“The Health Sector in Africa faces many challenges. Even though Africa has close to 11% of the world’s population, it bears 24% of the global disease burden. Less than 1% of all total global health expenditure is spent here, and it has just 3% of the world’s healthcare professionals (doctors, nurses, etc.)”, explains Steven N. Adjei (Hons.) “We have all heard of the AIDS, Ebola, Polio, Malaria and Tuberculosis epidemics that have ravaged the continent in the last 20 years. AIDS in particular has been a huge burden here in South Africa, 19% of the country’s 48 million people have contracted the disease, making it the highest in the world. “
Apart from all this, there has been a rising worrying trend – the rise of non-communicable diseases (NCD’s). The principal NCD’s are asthma, diabetes, high blood pressure leading to cardiovascular diseases, and respiratory diseases such as asthma. There is also the so-called ‘brain drain’ – the exodus of health professionals to the developed world, as well as poor infrastructure, corruption, counterfeit medicines and poor quality standards.
These challenges however present huge opportunities for the potential investor. Healthcare investment has been overlooked by many investors on the continent, but it is one of the fastest growing sectors in Africa at 7% in from 2002 - 2013, growing faster than real estate (5.9%), manufacturing (4.5%) wholesale and retail (6.8%) and even agriculture (5.5%). Compare this to the negative change in performance in the FTSE 2012 in healthcare (-6.1%) and pharma and biotechnology (-6.9%) sectors; its obvious where the next hotspot for healthcare investment will be in the next 10 years: Africa.
Primarily a fast growing middle class who demand better healthcare, as well growing education of healthcare needs and better healthcare governance is and will be, driving this trend. For instance, medical tourism, where Africans seek medical treatment abroad is booming in Africa: Nigeria alone spent $1.6 billion in 2013 in patients seeking medical treatment abroad. Many entrepreneurs particularly in Nigeria and Kenya are arising in this sector and even private equity companies are beginning to offer a dedicated healthcare fund; as an example, The Abraaj Group dedicated $160 million of its total fund in 2013 exclusively to the African health sector, the IFC has an African healthcare fund operating out of Nairobi, Kenya, and the investment Funds for Health in Africa (IFHA) deal exclusively in private equity in the African healthcare space.
The missing middle affects healthcare disproportionately to other sectors. This is primarily due to the perceived lack of understanding and high risk associated with the sector. BlueCloud Healthcare works in, and is primarily committed to this sub-sector, and seeking investment here is extremely challenging. We are working with a pharmacy chain in Ghana ($5million required) a diagnostic centre in Nigeria ($2 million required) and a hospital in Zambia ($5 million) and raising money for these have been very difficult.
This is because no one wants to be a first mover to develop greenfield projects in the market; most investors want already high quality, mature and profitable projects, which are very scarce and oversubscribed in the African health landscape.
It is far easier to seek investment for health companies below $1million (numerous NGO’s and funding alternatives exist here) or above $30 million (private equity and investment institutions exist here) – and this ‘missing middle syndrome’. To enable increased investment in this space, BlueCloud is currently partnering with Money Physicians (represented at this conference) who are raising a funding round of $100 million to release much needed funds to this sub-sector. The missing middle healthcare sector holds much promise, for this is where exponential growth is likely to take place with minimum effort after a few years. However it requires incubation, patience and hard work the (so-called ‘hand-holding’), which most investment institutions are reluctant to do for understandable reasons.