Old Mutual looks ahead to charter
Stephen Gunnion
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OLD Mutual Healthcare plans to sell a further stake in its business to black investors as it gears up for the introduction of an empowerment charter in the health-care sector and aims to win lucrative government business.
Newly appointed MD Thabiso Buku said yesterday the group would lift its empowerment ownership above 30% in a deal expected to be announced towards the end of next month.
Old Mutual Healthcare is wholly owned by Old Mutual SA, and it is the fourth biggest administrator in the market with a market share of 7%-8%, and about 400000 beneficiaries.
Although the group already benefits from Old Mutual’s sale of a 13,5% stake in its South African businesses to black investors last month, an empowerment charter for the health-care sector is expected to require direct equity stakes of 30%-35%, compared with the 10% threshold in the financial sector charter.
“Our immediate priority is to identify an empowerment partner which is credible, which can bring value and help us grow the business,” Buku said. “We are engaged in serious negotiations with several parties and for us, it is prudent that everything is well considered before we choose the right partner.”
Buku said rather than wait for the health-care charter to be finalised, his group wanted a deal in place ahead of a tender for the government medical scheme, which is expected to provide health insurance to an additional 400000 government employees who are currently not covered.
“It’s a huge opportunity. We want the correct credentials to participate,” Buku said.
About 600000 government employees already have medical cover.
He said the medical-aid market had not grown in the past four to five years, forcing medical aid companies and administrators to look further than their existing client bases.
Old Mutual Healthcare planned to launch a new product aimed specifically at the LSM 4-6 market later this year. Although margins would be lower, volumes would compensate for this, Buku said.
“The government scheme provides us with an opportunity to be innovative, to come up with an integrated low-cost offering in order to bring into the net the great numbers of state employees who do not have access to medical cover.”
He said Old Mutual would also assist a task team set up by the Council for Medical Schemes looking into medical cover for low income earners.
Marketing executive Thenjiwe Ndlela said this would include negotiating with unions, who would play a much stronger role in the delivery of low-cost products than they did at present.
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