An Ecosystem Approach to Achieving High Quality Healthcare for All
To be successful, a healthcare fund requires the flexibility to target both smaller and larger entities, manage inherent risks and to be deployed by professionals who operate on the ground.
This report offers a series of insights from a remarkable journey – the journey of a private equity firm into a field that, historically, has been regarded as the domain of aid organisations and governments. The firm is The Abraaj Group, which manages US$9-billion across a global array of funds, and the field is healthcare for the people of Sub-Saharan Africa. The Abraaj Group is germinating quality healthcare systems for populations near the base of the income pyramid – and, excitingly, it is doing so with strongly competitive, sustainable returns. The Abraaj Group workshop “Building Blocks of a Successful Healthcare Business”, held in Nairobi, June 2015, and facilitated by KPMG, has provided the basis of the report.
The workshop’s proceedings consolidate The Abraaj Group’s five-plus years of support for new African healthcare enterprises, and point to dynamic future directions for the Group’s healthcare initiatives. The articles that follow guide the reader through the different levels of scale at which opportunities in African healthcare should be assessed. We start with the broadest, continent-wide developments and trends, and gradually narrow our focus to the specifics of investing in small-to-medium African healthcare enterprises. The conclusion then takes us to the future, which promises economically buoyant healthcare sectors across Africa’s cities, countries and regional blocs. From the overall content, we can plot a progression of strategy-informing trends and intelligence.
Investing in Healthcare in Africa
“Whereas, in the past, our discussions with multi-national investors almost inevitably began with an “Africa 101” debate, we have seen a strong shift. Today, multi-nationals barely mention “the usual suspects” – corruption and political instability. Instead, they openly express concern that they may already have lost prime investment opportunities to their competitors. They are literally telling us that, while they know they will not be first, second or even third to enter a particular African market, they do not want to lag at eighth, ninth or tenth. There is now a clear and palpable urgency to these discussions. The number of ring-fenced Africa funds that have been raised and closed by private equity houses [at] anywhere from US$350m to US$1bn.
Private equity operating norms suggest that these funds will have to be deployed within the next couple of years – and this illustrates the direction of travel of one of the most focused streams of global investment capital.”
For private investment in healthcare in Africa, 2007 marked a tipping point. In that year, the International Finance Corporation (IFC) published The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives, a 136-page report funded primarily by the Bill & Melinda Gates Foundation.
This report defines the vast contribution that private investment can make towards creating quality healthcare for Africans at the base of the income pyramid (BoP). The IFC simultaneously announced that it was set to pump US$1 billion in investment into the healthcare sector in Africa, to improve the operational environment for private healthcare firms.