Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Dave Koning - Robert W. Baird
Dave Koning - Robert W. Baird
As we look out in the core South African business how do you see grant growth in fiscal 2009 and then revenue per grant growth in fiscal 2009 just given all the dynamics with inflation etc. that are going on?
Herman Kotze
Obviously we’ll be influenced by a number of factors. The inflation rate in South Africa remains very high currently, 12.9% being the latest indicator and clearly also with us being in an election year the chances of the grant amounts being increased by anything less then inflation I personally think is fairly remote. So from that point of view, specifically in terms of the KwaZulu-Natal province where we get an automatic increase when the grant amounts go up, it certainly will grow the earnings in our biggest province quite significantly. So we will also obviously receive our price increases based on the current inflation rates in the other provinces as and when they become due and they are scattered during, throughout the year.
But the key one will be KwaZulu-Natal and the increase from the budgets allocation will probably only become effective in the fourth quarter of fiscal 2009. From a higher volume point of view, I think that’s a bit more unclear to us. SASSA doesn’t provide us with any specific details and looking at the press release that we got from the Ministry they talk about a million people who will now qualify for grants simply because they’ve increased the minimum thresholds. Again the time taken to process those applications that will come in from the various provinces, and if we use the rule of thumb and they say a million people, we could probably expect us to have at least 400,000 of those in our provinces if not more because I think a high concentration of these guys that will now qualify are probably going to be more rural then urban based.
But be that as it may, the application process, the evaluation process and until they really end up on the pay file for us to pay them, could be at least four to six months. So again I don’t think that we’ll see the numbers starting to tick up significantly as a result of this announcement at least until the end of the third quarter or the beginning of the fourth quarter of 2009. Overall we always say that we budget on a 6% growth rate in terms of the beneficiary numbers. I think if you look at the last year it’s slightly less then that, its 5%. Given all the developments within SASSA and the time they’ve spent on the tender and other processes and obviously also with the removal of quite a number of beneficiaries from the fraud eradication campaign, I think that that still is probably a fairly conservative guideline to use and in terms of price increases, given that our increases in most of the provinces are normally around 80% of the [CBI] rate, we probably look at a further 10% increase from a price increase point of view and that will obviously also be phased in during the months of the year when those increases become due in the various provinces.
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