Afrox wins exclusive R1bn deal to supply gases to public hospitals
The company last held the entire contract a decade ago
In a deal valued at more than R1bn, Afrox has won the healthcare contract to supply gases to public hospitals in SA for five years.
This is a coup for the JSE-listed gases group as it last held the entire contract a decade ago and has long identified the healthcare sector as a growth opportunity.
The company, a subsidiary of the global Linde gases group, says the contract stipulates that it contracts 30% of business to empowerment companies.
The award is effective immediately across all of SA’s nine provinces and is exclusive for the next five years.
Afrox has until the end of September 2018 to extend its existing contract supply to additional government healthcare facilities in KwaZulu-Natal, Free State, North West and Mpumalanga. Afrox will supply more than 400 hospitals and 1,600 clinics across SA.
"Afrox supports the Department of Health’s aspirations and we have been working to ensure our processes, distribution and supply chain operate at efficiency levels to meet the expectations of the entire healthcare sector in SA," Afrox CEO Schalk Venter said on Tuesday.
We have the production and filling capacity to meet the government’s healthcare requirements for medical gases, and processes and systems in place, backed by a skilled workforce and a robust supply chainSchalk Venter
"We are committed to and have invested in [broad-based black economic empowerment programmes] and 30% of the total contract value has been contracted to black-owned [small, medium and micro-sized enterprises]. We have long identified the healthcare sector as a growth point and have been concentrating our efforts in recent years to ensure Afrox can operate at efficiency levels to win this new business," he said.
"Being awarded the contract for the provision of medical gases to state hospitals across SA underscores this achievement and affirms Afrox’s capability as the leading provider to healthcare services in Southern Africa offering security of supply of quality products."
Afrox said its health and safety practices and full healthcare products range were of South African and international standards. "We have the production and filling capacity to meet the government’s healthcare requirements for medical gases, and processes and systems in place, backed by a skilled workforce and a robust supply chain," Venter said.
The government provides full medical services to the more than 45-million South Africans who fall outside the private medical aid system and are dependent on public healthcare.
The latest figures from Statistics SA show that provincial government expenditure on public healthcare stands at more than R150bn a year.
The new state healthcare contract runs from October 2017 to September 2022 and provides for the supply of a range of medical and other gases, including oxygen, nitrogen, nitrous oxide, carbon dioxide, hydrogen, helium, argon, gas mixtures and refrigeration gases.
Afrox said it had made up a lot of ground in financial 2017 after a legacy legal settlement with SA’s largest steel producer, ArcelorMittal SA, saw a net R161m injected into the group.
Chasing "pockets of growth in a difficult environment", after an exceedingly tough financial 2016, the gases group pushed revenue up 2.8% to R5.7bn in the year to December 2017.
Dividend payouts were in the top quartile of JSE-listed companies in the last three years, Afrox chief financial officer Matthias Vogt said.