Also from GAN

The business of health in sub-Saharan Africa
Mon, 25 May 2009 15:21
Nelly Nyagah

Global spending on healthcare has risen dramatically and more so in emerging markets where demand has presented big opportunities for investors.  African governments, faced with greater demand, have embraced the private sector to meet delivery goals.

“Most people in Africa are debt free because they don’t have access to cheap finance. They are demanding medical services and are willing to pay for them. I think the global financial downturn will have a lesser impact on our healthcare sector compared to the developed economies,” says Dr. Vivek Solanki the chief executive officer at African Medical Investments (AMI). The healthcare provider, like many others, is now soldiering on with expansion plans across Africa, this despite the crisis.

These investors are profiting from exploiting gems of opportunities underlying the challenges facing the healthcare sector in sub-Saharan Africa. Their expansion plans are being fuelled by statistics that predict continued growth in the continent’s healthcare sector, as more people demand better services.

Healthcare represents a significant investment opportunity, yet current consumer demand continues to be unmet in most sub-Saharan countries. For instance, an estimated 18,000 wealthy Nigerians travel abroad every year to seek medical care, while in Kenya at least 5% of the total stated demand for healthcare is not satisfied due to limited access to services and products.

Nevertheless there has been a notable growth in healthcare provision in the recent past, though other sectors such as telecommunications, financial services, oil, minerals and infrastructure have traditionally attracted more investment. A key indicator spurring positive investment trends is the involvement of the private sector by governments in the region in a bid to fulfil their mandate of providing more, and better quality, healthcare services to citizens. 

Healthcare providers in Africa

Investors are getting new opportunities as consumers’ incomes and the need for quality healthcare rises. AMI which has clinics and trauma centres in South Africa, Tanzania and Zimbabwe, plans to establish Woman Wellness and trauma centres in Mozambique, Kenya, Uganda, Ethiopia and later West Africa because it believes there will be sufficient patients with the financial means to afford its services within its niche market.

"An estimated 18,000 wealthy Nigerians travel abroad every year to seek medical care, while in Kenya at least 5% of the total stated demand for health care is not satisfied due to limited access to services and products."

“We are cultivating partnerships with leading corporations and institutions,” explains Dr. Solanki on AMI’s strategy of partnering with local organisations in other countries. “The results have been amazing in Tanzania judging by the numbers of expatriates, non governmental organisations and companies who have signed up for our services.”

South African health care group Lenmed Health is in a partnership to build a 110-bed hospital in Mozambique while Netcare is rebuilding a 390-bed hospital in Lesotho, worth R1 billion. Kenya’s Nairobi Hospital, which has made huge investments in infrastructure and equipment, also has no intention of scaling down on key investments despite the global crisis. Its chief executive officer Dr. Cleopa Mailu says future plans will involve expanding in the region.

“We have to be one step ahead and prepare ourselves for the future. The hospital has various revenue streams and the business mix is derived from different segments and regions, hence de-risking the business.”

Can the sector weather the economic storm?

Participants attending an International Finance Corporation (IFC) conference on the future of private healthcare in emerging markets in May agreed that the healthcare sector appeared to be less affected by the global economic downturn. Investment experts said opportunities for health providers will lie in re-inventing businesses to thrive during times of crisis.

Fola Laoye, chief executive officer at health insurance provider Hygeia Nigeria says standards and quality will be critical in these times. “With the shift to third-party payers and increase in health literacy, patients are demanding high standards of care….international standards are critical in benchmarking and Hygeia is working toward receiving a Joint Commission International accreditation.”

Medical tourism

Dr. Mailu knows too well the importance of implementing global standards and the benefits of re-inventing.  The hospital’s four ISO certifications are helping its endeavour to chart medical tourism in Kenya. “We have to re-invent and diversify our business to take advantage of new opportunities. Right now there is a great opportunity for medical tourism in Kenya and the region.”

Medical tourists are broadly defined as people who seek quality treatment abroad, or in a neighbouring state where the cost is significantly lower, leaving them with enough money to tour the host country as part of their recuperation.

In Africa, South Africa is king in this category of tourism, with Kenya steadily catching up with development of new medical facilities. Already famous for its tourism packages, what is lacking in Kenya now is an elaborate marketing strategy to tap into the medical tourism resource.

“There are huge untapped prospects. East Africa is a tourist hub with world famous sites. World standard healthcare and promotion would ignite a medical tourism drive into the region. Also the medical costs here are much lower than in the western world,” says Dr. Solanki. 

The Nairobi Hospital is pioneering medical tourism in Kenya and has upgraded infrastructure and equipment, and is now able to perform, at a fraction of the cost, many procedures that previously could only be done in South Africa, the West or India. “While staying in a hospital may not be many people’s idea of a vacation, the fact is that Nairobi Hospital is becoming a healthcare hub for thousands of international visitors,” says Dr. Mailu.

The renovation and equipping of Kenyatta Hospital, Kenya’s largest referral hospital, with modern equipment will also improve the country’s attraction for medical tourists.

In neighbouring Uganda, medical tourism is also showing great potential and is poised to carry the healthcare sector in that country to new heights, even though the concept is still emerging.  Investments in specialist clinics, spas, medical facilities and herbal medicine have been a driver of growth.

“The cost of healthcare is soaring abroad following the global recession. More people will be seeking medical care here and we are engaging the private sector to ensure Uganda is well positioned,” says the executive director at the Uganda Investment Authority Professor Maggie Kigozi.

Investment opportunities growing

The private sector, including non governmental organisations and charitable organisations, are already active players in improving health in sub-Saharan Africa.

According to the International Finance Corporation, an estimated $25–$30 billion in new investments will be needed to meet demand for medical care between now and 2016 - of which $11–$20 billion is likely to come from the private sector.

There is a broad range of existing investment opportunities across all components of the healthcare sector.

The largest individual investment opportunities will be in building and improving the sector’s physical assets - an estimated 650,000 additional hospital beds will need to be added to the existing base. An additional 90,000 physicians, about 500,000 nurses, and 300,000 community health workers will be required over and above the numbers that will graduate from existing medical colleges and training institutions.

Demand for better distribution and retail systems and for pharmaceutical and medical supply production facilities will also be strong. These opportunities can deliver compelling financial returns and have an enormous potential development impact.

The private sector is delivering almost half of sub-Saharan Africa’s health products and services and for this trend to continue stakeholders will have to address some of the impediments to the region’s healthcare sector.

“There is a lot of pressure on private hospital facilities because the public healthcare system in many countries is in a poor state and thus not meeting the needs of the population. Private providers will need access to capital, investment incentives, skilled workers, easier procedures and regulations; and risk-pooling mechanisms that can mobilize revenue for investors,” says Dr. Mailu.

Here is a detailed profile of existing investment opportunities in the healthcare sector.