the industry. Our alternative reimbursement model aims to increase the sustainability of the schemes and make healthcare more affordable. It incentivises general practitioners to be the primary caregivers, and decreases the number of specialist consultations required. The Bonitas Capitation Fee Agreement has also played a role in cutting costs in the healthcare value chain by paying the healthcare providers on our network a predetermined amount for the number of people assigned to them.
Our data capabilities enable us to optimise the value chain and disrupt the industry. AfroCentric is preparing to be fully participative in the digital economy through technological innovations in the fields of patient engagement, profile management and data exchange.
AfroCentric is assured that predictive analytics provided by IFM will enhance the Group's competitiveness by saving clients costs. The software eliminates a significant portion of irregular billing patterns and trends across many medical schemes, and enables preventive measures to be taken against wayward providers and facilities.
UPLIFT OUR PEOPLE
AfroCentric believes that our people are our greatest asset. We are committed to our employees, their well-being and development. We value them as integral to our success, and have developed our Employee Value Proposition ("EVP") to attract, develop and retain only the top talent. We believe in the potential of our people and as a result, our EVP occurs at every stage of our employee life cycle – from recruitment to learning and development, from performance management to rewards and recognition.
Human Capital in AfroCentric has recently won the future of HR awards for our integrated wellness strategy. Together with Kaelo, we have a wellness programme that focuses on our personal emotional wellbeing, financial coaching, guidance to lifestyle changes and other services such as legal advice.
At the AfroCentric Group, we believe that each person is unique and special. Every employee is valued for their distinct qualities and their exceptional contributions that make this organisation great. We believe in our people and therefore make purposeful efforts to improve their value, enhance their leadership competence and holistically meet their diverse needs. Our vision covers empowerment and quality, and we believe that through alignment to our values, we are making every effort to create a high performance and nurturing culture.
CONCLUSION
Despite the unfavourable economic environment, we are exploring opportunities to enhance shareholder value by improving the Group's efficiency, pursuing growth through acquisitions and consolidation.
AfroCentric is committed to achieving universal healthcare. We face the future with a relentless appetite for growth, and we are collaborating with the government to find solutions to our social challenges. Public Private Partnerships and joint ventures have become more relevant to the success of our efforts to reduce the cost of care and enable access to healthcare. To this end, we are leveraging on the strength of the Group's subsidiaries and the support of our shareholders to make this possible.
ACKNOWLEDGEMENTS
My appreciation goes to the Board for their unremitting oversight and guidance, our management teams and employees who are working towards our goal of providing sustainable healthcare.
I extend my gratitude to the schemes, our operating subsidiaries and other stakeholders who are also working to achieve this common purpose.
Antoine Van Buuren
Group Chief Executive Officer