RH Bophelo braves affordable healthcare
In SA, the words “affordable” and “healthcare” are probably contradictory, yet this is the niche RH Bophelo hopes to occupy with its listing on the JSE last week as a special-purpose acquisition company.
This means the company is effectively a shell, mandated to acquire infrastructure assets in healthcare.
It is the first such blackowned health entity to list on the JSE and only the sixth nonequity investment in its sector.
Trading in RH Bophelo’s shares opened at R10. In late trade on Tuesday, the share price had reached R10.50.
So far, it has raised R500m to invest in hospitals that are already in operation, other healthcare projects including medical funds as well as related subsectors.
Although it clearly defines its target market as that vast number of patients for whom public healthcare is inadequate but private hospitals are unaffordable, it is by no means a low-risk investment. Much will depend on the company’s ability to find infrastructure in which to invest before the JSE’s two-year deadline flies past.
Two success factors are critical: the quality of its managers; and the assumption that the company’s status as a blackowned entity will result in its being favoured for concessions and new licences.
Some analysts have their doubts as to whether affordable, quality healthcare is possible in SA’s economic climate.
Casparus Treurnicht, a portfolio manager at Gryphon Asset Management, says this is not the time to attempt it. “Our government is not creating an environment that is supportive of business, not to mention corruption and misallocation of funds.”
The need, however, is great and urgent. The government’s National Health Insurance is a long way off and its implementation is likely to stall when its funding model collapses. At best, RH Bophelo will fill the niche. At worst, it will move the leading three private providers to widen their offering.
There have been no details of the specific repurchase of 8.7-million Shoprite shares from former CEO Whitey Basson that shareholders were told about in May. The price tag is a staggering R1.8bn.
In terms of the previously unheard-of employment agreement with Basson, the retailer is obliged to repurchase any shares put to it by Basson. On May 2, Basson notified Shoprite he was exercising the option at the middle market price of R211, which proved to be a five-year high for the share.
Even in May, it seemed hefty. The payout is going to put huge pressure on Shoprite’s liquidity and skew its working capital ratios. A few analysts say the liquidity pressure could result in some suppliers being paid late. In May, the company estimated the R1.8bn outlay would add R144m a year to interest costs.
Two months later and it’s evident from Tuesday’s trading update that things have got a lot tougher for Shoprite, as they have for all retailers. Now is not the time to be indulging in generous payouts to former CEOs, no matter how critical this one happened to be to the company’s remarkable growth.
Shareholders were on tenterhooks as they awaited details of the agreement between Basson and Shoprite.
Presumably those details will also include reference to the members of the audit and remuneration committees that signed off on the agreement.