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This interview was originally aired on RSG Geldsake and has been translated into English in this transcript.
RYK VAN NIEKERK: I spoke to Ahmore Burger-Smidt from Werkmans last night about the apparent extremely stringent conditions that the Competition Tribunal has imposed on the transaction in which Remgro and MSC wanted to buy out Mediclinic’s minority shareholders. The conditions have raised eyebrows because the Tribunals’ conditions do not really have anything to do with competition.
The list of conditions is long, and includes a stipulation that Mediclinic must perform at least 1 000 pro bono surgeries at its hospitals over the next five years with a view to relieving pressure on the public healthcare system.
Mediclinic would also have to spend millions on training doctors and nurses, and must upgrade various clinics. Mediclinic must purchase at least R5 billion [in products] from black-controlled businesses over the next five years and its employees must also share in Mediclinic’s after-tax income.
Remgro CEO Jannie Durand is on the line to chat with us from London. Jannie, welcome to the programme. The conditions seem very prescriptive, particularly at operating level. Would you regard them as strict?
JANNIE DURAND: Ryk, as you mentioned in your opening remarks, there is no competitive problem because there are no other hospitals being bought out, so these things were all what they termed matters ‘in the public interest’ that the Department of Trade and Industry today requires with these types of takeovers. So it’s just a process of negotiation.
But at the end of the day we are comfortable with it. From Remgro and the MSC side we have signed.
I think we are looking at this through a different lens – as part of the solution to healthcare in the country. We will learn what is happening on the ground. I think we will also be able to show the public sector how we do things, and be able to help, as a responsible role player in the health industry.
RYK VAN NIEKERK: I think it’s very good for both South Africa and the healthcare industry, as you have said. But on the other hand one can see that it could result in additional expenditure for businesses. Would it in any way increase Mediclinic’s cost structure?
JANNIE DURAND: No, it definitely won’t raise the cost structures for clients, but it would involve costs for Mediclinic. We budgeted for that, we made provision, so we accept it. If you want to do such takeovers today in South Africa you have to accept the imposition of a so-called ‘hidden tax’, but you need to make that part of your business in building that intellectual capital, perhaps in a few years, in the hospital industry in the public sector. We are fully prepared to do that; it’s a learning curve.
But you are absolutely right. In other countries where we’ve done similar transactions there have been no such problems. I think it’s a unique South African solution that they are creating here, and we have to live with it.
RYK VAN NIEKERK: Who placed this proposition on the table? Was it the Tribunal or Mediclinic itself?
JANNIE DURAND: We tabled these proposals ourselves, because these were conditions we were comfortable with. The other side of course had a few different proposals, and those were ultimately negotiated. I would say that more than 80% of the proposals came from our side.
RYK VAN NIEKERK: The pro bono work – these 1 000 surgeries – must take place over five years. Have you performed many pro bono surgeries on people who might not necessarily have afforded them?
JANNIE DURAND: Yes, we have in the past. What is very important here is to get the cooperation of the doctors and the specialists participating as part of the conditions because, as you know, in South Africa we don’t have our own doctors. The doctors don’t work for us, so we need their cooperation to fulfil this obligation. But we have done this before.
RYK VAN NIEKERK: And what is the attitude of the doctors in the private sector towards doing such surgeries?
JANNIE DURAND: I think very positive. We have experienced it very positively in the past. I think they also learn from them. In these surgeries there could be cases they don’t encounter every day, so it hopefully becomes a win-win for both sides. But they are very positive. You generally hear that we [have had successes] in the past.
RYK VAN NIEKERK: Something I also find interesting is that employees are to share in the company’s after-tax profit. Is that also something you’ve done before, profit-sharing for employees rather than bonuses?
JANNIE DURAND: Yes, that’s something we have been looking at for a long time, Ryk. It has not usually in the past been … an attraction for normal bonuses, as you know. Here we’ll try doing something more innovative; where it can be linked to the hospital in that the nurses can be involved and they can see if they work hard and the hospital is doing well they will be able to participate. So it’s nothing new in the business world, it’s just something that is perhaps seen a little more often in the hospital and healthcare world. But we are comfortable that we can work something out to everyone’s benefit.
RYK VAN NIEKERK: Jannie, what was your experience with the Competition Tribunal from your making the offer and they then had to reflect on it? Was there head-butting, or are you relatively happy with the process?
JANNIE DURAND: I think there is always some head-butting. Fortunately this process went far more quickly than the Distell-Heineken process, which took much longer, greatly frustrating me. Here the process was quicker. There is always some head-butting and wrestling over certain conditions, but fortunately we were able to conclude the process quickly and we hope to be able to implement it without delay.
RYK VAN NIEKERK: Jannie, thank you very much. That was Jannie Durand, the CEO of Remgro.
