Operating context

EXTERNAL ENVIRONMENT

Understanding AfroCentric's external environment is crucial for the Group’s integrated thinking and strategic decision-making. The external environment encompasses various factors, including economic conditions, market dynamics, workforce dynamics, regulatory landscape, technological changes, and socio-environmental context. These elements influence AfroCentric’s operations and its ability to deliver value to stakeholders.

Economic conditions

The South African economy has faced significant challenges, including slow economic growth, high unemployment, and elevated inflation. These economic conditions impact consumer spending power and the affordability of healthcare services. The Group must navigate these economic pressures while maintaining cost-effective and high-quality services.

Economic conditions in South Africa (2018 – 2023)

1	https://www.statssa.gov.za/
2	2024 Work Trend Index from Microsoft and LinkedIn.

Market dynamics

The healthcare sector in South Africa faces several challenges, including muted growth, high medical inflation costs, and a rising trend in fraud activities. Over the past 20 years, the industry has undergone significant consolidation, resulting in an 80% reduction in medical schemes and a decrease in administrators from 37 to six. Notably, year-on-year industry growth saw GEMS grow by 107 146 members while the rest of the industry experienced a decline of 12 940 members. The private sector, where AfroCentric predominantly operates, serves a smaller population segment due to these high costs. Despite these challenges, there is a growing demand for affordable healthcare solutions. This demand presents opportunities for AfroCentric to expand its market share by offering cost-effective and innovative healthcare products and services.

Workforce dynamics

The workforce landscape is evolving rapidly, driven by technological advancements and changing employee expectations. According to the 2024 Work Trend Index from Microsoft and LinkedIn, 75% of knowledge workers now use AI to save time, boost creativity, and focus on essential tasks. This trend is increasingly relevant in healthcare, where AI is utilised to enhance diagnostics, patient care, and administrative efficiency.

The South African healthcare sector faces a significant challenge in addressing the shortage of skilled professionals. There is a growing concern among leaders about having enough talent to fill crucial roles. The brain drain phenomenon, where skilled professionals emigrate for better opportunities abroad, exacerbates this issue, leaving the local healthcare system with a critical talent gap.

In addition to the talent shortage, the healthcare sector must adapt to the shifting career expectations of its workforce. Approximately 46% of employees globally are considering career changes² , highlighting a dynamic and competitive talent market.

Regulatory landscape

Stringent regulations and policies govern the healthcare industry to ensure quality and accessibility. Currently, South Africa’s healthcare system remains incredibly unequal, with 86% of the population relying on an under-resourced public system, while only 14% benefit from private healthcare. AfroCentric therefore supports the principles underpinning the movement towards universal health coverage in South Africa through an integrated health system that offers quality, affordable, and accessible healthcare.

The NHI Bill was signed into law this year, aiming to achieve equitable access to healthcare services for all South Africans. First introduced in 2019, the Bill has not undergone material changes despite extensive consultations and engagements. AfroCentric will continue to advocate for a fair, transparent, and phased implementation of the NHI.

Additionally, the Council for Medical Schemes (CMS) continues to prioritise the Low-Cost Benefit Option (LCBO) framework, aiming to enhance healthcare access for lower-income families through affordable private coverage. This effort aligns with AfroCentric’s mission to improve stakeholders’ quality of life by supporting the integration of LCBOs into health schemes, addressing the need for cost-effective, high-quality healthcare options. (see page 33 for more details on our engagements surrounding the NHI and LCBO).

Technological changes

Advancements in healthcare technology, such as telemedicine, electronic health records, and AI-driven diagnostics, are transforming the industry. AfroCentric is well-positioned to capitalise on these trends by integrating cutting-edge technologies into its service offerings, enhancing efficiency, and improving patient outcomes.

Socio-environmental context

Increasing awareness of sustainable and ethical practices in healthcare is shaping consumer expectations and industry standards. AfroCentric’s commitment to delivering affordable and quality healthcare aligns with these societal values, enabling the Group to build stakeholder trust and loyalty.

HEALTHCARE TRENDS IN FOCUS

Virtual healthcare to streamline access

Digital health continues to expand, with virtual healthcare emerging as a significant trend. Given that over 90% of South Africans own smartphones, the potential of virtual healthcare solutions to bridge gaps in underserved populations and address prevalent health delivery challenges cannot be overstated.

Moving beyond consultations with healthcare providers, advancements in virtual screening and diagnostics are poised to empower patients, enabling them to take a more proactive role in their health while equipping healthcare professionals with crucial data for informed treatment decisions.

Wellness and self-care as preventative measures

The primary prevention of non-communicable diseases (NCDs) is increasingly focused on improving lifestyle behaviours, as poor nutrition, physical inactivity, smoking, and alcohol misuse are key risk factors driving conditions like cardiovascular disease, diabetes, cancer, and respiratory disease. These conditions are responsible for 65% of healthcare expenditure and account for 80% of deaths attributed to NCDs¹. By managing these behaviours, 90% of diabetes, 60% of cardiovascular disease, and more than a third of cancers can be avoided². This understanding is driving a shift towards preventative healthcare, emphasising mental wellbeing, diet, and exercise. The rise of the Internet of Things (IoT) further enhances our understanding of the link between psychological and physical health, shaping more comprehensive and effective preventative care strategies.

1	Statistics SA mortality data 2022.
2	WHO (2005) Global strategy on Diet Physical Activity and Health.

Mental health: Challenging stigma and access

Mental health remains a challenge in South Africa, with an average increase in the prevalence of anxiety and depressive disorders of more than 30% since the COVID-19 pandemic. With this growing population in need of support, scalable solutions that offer early intervention need to be deployed. Digital enablement facilitates the ability to scale mental health promotion initiatives and allow for early identification of at-risk individuals.

GenAI in healthcare: Revolutionising health solutions

The advent of Generative AI (GenAI) has invigorated innovation in the healthcare industry. These technologies hold promise in addressing long-standing resource constraints and health risk management challenges. Integrating AI into healthcare solutions is crucial, as it can significantly impact decision-making support and enrich predictive analytics for preventative and curative healthcare.

Value-based care: Redefining healthcare delivery

As healthcare costs rise and population health declines, new healthcare delivery models are gaining traction. Value-based care seeks to remunerate services based on the quality of care provided. This approach aims to hold healthcare professionals accountable for health outcomes, paving the way for more effective, patient-centred services.

However, the implementation of value-based care underscores the necessity for considering social and environmental determinants of health and a supportive system to enable healthcare professionals to achieve desired health outcomes.

Consequently, the industry is prioritising data integration, defining health objectives, and designing new reimbursement models to steer towards value-based healthcare.