UNDERSTANDING OUR STRATEGIC TRADE-OFFS
Robust strategic decision-making requires careful consideration of which trade-offs to pursue and which to avoid, particularly when these decisions might negatively impact certain stakeholder groups while ensuring 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 direction over short-term gains.
This central trade-off plays out in all the decisions listed below.
Navigating reduced profitability for long-term strategic positioning
Related material matters
- Access to healthcare and medicine
- Business continuity and business model adaptation
- Economic, transformation and political and societal risk
- Legal, regulatory and compliance management
Link to strategic levers
Analysing the trade-off
The terms of the CCMDD contract, while crucial in establishing AfroCentric as a majority service provider across five provinces, include a reduction in the price per script. This reduction inevitably impacts our financial capital, particularly in the short term. Moreover, the need to increase staffing levels to meet the demand for prescriptions further strains our operational budget.
Despite these challenges, AfroCentric views this as a strategic investment in the future. By aligning closely with government initiatives, we position ourselves as a key player in the evolving healthcare landscape. The long-term value creation derived from this partnership far outweighs the short-term financial pressures. Our ability to demonstrate significant success, such as the 17% growth in NDoH script volumes, underscores our commitment to supporting the government’s objectives and highlights the potential for future collaboration under the NHI.
Central capital trade-off
Balancing short-term financial impact with long-term value preservation
Related material matters
- Economic, transformation and political and societal risk
Link to strategic levers
Analysing the trade-off
The market factors in the pharmaceutical sector are increasingly geared towards heightened competition, leading to margin erosion within the pharmaceutical cluster as members opt for cheaper generic medicines that reduce their out-of-pocket expenses. In response to these challenges, the Board has decided to take a prudent approach by impairing some of the historical investment values within the cluster. This is a strategic move aimed at safeguarding the Group’s long-term value. By realigning our financial resources in this way, AfroCentric ensures that we remain resilient amid market shifts while positioning ourselves to capitalise on future opportunities and sustain our competitive edge.
Central capital trade-off
Balancing the need for IT modernisation with financial impact
Related material matters
- Business continuity and business model adaptation
- Digital transformation and resilience
Link to strategic levers
Analysing the trade-off
The Group is currently undertaking significant investments in IT system modernisation and an infrastructure refresh (manufactured capital) to prepare for a more digitally focused mode of engagement. This strategic initiative is essential for maintaining and enhancing our social and relationship capital, particularly as we strive to meet evolving consumer demands and deepen our collaboration with Sanlam. However, these investments have a notable impact on the Group’s profitability in the short term. This trade-off highlights the tension between the immediate financial impact and the long-term benefits of staying competitive and responsive in a rapidly digitalising market. While the financial effects are significant in the short term, this investment positions the Group to deliver enhanced member experiences and maintain strong relationships with our stakeholders, ultimately securing long-term value and sustainability.
Central capital trade-off
