While healthcare remains one of the largest and most important industries in the world, Africa has continued lagging behind other developing regions in a number of key areas. This is easily illustrated by the huge number of people who still die from commonly preventable diseases and the fact that leaders usually travel abroad to seek treatment.
With some estimates indicating that sub-Saharan Africa accounts for 24 percent of the global disease burden while only accounting for 11 percent of the world’s population, there is certainly plenty of room for improvement and general re-evaluation of how these challenges can be tackled.
Thanks to a more educated and growing middle class, the demand for better healthcare is set to increase significantly, highlighting a massive opportunity that has the potential to be more attractive than telecoms and infrastructure but is yet to be tapped into.
An overview of the healthcare challenges
One of the major challenges facing the healthcare sector is the lack of skilled labor considering that 2012 statistics indicated that there were 145,000 physicians or 18 physicians per 100,000 people in sub-Saharan Africa. This is in stark contrast to the more developed regions such as Europe which has about 280 physicians per 100,000 people respectively.
This shortage of healthcare workers can be attributed to the low number of medical schools which are usually under-resourced with poor infrastructure and often have outdated curricula coupled with low enrollment rates.
In addition to this, low output form the medical schools and the tendency of graduates to migrate out of their countries has prevented sub-Saharan African countries from having an optimal healthcare workforce.
The impact of the emigration of physicians in the regions has been well documented in one study titled The financial cost of doctors emigrating from sub-Saharan Africa: human capital which goes on to explain: “many wealthy destination countries, which also train fewer doctors than are required depend on immigrant doctors to make up for the shortfall,” indicating that this particular problem isn’t likely to be resolved any time soon.
Another huge problem facing the broader healthcare industry is the over reliance on foreign aid to fund programs. Most sub-Saharan African countries spend less than 10 percent of their GDP on the health sector with experts estimating that 25 to 35 percent of the region’s healthcare spending originates from non-governmental organizations while 10 o 12 percent comes from private capital investment.
According to one physician, it is extremely difficult for local entrepreneurs to compete with foreign funded public programs which further discourages local investments in the space as there are no incentives to do so.
Lastly, corruption has also been cited as a major hindrance in the quest for a more robust healthcare sector with examples including healthcare workers who sell drugs that are meant to be distributed free of charge, theft, and bribery in order to gain approval for drug registrations which has fueled the proliferation of counterfeit drugs.
Solutions and opportunities
In spite of the numerous challenges, it is important to note that there is a similar degree of viable solutions and success stories on both the government and private sector fronts. More African governments are beginning to embrace working with private healthcare sector players in a number of different ways.
These include drafting laws and regulations which encourage investment in facilities, ensuring innovation and trademark protections. Although progress has been slow, these methods have yielded considerably encouraging results.
For instance, though criticized by some, Nigeria recently passed a law committing to a minimum spending of its annual revenue on healthcare. According to the FY2017 national budget, 4.17 percent of total spending was allocated to healthcare which is still clearly not enough to help ease the burden of treatment costs to a huge number of residents considering that other countries such as Malawi and Rwanda have allocated 17.1 and 18.1 percent of their budgets to healthcare.
On the other hand, according to Peter Kimuu head of Kenya’s Health Ministry’s directorate of Policy, Planning and Healthcare financing, there are plans to introduce compulsory health insurance which would entitle Kenyans to an array of services from both public and private health facilities. The government believes that this would give an incentive to medical facilities to enhance their services since they would be paid according to the number of patients treated.
With the increased focus on the demand for better healthcare, multinationals haven’t been left behind in seizing the opportunity. According to Farid Fezoua, the head of GE Healthcare Africa, even analysts have underestimated the opportunity that the African healthcare market presents.
Back in 2015, GE secured a $230 million partnership with 98 Kenyan hospitals to provide them with diagnostic equipment and also stock 11 intensive care units. Furthermore, private equity firm LeapFrog Investments acquired a majority stake in Kenya’s Resolution Health Insurance for $18.7 million in 2014 and later invested $22 million for a majority stake in GoodLife Pharmacy, making it the largest direct investment in East Africa retail pharmacy to date.
Last year, the International Finance Corporation (IFC) and a group of other investors including Investment Funds for Health in Africa (IFHA) invested $66.8 million in Nigeria’s leading private healthcare provider Hygeia following a similar investment by IFC and two other investors of $25 million back in 2009.
Apart from Hygeia, IFHA has invested in AAR Holdings East Africa’s leading healthcare provider, Sourcelink – a medical disposables manufacturing plant in Johannesburg and CarePay which administers conditional healthcare payments between funders, patients and healthcare providers.
The emergence of more startups with a focus on healthcare solutions is also expected to further drive the industry’s growth. Some great examples of these include Momconnect a phone based application backed by Johnson & Johnson which provides information and advice to pregnant women in South Africa and Mobidawa backed by Merck which provides free medication information to patients across Africa.
Merck also launched a digital health accelerator hub in Nairobi last year in a bid to support health entrepreneurs across the African continent while Microsoft’s Microsoft 4Afrika provides financial, technical and virtual mentorships for digital health startups in Africa.
McKinsey & Company projects that by 2025 two-fifths of economic growth in Africa will come from 30 cities of two million people or more with 22 of these cities having a GDP in excess of $20 billion. Since urban households have more purchasing power and are quicker to adopt new medicines, the opportunity here is massive.
Considering that the pharmaceuticals market alone is expected to grow from $20.8 billion in 2013 to $65 billion by 2020, there is certainly no doubt in my mind that Africa is the next big frontier for healthcare investment.