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AfroCentric CEO: people did what they could to hold on to medical aid

The owner of Medscheme is diversifying its portfolio with the likes of pharmaceuticals, virtual consultations and vaccine rollouts.

SIMON BROWN: I’m chatting now with AfroCentric CEO Ahmed Banderker. Results came out yesterday for the six months ending December. Revenue up at 25.3%, Heps up 10.9%, and a dividend of 17 cents was declared. They of course own Medscheme, which is one of South Africa’s largest medical aid administrators. I think, certainly as an administrator of the fund I’m a member of, we are unaware that they are sitting in the background. 

Ahmed, I really appreciate your time this morning. It’s fair to say that as a rule one doesn’t get rid of medical aid. It’s an important part of a family budget, and during a pandemic probably even more so. But did you perhaps see some of your customers shopping down in the schemes that you administer, maybe moving to cheaper offerings?

AHMED BANDERKER: Good morning, Simon, and thanks for your time this morning. It’s a good question on medical aid membership. While because of the unemployment that was expected, with the loss of jobs in the second half of last year, we did expect a consequential impact on membership. Surprisingly, however, I think what was clear is that people did what they could have done to actually hold on to their membership. There were far fewer resignations than we anticipated.

Surprisingly, we had a 1% growth in new business of membership, and far fewer buy-downs compared to the previous year.

SIMON BROWN: I suppose so. It’s a pandemic. It focuses your mind on your health perhaps like never before. How many individuals are now covered by your scheme? How many are you administrating?

AHMED BANDERKER: It’s now 3.9 million, and that’s cumulatively with administration as well as the managed care services. 

SIMON BROWN: Does that make you the largest in the country? 

AHMED BANDERKER: On managed-care services, it makes us the largest, which is specialised health-risk management services. The administration would be the second largest.

SIMON BROWN: Okay. One of the things that I note – we’ve been talking around the administration and Medscheme, but you’ve actually been expanding the business, moving into, for example, your virtual care, the telehealth; you’ve got the pharma businesses. Well, those have been growing often at perhaps slightly better margins, in a sense. Is that a strategy you’re going to continue with, that integration of other parts of the healthcare industry into AfroCentric? 

AHMED BANDERKER: Simon, 100% correct there. Medscheme itself is in fact 50 years old and up until about five years ago the group was dominated by Medscheme. But that’s when we undertook a strategy of diversifying the business, which included pharmaceuticals, as an example.

Pharmaceuticals now make up about 40% of our profits in the group, and continue to grow as well. 

But for us what’s quite reassuring and exciting to see is that the work that we’ve set out to achieve is also yielding results with Medscheme’s growth. So, even though it’s 50 years old, you’d have seen that the operating profit lifted about 16% there. And that’s on the back of all the advancements we are doing, which include the virtual consultations. 

SIMON BROWN: As a country we are rolling out vaccines slowly, but we have started. People are getting the jabs in their arm. I imagine this is a space in which you are able to assist, you are able to help. You’ve certainly got capacity out there. Probably not a profit centre for you, but something that you will be able to assist in. Have you been engaging with the health department on this? Is it a space that AfroCentric will be operating in?

AHMED BANDERKER: Absolutely. We’ve been engaged with the Department of Health. We’ve been engaging with some of the non-profits as well.

We have a nurse network, Simon, in excess of 3 000 registered nurses, which is capable of countrywide rolling out about 50 000 vaccines a day that it can administer. So we certainly can mobilise that the moment we get our hands on those vials.

We can do that through our membership, obviously. But we’ve also extended it further and said to government that we are happy to help in the outlying areas, in the little communities or the CBD, to the extent that they may need the support.

SIMON BROWN: We had our national budget day two weeks ago with Minister (Tito) Mboweni. What struck me was no mention of the National Health Insurance, although I imagine he’s got bigger challenges right now. I don’t think it has gone away. It might just be delayed a bit. Your sense around that? I’ve seen comments out of AfroCentric that you view this potentially as an opportunity rather than a threat for the group.

AHMED BANDERKER: Simon, we actually have one of the most successful public-private partnerships in the healthcare sector. In our pharmaceutical business, we are delivering in excess of 700 000 antiretroviral drugs per month to state patients. That gives you an idea of the scale and reach that we have countrywide. 

In addition to that, we do the administration for Polmed and we do the managed-care services for Gems, all of (which) will probably form the backbone of the NHI. And hence as a level one company we are saying that we are well-positioned to be able to assist government in rolling out the NHI.

SIMON BROWN: We’ll leave that there. That is Ahmed Banderker, CEO of AfroCentric. Everyone gets excited about Discovery, but here is a little gem. Go along to Moneyweb and fund the article Keith McLachlan wrote maybe two, three weeks ago on AfroCentric. There’s a little gem sitting here. 

Read: Discover the other healthcare stock option

Ahmed, I appreciate the early morning time.

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Just what we need – more people ready to “assist government in rolling out the NHI. Perhaps the same helpful people will pay for it, too.

“We can mobilize as soon as we get our hands on those vials” That’s the problem here. Everything is in place, the weak link is the Govts ability to procure vaccine in any significant quantity. The smart countries have beaten us to it .

So he is admitting that they are well connected to score from the NHI. I see a huge conflict of interest.

End of comments.

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