Sizwe Medical Fund, which was put under curatorship in September last year, owing to governance failures, has put out a tender for administration. The closing date for tenders, estimated at no more than R150m per annum, is 21 February. Bonitas, which was under curatorship until last August, has retained Medscheme as its administrator.
It’s unclear who’s vying for the Sizwe account, but Sechaba Medical Services (Sechaba), the incumbent, might face competition with stronger contenders including the country’s premier administrator Discovery Health, Metropolitan and third-ranked Medscheme. Hungry minnows Agility, Allcare and Sanlam might also take a stab.
Contrary to hushed but widespread speculation that Sizwe’s tender is a neat way to axe Sechaba, curator Khaya Gobinca says the scheme is in the process of “renegotiating” and “reviewing all contracts”.
He won’t say which or even whether any suppliers have been fired since he was installed in place of the conflicted board ousted last year. Asked what this move means for Sechaba, chairman and seasoned industry player Peter Matseke says his firm “appreciates the importance to benchmark service standards and costs”. Sechaba, admin and managed-care service provider to the 150 000-member fund for the past three decades, is “strongly placed” for a return, Matseke predicts.
At last check, Sizwe’s service providers included actuarial firm Health Monitor and Sechaba, now under CEO Grant Newton who previously headed Sanlam Healthcare and Eternity. Furthermore, Afena, Cadiz, Investec and Prescient all serve as investment managers while auditors PKF and SizweNtsalubaGobodo also do business with Sizwe. KPMG, PwC and RMB ceased to be service providers two years ago.
“In respect of governance issues that triggered curatorship, those who have been with us for a long time need to be reviewed – given that the curatorship came as a result of governance concerns,” Gobinca says. “All contracts are being reviewed, the idea is to ensure that members are getting value for their money.”
However, partly because of the huge returns they promise with, often, little investment, it’s administration that tends to generate a lot of excitement and keen interest in the R100bn medical aid market that covers almost 9m people.
In 2011, Sechaba made almost R170m after hiking its fees by 6% for administration (R129.4m) and managed-care services (R40m) from Sizwe. The admin fee works out to R250 per beneficiary per year. That’s markedly lower than what members of market leader Discovery (R385), Bonitas (R330) and mid-sized player Fedhealth (R320) pay their respective administrators for the service.
Purely on the size of its price tag, coupled with what Matseke labels “our strong track record” Sechaba would be justified in its expectation to retain the admin account. But, a tainted record on the governance front would prove too hard to ignore. That said, Newton and his management team need to spend more time considering life after Sizwe. The threat that could spell the end for Sechaba is too real to wish away.