CEO'S REVIEW
At the start of 2020, we could not have imagined the widespread impact of a virus yet to be named. Moreover, more than a year and a half on from our first hard lockdown, we find ourselves still in the riptide of the ongoing devastation. By any measure, the world has been dominated by mounting challenges and perpetual uncertainty. However, amid it all, the pandemic has served to clarify our priorities and entrench our purpose in a way we could not have imagined.
Progressing purpose-driven collaboration in the fight against COVID-19
The world needs the COVID-19 vaccines. A global effort has led to the successful development of multiple vaccines, and further cooperation is necessary to enable the optimum roll out of the vaccination process. There was never any doubt that AfroCentric would use the full might of our diversified business to answer this call.
AfroCentric has therefore remained on the frontline in efforts to help the country in its fight against COVID-19. We have continued to do what we do best by ensuring that our over 3.8 million beneficiaries – who make up a large percentage of those who have, or will be, vaccinated – are protected and given the care they deserve. With more than 10 years of experience in delivering vaccination services to individuals across South Africa, we are proud to be again lending a hand, especially at a time like this.
From the inception of the vaccination roll out, we had our internal war room team working on the logistics required. To achieve this massive undertaking, entities within the AfroCentric Group have partnered to deliver national influenza (flu) and COVID-19 vaccination campaigns on behalf of our clients. We are currently operating six vaccination sites, and the mobile nurse network has delivered outreach services to worksites of participating employer groups. This critical work has been conducted around the clock through innovative models of public-private partnerships and new heights of purpose-driven collaboration.
During the period, we also rolled out COVID-19 rapid testing stations at two major South African airports – OR Tambo International and Cape Town International – where international travellers can receive a COVID-19 antigen test upon touchdown in South Africa. The testing stations are a joint effort between two of our subsidiaries, MMed and FastPulse. MMed provides the medical equipment (including PPE), with nursing staff from FastPulse administering the nasal swab tests to travellers, proving once more how impactful our differentiated and collaborative health offerings can be. These developments, along with many others across our various businesses, further strengthen our efforts to enhance South Africa's capacity to contain the spread of COVID-19.
Education has likewise been a critical area of focus for our roll out plan. Nelson Mandela famously said, "Education is the most powerful weapon that can be used to change the world". We therefore see our educational efforts as being on par with our other actions in the fight against COVID-19. I have taken every opportunity to speak to our staff, the media and other stakeholders. We have also rolled out various initiatives, including educational videos, talks from our registered nurses and one-onone counselling.
As a Group, we are humbled to continue contributing to the government's efforts as we forge ahead with these endeavours that contribute to saving lives, rebuilding our society and restoring economic activity.
Delivering on our strategic ambitions in an uncertain context
Our diversified business model and focus on sustainable growth have enabled us to continue to achieve our highest ambition of enhancing the quality of life of our stakeholders by transforming healthcare. The impact of the Group's deliberate diversification strategy on our resilience within the current context is particularly evident when measuring the impact of the pharmacy cluster, now fully integrated into the Group offerings.
This critical work has been conducted around the clock through innovative models of public-private partnerships and new heights of purposedriven collaboration.
The medicine management contracts won by Scriptpharm during the previous year have positively bolstered the profits of the pharmaceutical cluster. In addition, we have seen an increasing volume of activity in Pharmacy Direct and pleasing growth within Activo Health, which has been continuously boosted by vitamins and chronic medicine sales. The completion of the acquisition of the DENIS group was another notable contributing factor in generating growth in comparative cluster operating profits in excess of 20.8%. We continued to pursue our Pharmacy Direct automation project with the intent to fully automate our private facility, which serves medical scheme members in South Africa, filling approximately 169 000 scripts per month. We have also pursued the partial automation of our CCMDD facility to enhance efficiencies. Additionally, we are pleased to report that Pharmacy Direct launched an online shop – available to all our patients and the public to strengthen our offerings and utilise other integration platforms in the Group, such as VirtualCareTM. The cluster has contributed significant value and relief in meeting all stakeholder needs, particularly during the stressful times under COVID-19.
The medical aid administration, risk management and technology cluster, substantially comprising the medical scheme administration business, has performed well. The Group's continued focus on cost efficiencies and process improvement has yielded satisfactory results. The cluster has leveraged our Group-wide capabilities through our integrated model, resulting in innovative solutions that meet critical needs while increasing healthcare savings, assisting both medical scheme members and employers during the COVID-19 pandemic, and will be to their benefit in its aftermath. In addition, the cluster has escalated the use of automation solutions and machine learning and artificial intelligence to refine our operational business model. Despite the loss of medical scheme members and members buying down on their medical aid options due to significant economic pressures, the stable and consistent fee structures in this business unit, along with the new measures and more effective cost controls described above, enabled the cluster to increase its operating profit by a satisfactory 15.3%.
