CEO’s review

Medical cost inflation remains a critical challenge, consistently outpacing CPI and placing increasing financial strain on members and medical schemes. While the Department of Trade, Industry and Competition’s block exemption on tariff determinations offers a step toward structured cost negotiations, meaningful containment requires deeper reforms. At the same time, the CMS’s recommendation to phase out currently exempted LCBOs, if implemented, may negatively impact affordability. This move may restrict access to private healthcare for individuals who use these services but cannot afford conventional medical aid.

Beyond affordability, healthcare utilisation trends are increasing system pressures. For example, within Medscheme’s managed care environment, hospital admissions rose by 3% in 2024, following a return to pre-COVID levels in 2023. Additionally, the number of disease management interventions per thousand lives within Medscheme’s managed care ecosystem has surged by 211% over the past five years, underscoring the urgent need for transformation across the healthcare value chain.

Recognising that these challenges are not short-term disruptions but fundamental shifts in the operating landscape, we have taken decisive steps to ensure AfroCentric is well-positioned to lead a necessary healthcare transformation. Our Vision 2030 is bold, aimed at transforming the healthcare landscape by relentlessly focusing on customer obsession, innovation, operational excellence, and aligned partnerships. By championing value-based care, preventative measures, and digital innovations, we are driving a healthcare system that is more sustainable, accessible, and patient-centred, delivering long-term impact.

Embedding Vision 2030 in everything we do

AfroCentric’s strategy is anchored in our ambition to be the most trusted and innovative healthcare partner in Southern Africa, providing accessible, high-quality, and cost-effective healthcare solutions.

Delivering progress through innovation and strategic partnerships

We made significant strategic strides during the period. Our collaboration with Sanlam is progressing well, with the first phase successfully implemented to support their partnership with Fedhealth, and we are now focused on deeper innovation and integration. This marks a step-change in positioning AfroCentric’s healthcare solutions, ensuring we deliver more integrated and value-driven offerings for our clients.

Investment in digital platforms and core technology modernisation has also been a significant focus, with key system upgrades completed during this period. These enhancements have improved processing efficiencies, customer experience, and operational resilience. The shift towards value-based care has gained momentum, supported by the establishment of a dedicated Value-Based Care Orthocare Unit. These advancements reflect AfroCentric’s growing leadership in clinically driven innovations.

At the heart of our strategy is our people – the driving force behind our ability to respond with agility and purpose in a rapidly evolving landscape

Their commitment to making healthcare more affordable and accessible enables us to turn strategy into action. To strengthen our foundations, we have restructured certain business units to enhance efficiency and long-term sustainability. This has allowed us to realign our operations to better serve our clients while improving our ability to innovate at scale. I am incredibly proud of the resilience and dedication shown by our teams in embracing these changes and stepping up to the challenge.

Navigating challenges while positioning for future growth

While we have made significant strides in delivering against our strategy, this period has not been without its challenges. We navigated regulatory uncertainty, contract losses, and margin pressures. For example, while the medical scheme administration, risk management, and technology cluster has made significant progress in enhancing managed care capabilities and strengthening client partnerships, revenue growth was tempered by a decline in the high-cost options of the open schemes and the termination of key contracts. However, investments in clinical innovation, IT modernisation, and operational efficiencies have laid the foundation for future growth.

The pharmaceutical cluster plays a key role in reducing medicine costs and expanding access to quality healthcare, with Pharmacy Direct remaining a key government partner in advancing NHI objectives. We successfully increased script volumes in the CCMDD programme amid challenges such as the reduced price per script and shift to a three-month supply cycle. Despite a strong focus on cost-saving initiatives, the cluster’s performance was also affected by lower private patient scripts, adverse price adjustments in key product lines, and margin erosion in Activo, driven by regulatory constraints and lower retail demand. In response, we have taken a prudent approach, recognising an impairment while continuing to explore growth opportunities. New product launches in 2025, along with cost efficiencies, synergies, and strategic integration, aim to enhance long-term resilience. Additionally, the cluster has strengthened working capital management, addressing overstock and understock challenges to optimise supply chain efficiency and improve overall operational effectiveness.

The corporate solutions cluster is critical to AfroCentric’s broader strategy. While it represents a smaller portion of the Group’s revenue, the cluster has driven innovation, offering the most product integration points and differentiated client solutions. This has positioned it as a key growth driver for various AfroCentric and Sanlam entities.

Across the business, we have maintained our focus on operational agility. While the external environment remains complex, our commitment to innovation, clinical excellence, and customer-centricity has positioned AfroCentric well. The progress made during this period has reinforced our confidence in the potential of our Vision 2030 ambition as we continue to build a business that delivers meaningful impact across the healthcare value chain.

Building momentum to become the leading and innovative healthcare partner in Southern Africa

The remainder of 2025 will be pivotal in advancing Vision 2030. At the core of our efforts is a commitment to building trust and making a meaningful impact on the lives of those we serve. As we navigate the opportunities and challenges ahead:

• We are driving partnership expansion, mainly through our collaboration with Sanlam and their partner Fedhealth, to unlock new growth opportunities
• Digital innovation continues to be a priority, alongside refining our focus on our core business, reimagining existing models, and fostering deeper integration around Medscheme
• By optimising our operating model, we are creating efficiencies, unlocking synergies, and positioning ourselves as Southern Africa’s most trusted and innovative healthcare partner

To track our progress toward this ambition, we have set clear long-term financial and non-financial targets that define success. We aim to achieve:

• An earnings before interest and tax (EBIT) margin of 24% to 28%
• Membership growth of 5% to 8%
• Return on Group embedded value (RoGEV) of risk-free plus 2% to 5%

In parallel, we are enhancing client and member experience through:

• A targeted Customer Effort Score (CES) of 85% to 90%
• Increasing hospital claims automation to between 75% and 85%
• Fostering a high-performance culture with an Employee Net Promoter Score (eNPS) of 30 to 50

These measures reflect our long-term ambition and serve as tangible indicators of our progress in reshaping healthcare and delivering value to all stakeholders.

Our ability to achieve this ambition is strengthened by an engaged and motivated workforce, a robust governance framework, and a commitment to innovation and operational excellence. Together, these elements ensure sustainable healthcare solutions that drive long-term impact.

Appreciation

Our success is driven by the passion and resilience of our people, who continuously rise to the challenge of making healthcare more accessible, efficient, and patient-centred.

I am grateful to our Board for their strategic guidance, strong governance, and steadfast support in navigating a complex landscape.

To our clients, scheme members, and partners, thank you for your trust and collaboration. As we move forward, we remain focused on delivering sustainable value. The future holds great promise, and I am confident that, together, we will continue to shape a healthcare landscape that is fit for the future and for all.

Gerald van Wyk
Group CEO