Understanding our strategic trade-offs
Deciding which trade-offs to pursue and which to avoid requires robust strategic decision-making processes, especially when these decisions may negatively impact certain stakeholder groups while enabling sustained value creation for others.
We recognise that in improving access to quality healthcare, value is created, preserved or eroded across the six capitals. The alignment of our core purpose with national and global goals positions the business well within a changing South African healthcare context but requires the Group to make decisions regarding the pursuit of long-term value over short-term gains.
This central trade-off plays out in all the decisions listed below.
Related material matters
- Access to healthcare and medicine
- Business continuity and business model adaptation
Link to strategic levers
Analysing the trade-off
Our purpose-driven response to the COVID-19 pandemic resulted in short-term financial costs (financial capital), as well as additional pressure on our people (human capital). However, taking a long-term view, we recognise that the sustainability of our business relies on the stability of our operating environment. Therefore, while our chosen response resonates with our purpose and mission, we also believe that our role in supporting government’s efforts has further demonstrated our ability to act as a strategic partner within a changing healthcare context (social capital). This has been demonstrated by our leadership being invited to speak at the Health Portfolio Committee meeting to discuss potential ways forward and possible synergies between the private sector and government within an NHI context. Moreover, significant lessons have been learnt in the process, which we believe will assist in establishing innovative models of public-private collaboration in the future (intellectual capital).
Financial and human capital invested in our COVID-19 response.
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Intellectual and social and relationship capital gained through the process.
Related material matters
- Business continuity and business model adaptation
- Access to healthcare and medicine
- Economic, transformation and political and societal risk
Link to strategic levers
Analysing the trade-off
While trading in the pharmacy cluster did not achieve the peak levels seen in 2021, we continued to invest in new product launches, which are generally slow moving in the first two years, in line with our medium to long-term objectives for a sustainable pharmacy cluster. This deliberate approach to capital allocation continues to consider our optimal capital structure of equity, debt and working capital balanced by a reasonable dividend policy to ensure the sustainability of our business and continued returns for our shareholders.
Financial capital
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Manufactured capital in the form of inventory
Related material matters
- Employee wellbeing, acquisition, talent management and retention
- Business continuity and business model adaptation
- Legal, regulatory and compliance management
Link to strategic levers
Analysing the trade-off
The accelerated speed of technological transformation continues to impact the ways we relate to one another, how we work and the level of always-on service delivery that we expect. Moreover, digitisation and automation have accelerated the rate at which historical jobs have become obsolete. This change process needs to be managed strategically, as rising unemployment in our country places unsustainable pressure on the stability of the operating environment. We therefore invest (financial capital) in upskilling and reskilling our people (human capital) in line with our changing business needs and investing in change management initiatives to support this process. Furthermore, we invest in job creation through our enterprise and supplier development initiatives.
Financial capital invested in upskilling and reskilling our employees.
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Human and social and relationship capital increased through initiatives that upskill and reskill employees and those that serve to stimulate wider employment.
Related material matters
- Business continuity and business model adaptation
Link to strategic levers
Analysing the trade-off
In line with our objective to enhance the Group-wide focus on ESG, management and the Board focused significantly (human capital) on developing our ESG framework (intellectual capital) and determining the best way forward to integrate our material ESG-related performance measures. While we have identified many strengths in our social monitoring and tracking, our natural capital monitoring, in particular, will require enhanced focus in the coming years. Therefore, we have developed a three-year strategy to integrate the necessary processes into the business to manage and measure the full range of identified matters.
While this undertaking may not be directly linked to short-term financial return, we recognise that companies that do not prioritise ESG are more likely to endure materially adverse events. Furthermore, a deep understanding of the full range of our material matters will provide the business with valuable information to make forward-looking capital allocation decisions regarding key ESG opportunities. Likewise, investments in enhancing our understanding of our natural capital, our impacts on it and its impacts on us (for example, climate change and its effects on health and wellbeing), will enhance our decision-making capabilities regarding our medium- to long-term objectives to safeguard our resilience and sustainability.
Financial capital and human capital invested in developing our ESG framework.
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Intellectual capital and social and relationship capital increased through initiatives that enhance the decision making capacity of the business based on broader KPI monitoring.