Focusing on growth that sustainably transforms healthcare
AfroCentric has focused on growth initiatives designed to create a value chain of healthcare enterprises to maximise the purchasing power of individuals' healthcare spend. In addition, through models of cooperative partnerships and collaboration, we seek to improve the affordability of patient care, with viable patient outcomes for easier accessibility to a broader community.
In keeping with that principal philosophy, we continued to seek out enabling growth opportunities during the period under review. As a result, ACT Healthcare Assets acquired the remaining 20% of the shares in Scriptpharm Risk Management, effective 1 August 2020. Furthermore, as mentioned earlier, ACT Healthcare Assets acquired 100% of the shares in the DENIS Group, which specialises in dental benefits management. The transaction will enable the Group to focus on innovation and efficiency management in dental treatment offerings to all South African medical schemes and their members.
Activo Health acquired Exeltis SA (effective 1 August), the holding company of Forrester Pharma and Lamar International. The acquisition is consistent with AfroCentric's growth objectives in the healthcare sector and will serve to strengthen Activo's product offering to the pharmaceutical market.
Medscheme was awarded the GEMS managed care contract for the next five years. For AfroCentric, this means we proudly continue our long-standing relationship with South Africa's largest closed scheme, representing 760 000 principal members and 1.9 million lives. The new contract includes additional services not previously part of the managed care contract regarding HIV management, maternity management and expanded services relating to medicine management. Furthermore, the POLMED contract was also renewed during the year.
Pleasingly, FastPulse concluded a contract to provide COVID-19 occupational health and safety support for the Western Cape's Economic Development and Tourism Department. We were also awarded the Black Rock Mine contract for occupational health and associated services.
Given the challenges faced in our operations in Zimbabwe and Eswatini, we exited these areas during the year.
Powered by our people
While the fierce headwinds of COVID-19 have put our most deeply held values to the test, our people have, time and time again, proven their resilience and commitment to delivering on our ambition of improving the quality of life of our stakeholders. Through the various alert levels and restrictions, our people have collaborated and supported one another to achieve broader aims.
This was aptly demonstrated post-year-end as we navigated the unrest in areas of the country. Indeed, July 2021 will be remembered as a poignant month in our country's history. The unrest shook us all. As the AfroCentric family, however, we were proud to support our colleagues in KwaZulu-Natal, who were the hardest hit. Our people leaned in to help one another – whether it was lending a hand with the packaging and distribution of food parcels or donating to the aid fund. Seeing the collective efforts of care provided a ray of hope in the midst of a dark time in our country.
Throughout the year, as COVID-19 continued to challenge us on all fronts, creating a safe working environment for our employees, whether they worked from home or the office, remained a top priority. With this in mind, it is with great regret that I report that we lost 19 of our colleagues during the year due to COVID-19 related causes.
Within this context of genuine loss, uncertainty and constant change, we have recognised the need to heighten our focus on mental health and wellbeing – for both our staff and members. We therefore launched the Mental Health Project to address this growing need (see Medical aid administration, risk management and technology for more information).
Outlook
While almost all South Africans have, in one way or another, been affected by COVID-19, the full impact of the pandemic on our economy is not yet fully measurable. It is anticipated that economic weakness will continue in 2022 and beyond, as South Africa strives to overcome the effects of the pandemic and reboot economic activity.
While medical scheme membership was expected to fall dramatically, we have seen members do everything in their power to retain their existing health cover, not only for their own protection but also for the health needs of their families. Recognising this, and in line with the Group's strategy to reduce the cost of healthcare, we will maintain our focus on driving efficiencies and supporting members' health, with greater emphasis on lifestyle risk management and mental wellbeing.
The financial position of the Group remains sound. We are sufficiently capitalised to meet immediate needs, and management will continue to promote organic growth and consider compatible bolt-on opportunities for acquisition. The impact and industry consequences of COVID-19 will be closely monitored, and the Group will naturally consider any changes to our strategy in response to any such events.
Our future focus will remain on enhancing the elements of the Group's businesses to leverage the full benefits of being the most diversified healthcare group in Southern Africa. Through these efforts, we will make significant progress towards achieving our vision of transforming healthcare.
Appreciation
I am profoundly humbled by the opportunity to lead AfroCentric as we seek to meet critical needs through our purpose-driven model. I would like to extend my heartfelt gratitude to all those who have assisted in the fight against the pandemic, which most certainly includes our people across the Group. The ability of the business to continuously pivot to meet changing regulatory and stakeholder needs is a testament to the strength of our people, who have prioritised service excellence at every juncture – recognising the critical nature of the work we do.
The last year has not been easy. I thank all the members of the Board for their invaluable contributions, guidance and oversight. The management teams have also gone above and beyond in ensuring we are able to deliver sustainable healthcare in a context when it has been needed most.
The Group is grateful for the ongoing support from our operating subsidiaries, our schemes, and other stakeholders. We remain steadfastly focused on delivering on our commitment to transform healthcare, both in and beyond the current crisis.
Ahmed Banderker
Group CEO