Comment: Investing in Africa’s healthcare sector – African Business Magazine

Africa is experiencing consistent economic growth. As McKinsey puts it, the “lions are on the move”, resulting in increased urbanisation, social mobility and increased life expectancy.

Around 50% of Africans will be living in cities by 2030, and by 2034, 1.1bn will be of working age, increasing the demand for improved infrastructure including improved healthcare provision. Challenges and opportunities are plentiful in the African healthcare sector, which the International Finance Corporation (IFC) estimates is worth $35bn.

An educated and growing middle class will demand better quality healthcare. Meanwhile, increased life expectancy and lifestyle changes will place an increased focus on non-infectious diseases such as diabetes and cardiovascular conditions.

Existing market constraints are being considered and often addressed, whether through regulation (and deregulation) of the industry, increased private sector involvement in the implementation of healthcare facilities, greater investment in pharmaceutical production and the supply chain, and on new technology and innovation.

Supporting The Private Sector

Various governments are now working together collectively – for example, both the East and West African Private Healthcare Federations – to tackle the challenges faced by players in the sector, whether through encouraging investment in facilities, or protecting trademarks and innovation.

Drafting law and regulation which attracts and sustains investor interest for healthcare projects is a priority for many governments. For example, the Kenyan Government is focused on private sector involvement in healthcare provision, and has ensured the correct legal and regulatory framework is in place.

While the East African country is currently grappling with how best to allocate budgetary funds for healthcare provision, Kenya plans to tender for $600m worth of new contracts for facilities and equipment, including 300-bed hospitals, oxygen supply plant and IT systems.

Meanwhile, Nigeria has passed a law committing to a minimum spend of its annual federal government revenues on healthcare. Furthermore, the IFC led a consortium of investors to invest $70m in Nigeria’s largest healthcare group, Hygiea. There is a focus on reversing the outflow of over $1bn spent by Nigerians on medical tourism.

Implementing public–private partnership policies and passing new legislation will open Nigeria’s medical industry to international private investors, helping the government to meet the demands of a new, upwardly mobile, generation. Many foreign investors will have witnessed the same trends in their home jurisdictions in Europe or North America.

Production And Innovation

The value of the African pharmaceutical market was worth $20.8bn in 2013, and is expected to reach approximately $US60bn by 2020. The African Union is collectively focused on supporting local pharmaceutical manufacturing in Africa, increasing access to affordable quality medicines and reducing the cost of medical imports.

African governments are also offering tax exemptions and reduced land prices to help bring manufacturing plants to Africa, subsequently helping healthcare companies looking to enter or expand their operations throughout the continent. Africa’s communication technology “leap-frog” is well documented, and at a time when digital health is an emerging trend, advanced connectivity helps combine healthcare, communication and technology.

There are advances in access to healthcare, electronic care records, remote monitoring and personalised medicine. Digital health has the potential to significantly reduce costs and inefficiencies, improve quality and to trigger people’s interest in monitoring their own health. As the market develops, law and regulation must also reflect the growing medical sector to ensure suitable quality standards, a level but competitive playing field, and an appropriate framework that attracts investor interest but safeguards public interests.

Mobile Supply Chain

Investment in African infrastructure is at an all-time high as a result of greater support from governments including on roads, rail and ports. The political will to reduce trade barriers and transit times is strong. While pharmaceutical logistics chains have specific requirements, closing the infrastructure deficit is an important step towards increasing the feasibility of a sustainable medical manufacturing industry.

In Africa, there is a growing trend to increased accessibility, and where the “last-mile” proves difficult, mobile phone technology is finding innovative ways of connecting Africans to goods and services. The ability to conduct a health check by tablet, order prescriptions over a smartphone and receive them by drone may shortly become a reality. Therefore, the potential of the African healthcare sector presents a great opportunity for informed investor.

3 Steps To Success

In order to maximise your return on healthcare investment in Africa, then adhering to the following three steps will help you to achieve that goal. Firstly, it is vital to do your research. Look at which countries are offering incentives for investment in healthcare, as well as investment in other areas that are directly linked to healthcare (such as infrastructure, housing and education).

Secondly, be prepared to partner. Local businesses will have sufficient knowledge of particular markets and consumers as well as brand recognition, but may lack investment and capacity.

Finally, get the right advice. Whether it’s hospital construction or operation, manufacturing, medical supplies, manufacturing or e-health, experts’ pragmatic and informed advice will be critical to your business.

Robert Breedon and Jonathan Brufal are both partners at Gowling WLG