January 8, 2020

Realizing the Promise of African Health Care

Biju Mohandas January 8, 2020

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There is reason for cautious optimism that a transformation of African health care is beginning to take hold, driven by government-led efforts to achieve universal health coverage, market-led consolidation of health-care providers, major private-equity investors, and digital technology.

NAIROBI – The quality and accessibility of health care have long been known to have a disproportionate impact on the economic and emotional wellbeing of entire societies. The 54 countries that make up the continent of Africa are no different. Like many of their emerging-market peers, these countries have been plagued by a combination of high disease rates and insufficient resources to tackle the health burden. But, after ten years of mobilizing more than $300 million for health-care providers across multiple African countries, I am cautiously optimistic that a transformation is beginning to take hold.

Four essential elements are driving the continent’s health-care transformation: government-led efforts to achieve universal health coverage; market-led consolidation of health-care providers; major private-equity investors; and digital technology.

Political leaders across Sub-Saharan Africa generally agree that government-sponsored insurance is the foundation of universal health care. In Ghana, Kenya, Nigeria, Rwanda, and South Africa, at least 60 million people now have some form of health insurance, according to health ministry data and a 2018 global analysis of Sub-Saharan Africa’s insurance markets. That number is set to grow significantly. As governments reimagine their role, shifting from care provider to payer, they could bring quality health care to millions. But much more needs to be done to make health insurance universal, comprehensive, and efficient.

For example, Ghana adopted a mandatory national health insurance program in 2003, but the country’s National Health Insurance Authority reported that it had enrolled only 38% of the population in the program’s first decade of existence. Meanwhile, Rwanda boasts more than 90% penetration, but the services covered are limited mainly to primary care.

Providing health insurance to everyone is difficult and complicated. Costs are a concern. Some government-backed insurance schemes are plagued by high overhead, inefficiency, and allegations of delayed payments and corruption, all of which undermine their sustainability. The solution is a combination of better governance and greater reliance on technology and the private sector to boost efficiency, reduce costs, and improve quality.

Governments will continue to play an important role, but partnering with the private sector is essential to reach health goals. I see great promise on this front. A sector traditionally dominated by thousands of small establishments is now benefiting from consolidation, which brings economies of scale, lower costs, consistent quality, and the power to attract high-quality staff.

In Kenya, for example, the Ladnan, Metropolitan, Avenue, and Nairobi Women’s hospitals, among others, now form a seven-city network of eight hospitals and 16 clinics under common ownership. Similarly, in retail pharmacy, Goodlife – a client of the International Finance Corporation, the World Bank’s commercial lending arm – runs 57 outlets.

Much of the market growth for these platform companies has come from mergers and acquisitions. Looking ahead, I believe more players will grow organically through brownfield and greenfield developments of hospitals and by branching out into specialties. As they grow, businesses must overcome stubborn structural hurdles such as low insurance penetration and medical skills shortages.

The third important element is institutional equity capital, which for too long was absent in Africa but is now becoming more widespread. In 2005, private-equity funds focused on African health care raised only $100,000, but by 2015 that figure had skyrocketed to $2 billion, according to a study of private equity in African health care from Preqin, a company that produces proprietary research on alternative assets. Vehicles like the Africa Health Fund and Investment Funds for Health in Africa (IFHA) have invested an estimated $200 million in the region, spawning successor funds totaling $1.1 billion. This private-equity investment is helping to professionalize financial management, improve business strategies and governance, and attract top-notch management talent. There is also a strong track record of profitable exits.

The fourth element, digital technology leveraging the ubiquitous mobile phone, has enabled the deployment of health care to distant and remote regions. Telemedicine apps such as Babylon, which provides virtual consultations, are gaining traction. As Africa’s disease profile shifts further to noncommunicable diseases, I expect that smartphones increasingly will be used not only for consultations, but also to diagnose pathological specimens and medical images, as well as to gather and analyze patient data to prevent diseases before they manifest. Each of these interventions has the potential to reduce dramatically the cost of health care, improve quality, and do more with fewer resources.

Clearly, there are many reasons for optimism. The building blocks have been laid: health-care systems funded by African governments via universal insurance schemes are being bolstered (where necessary) by private institutional capital and/or development aid, and by technology that broadens the system’s reach.

While a lot more remains to be done, Africa’s health-care sector is at an exciting crossroads. The meeting of public policy, private entrepreneurs, investors, and technology is bound to transform the development landscape for the better.

Biju Mohandas is Head of Health and Education for Sub-Saharan Africa at the International Finance Corporation.

The text has been adapted from Project Syndicate website

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