Health-market inquiry under fire for ‘lax fact checking’

Health-market inquiry under fire for ‘lax fact checking’

By Tamar Kahn, 31 May 2017,

Health-market inquiry under fire for sounding the alarm on Remgro’s and Afrocentric’s interests ‘before full checks’.

Independent economics consultancy Econex has criticised the Competition Commission’s health-market inquiry for sounding the alarm over the potentially anticompetitive effects of Remgro’s and Afrocentric’s interests in the private healthcare sector, saying it should have checked facts and spoken to the parties involved before publishing its concerns.

The inquiry released a research note last week on cross-directorships and cross-ownerships in the private healthcare industry in which it said the size and scale of Remgro’s and Afrocentric’s financial stakes in the sector had the potential to stifle competition.

The inquiry was established to determine whether there are barriers to competition and access in the private healthcare market. Econex MD Nicola Theron said the inquiry’s report was filled with allegations of implied misconduct yet failed to provide any evidence to back up its claims. “If they go on like this, they are going to lose credibility,” Theron said.

The report said Remgro’s and Afrocentric’s healthcare investments “may allow the groups to substantially influence the commercial and strategic decisions taken by the management of the portfolio firms”.

“They may even influence the very structure of competition in the South African healthcare market,” it said.

Remgro CEO Jannie Durand said the company would check the facts in the research note, as information may have changed since the publication of its 2016 annual report.

“If needed, [Remgro] will provide evidence to the commission that is missing that would contribute to the understanding of the nature of cross-ownership and cross-directorships in the South African healthcare sector.”

“We will work with the competition authorities to ensure there is no disincentives for competition and … ensure the scale of Remgro’s investments does not substantially influence the commercial and strategic decisions taken by the portfolio firms,” he added. According to the inquiry’s analysis, based on publicly available information such as annual reports, Remgro holds significant interests in MMI Holdings and Discovery, which in turn have interests in medical scheme administration, managed care and brokerages. Remgro also has a 42% stake in hospital group Mediclinic.

The report said Durand sat on the boards of Discovery, Mediclinic and the First Rand Group, which has shares in MMI Holdings. However, Durand said he had resigned from Discovery’s board two years ago.

Afrocentric spokesman Kabelo Letebele said on Monday that, while cross-holdings and cross-directorships might hamper vigorous competition in other industries, it was not the case in healthcare.

Afrocentric owns Medscheme holdings, a medical scheme administrator, various managed-care organisations and a brokerage, with pharmaceutical manufacturers, medical product distributors and retail pharmacy outlets.

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