Investments in Healthcare in Africa: The Public/Private Divide

Healthcare systems in Africa are complicated by the sometimes opposing objectives, priorities and capabilities of the public and private sectors. While the public sector commonly lacks financial resources, operational effectiveness, good human resources management and strong governance frameworks, the private sector is often viewed as pursuing profit margins that are inappropriately high, given the embedded social nature of healthcare. Overall the private sector provides approximately half of the healthcare in Africa, but quality, cost and the integration of services remain variable, as providers frequently function outside coherent, consistent and complete regulatory and governance platforms. In many countries, the public and private healthcare sectors have been unable to overcome the divide between them, which is an unfortunate missed opportunity for strengthening the provision of care on the continent.

Our Case Study

Kenyan Private Hospital Growth Strategy: The healthcare system in Kenya is being driven by the need to expand the provision of care to rural areas where nearly four out of five Kenyans live, the impact of the devolution of the healthcare system, and the prevalence of three diseases – Tuberculosis, Malaria, and HIV/AIDS, which account for over 50% of deaths. Poor governance structures also impede the development of the system and the country is suffering from a medical brain drain. The private sector faces the threat of an insufficient supply of specialist skills, and unfavourable regulatory environment, aggressive competition from new healthcare providers and difficult labour engagements. KPMG worked closely with the board and management of a leading private hospital in 2014, to review its current position in the market, create a platform for idea generation and explore how the hospital can make a bigger, more impactful contribution to the community. A road map was designed to develop the brand, segment the target market, enhance the technological platform, build a human resources retention strategy, strengthen the clinical governance framework, increase customer satisfaction and implement a robust growth strategy, which included developing a Centre of Excellence and Training School, with research capabilities. Partnerships between these types of private hospitals and the public sector are a critical step towards attaining the SDGs, as they can form the basis of future joint operations which can expand access to care and support the training of new healthcare professionals.

Medical Instrument Density in Africa

Medical Instrument Density in Africa

The Weakened Healthcare Infrastructure

Despite a common abundance of healthcare policies, the actual delivery of care is significantly impeded by the lack of adequate healthcare infrastructure and the presence of inconsistent and incomplete regulatory and governance frameworks. These foundations of healthcare are further weakened by the current low levels of technological maturity within the system, despite the high levels of adoption of certain technologies, like mobile, amongst the healthcare consumers. Moreover, investments in strengthening these core structures typically require extensive capital resources, but the rates of return, on this capital, often have high levels of variability and are difficult to compare directly to other competing opportunities. There are sometimes high sunk costs, indirect rather than direct benefits and lower or slower returns, than what is required by private capital. Brilliant isolated projects have been seen to collapse under the weight of their own overheads, because they have failed to develop an activated market around them, which would make the venture viable and sustainable. Systems of patronage and concealed vested interests also erode investor trust. A lack of access to capital or a lack of a suitable entry point for capital often leads to a mismatch between opportunity and investment.

The above is an excerpt from our sector report on Curing the Ails of Investments in Healthcare in Africa, please feel free to download.

David Okwara

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