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Africa Outlook

Surgitech

SURGITECH

The science of specialisation



Surgitech is a leading supplier of innovative speciality surgical devices throughout South Africa.

Writer Ian Armitage
Project manager Eddie Clinton

Established in 1986, Surgitech is a leading supplier of innovative speciality surgical devices throughout South Africa. It has developed a strong customer base in the private hospital segment and has a reputation within the industry as being market leaders within a number of product offerings.

"We are proactive and dynamic and more than just distribution," says Managing Director Paul Landman. "We regularly research the latest international surgical developments, enabling us to offer state-of-the-art products and we provide ongoing professional training, so that doctors and nurses can realise the full advantages of these world-class products and developments." S

Surgitech shareholders include private equity giant RMB Corvest and BBBEE investment firm Shalamuka Capital. It is headquartered in Johannesburg and is represented in Cape Town, Durban, Port Elizabeth, Garden Route and Bloemfontein.

"The South African medical industry is quite challenging from the point of view that there are uncontrollable variables that we are faced with on a daily basis," says Landman when asked about how the business is performing.

The big challenge is access to healthcare.

First-rate medical care is available but for a price. It's estimated that only 7.5 million South Africans can afford private high-quality healthcare. The rest, nearly 42 million people or 84 percent of the population, depend on the South African public healthcare system.

"Our business has two challenges: first, we are dependent on the private medical insurance companies that determine reimbursement prices," Landman says. "Second, the state is notorious for late or even non-payment of goods delivered. Looking at those two aspects, Surgitech really does about 95 percent of its business in the private sector in the South African market. The actual state side, being a local distributor where we are self-funded, we would not be able to wait anything between 12 and 18 months up to a period of two years for payment of goods. That is why we consciously decided to focus on the private sector."

That focus is shifting, however, as the government looks to improve the way the state hospitals are run.

"There is a lot of work being done to improve the administrative side," Landman explains. "Logically, if you look at the South African market, you have about 7.5 million people that have access to private healthcare which leaves approximately 42 million which have access to the state. In terms of volume and business potential, the state is where the majority of products would be used. However their inability or the lack of administrative urgency means local distributors like us can't play in that space – unlike the large multinationals, we can't carry costs waiting for payment."

Despite this, Surgtech is growing at a rate of knots and saw double-digit growth last year. That's in part down to growing its sales force.

"We've increased our market penetration," Landman says. "In this market it is all about relationships and you need people on the ground for those to develop and transfer into good business. We invest a lot in our staff because the products that we deal with are predominantly quite technical and the markets we deal with are pretty niche markets. That customer base is fairly small, the largest probably being orthopaedic surgeons at about 400 in South Africa."

Surgitech stands out because it takes extraordinary efforts to ensure that its sales staff are trained and retrained in specialist fields. The result is a committed group of knowledgeable professionals whose expertise adds immeasurable value to our product range – that is reflected in the growth the business is enjoying.

The firm represents brands like CP Medical, Integra, SiliMed, A&E Medical and Aspen.

"We're in a growth phase," Landman says. "We are looking at new agencies, acquisitions of new products and acquisitions, possibly, even of smaller local distributors who complement what we have. We are constantly on the lookout for new opportunities and growth and from our shareholders perspective that is exactly what they want to do – look at new products and new lines that will assist in the growth of the organisation."

That growth isn't limited to the borders of SA.

"We have realised that we have to look beyond South Africa. We have done a little bit of business in Namibia for a number of years and we recently started with a distributor in Botswana. Africa represents an exciting opportunity because it is an area we have not really touched on.

"Yes there are challenges and probably your biggest concern would be potential non-payment or skill sets but with those challenges come a big opportunity."

At home too, the proposed national health scheme offers growth potential.

"The feeling is it will take a number of years for national health to actually materialise," says Landman. "There are a number of reasons for that. The first challenge is the upgrading of the existing public facilities and you would have to get them up to standard where you can implement a national health system. But there would be an opportunity. The biggest challenge forthe state in my opinion is that they don't have the administrative skill set to manage the administrative side of the process. I think from a surgical point of view, using the product is not an issue. Where the problem comes in is on the administrative side once the procedure is done. I know there is quite a big drive in a number of areas where they are looking at introducing more business-like people to run these hospitals like businesses in the state in private-public partnerships. There is hope for it and mixed reaction around the national health system but there may be a way that these problems could be addressed."

Surgitech is fast approaching 30 years in business. What's the secret to its success?

"The main success factor would be around relationships and the quality of products that we distribute," Landman says. "We have long-standing relationships with our suppliers, very healthy relationships, and I think the relationships we have with the market, and the fact we have been around for almost 30 years, has shown that we are a stable organisation that will be around for a number in the future. I think that is important for the customers that we serve – they need to see that we will be around in the next five to ten years. On top of that, I think that the leadership we have and the fact we have kept our strategy to niche unique products has played an important part too. We look for products that are state of- the-art and we are focused on quality and the patient. Our number one priority is the patient and we want our clients to have peace of mind that the product they are using is safe and effective for the patient that they are serving. I think that is important."

To learn more visit www.surgitech.co.za.