Background
Healthcare in Africa is fraught with several challenges, from poor infrastructure to counterfeit drugs, health worker shortage and poor access to quality health services. A large population, widespread poverty and conflict have all contributed to the poor health outcomes experienced across the continent. With 24% of the global disease burden and 11% of the world’s population, Sub-Saharan Africa commands less than 1% of the world’s
health expenditure. Approximately 50% of total health expenditure is financed by out-of-pocket payments. Public-sector funding for healthcare remains uneven across the continent. While 53 African countries signed the Abuja Declaration pledging to devote 15% of their national budgets to health, most remain far from that target and according to some estimates, 7 countries have actually cut their spending on health over the past decade.
With the rising incidence of chronic disease and changing medical needs of the population, Africa’s healthcare system faces a new matrix of challenges. The traditional communicable diseases such as HIV/AIDS, malaria and tuberculosis, remain the main drivers of mortality. However, chronic conditions such as diabetes, cardiovascular disease and cancer-associated with a growing middle-class lifestyle- are also emerging as major killers. They are expected to overtake communicable diseases as Africa’s biggest health challenge by 2030. This is creating a double disease burden which African health systems are ill equipped to handle. African health systems are underfunded, overstretched and understaffed, rendering the challenge of addressing this double disease burden an enormous task. Additionally, continued high rates of maternal and child mortality and rising rates of injuries linked to violence, particularly in urban areas, are weighing down a system that is already inadequate to the challenges facing it.
Private Sector Role
The private sector consists of non-public entities including for-profit commercial companies, non-governmental organizations (NGOs) & social enterprises. An informal health sector – healers, midwives and individual medicine vendors; also exists and provides care mainly to the poor and underserved. The private sector plays a critical role in bridging the healthcare gap in Africa, particularly in the financing and delivery of healthcare throughout Sub Saharan Africa. Around 60% of healthcare financing in Africa comes from private sources and almost 50% of total health expenditure goes to private healthcare. Private insurance schemes have also been growing in countries especially in urban areas with large affluent populations or industries capable of funding large worker plans.
Rapid economic growth is set to expand the African middle-class, increasing the capacity to pay for care and consequently the demand for good quality services. This has opened the door to the private sector operating in a new role, often working in partnership with donors and governments to provide better healthcare facilities and increased access to medicine at an affordable price. The public sector, in several countries, is unable to meet the current demands due to a shortage of capital, human resources and problems with efficiency and quality. Demand is also increasing due to new developments in the healthcare sector, such as the emergence of generic drugs, low-cost insurance and medical tourism. Medical tourism is popular with Africans seeking usually elective medical treatment overseas, with destination linked to income group and region with the most price-sensitive heading towards India and
Egypt, with South Africa, Morocco, Tunisia and Kenya being regional destinations and other higher-priced alternatives in the Middle East, U.S. ,U.K. and elsewhere in Europe. For example, the number of foreign tourist arrivals to India on a medical visa increased about 140% from 2013 to 2015. 25% of the passenger loads on major airlines Kenya Airways and Ethiopian Airlines to selected destinations are medical tourists. Most of Africa’s medical tourists pay out of pocket.
Private companies can help close the gap in healthcare delivery by improving access to care and introducing innovation and competition. Although it accounts for 50% of healthcare provision, the private sector is fragmented with inconsistent quality due to lack of regulatory and accreditation frameworks. The private healthcare in Africa would thus benefit from enhanced regulations as well as financial and technical support to enforce quality standards where they may be lacking . Reformation of local policies and regulations that impede the development of the private sector is necessary, particularly in streamlining bureaucratic
processes that limit market entry. . The growth in demand for private healthcare in Sub Saharan Africa could add an additional $20 billion per year investment in private healthcare.
Pharmaceuticals
The pharmaceuticals market in Africa is expected to reach a business opportunity of $45 billion in 2025, propelled by a convergence of changing economic profiles, rapid urbanization, increased healthcare spending and investment, increasing number of healthcare professionals and increasing incidence of chronic lifestyle diseases. An increase in public & private sector funding will provide opportunities for domestic drug makers to expand their manufacturing capacities over the coming years. Most multinational drug makers operate indirectly through imports or collaborative agreements with domestic players.
Investment Potential
Africa presents potential opportunities for entrepreneurs and investors alike despite the problems in her healthcare sector- poor infrastructure, inadequate funding, shortage of skilled health personnel and fragile health systems. In spite of these constraints, business and investment opportunities in health in Africa are on the rise . There are wide ranging healthcare investment opportunities arising from the improved political and economic climate across the continent. Given the increasing demand worldwide for health services, including diagnostic treatment and care, health service providers represent the largest investment opportunity within the industry and there have already been recent international acquisitions/finance of some local diagnostic and/or pharmaceutical retail chains in several countries. Within healthcare provision, business models typically fall into four broad categories: Inpatient care (including primary care), Outpatient care, Preventive care and Diagnostic services. Inpatient care is by far the largest of these categories in financial terms, at 65% of total provision expenditure. High-end clinics that target growing middle- and upper-income populations in urban centers can deliver net profits of up to 30%. At the other end of the spectrum are high-volume, low-cost hospitals. These tend to be located in high-density areas and target low-income groups requiring basic medical care. Patient attendance is extremely high (up to 100 patients per day per doctor). However, there are several healthcare groups that are developing networks with different business models e.g. including both clinics, and relatively low cost hospitals.
Digital health is where technology converges with healthcare – the result of which will inevitably change our current approach to managing healthcare as technology changed approach to banking. Digital health is complex and involves multiple players- government, regulators, IT companies, content players, device vendors, pharmaceutical companies, start-ups/entrepreneurs, internet operators, payers, private investors, patients and health care providers. This is also a rapidly evolving area with the expanding technology investments focused in a couple of countries – and a few start-ups and relatively young firms in this space have receiving venture capital funding.
Investment opportunities require careful screening and understanding of the financing/operational environment which varies by country, and within countries especially in those with a decentralized health system.
Please feel free to contact us info@anadach.com if you are interested in exploring the African private health sector further.
References
- Anadach – several presentations, surveys and internal research 2014-2019
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http://documents.worldbank.org/curated/en/878891468002994639/The-business-of-health-in-Africa-partnering-with-the-private-sector-to-improve-peoples-lives
-WHO (World Health Organization) 2004. Investing in Health for Economic Development. Online at http://who.int/macrohealth/action/sintesis15novingles.pdf, accessed on 19 th October 2017