Africa Health Fund makes first investment

The Africa Health Fund, managed by private equity fund manager Aureos Capital (www.aureos.com) has made its first investment, acquiring a stake in the Nairobi Women’s Hospital (www.nwch.co.ke) for US$2.66 million. This is the first investment by the fund which was launched in June 2009 and aims to raise $100 million, with a final close this year (2010).
The fund is backed by International Finance Corporation (www.ifc.org), African Development Bank (www.afdb.org), DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH – www.deginvest.de, part of KfW banking group) and Bill & Melinda Gates Foundation (www.gatesfoundation.org). Together they have invested $57 mln. Aureos specialises in investing in small to medium-sized businesses in emerging markets.
The objective of the Africa Health Fund is to increase access to, affordability and quality of health-related goods and services for Africans, especially those at the bottom of the income pyramid. At the same time it hopes to provide investors with good long-term financial returns.
Nairobi Women’s Hospital provides health care services for women and children. It focuses on providing in-patient, out-patient and specialized services for women, including antenatal, gynaecology, obstetrics, breast cancer detection and surgery. Its Gender Violence Recovery Centre is believed to be the first in East Africa.
A proportion of the sum invested in NWH will be used to help fund a management buyout, with the balance going to the expansion of facilities such as clinics, beds, ambulances and operating theatres in the East Africa Region.
Sev Vettivetpillai, CEO of UK-based Aureos Advisers says: “Whilst we were setting up a unique HIV/AIDS risk management programme for our East African portfolio companies in 2008 we started to realise just how fragmented and under-capitalized the healthcare sector is in Africa.
“Many of the causes of the high costs and inefficiencies of the healthcare sector in Africa are essentially business issues that we hope the Fund, and the input of Aureos executives, will help to resolve.
“We believe the Africa Health Fund will make a valuable contribution to helping low-income Africans get access to affordable, high-quality healthcare services whilst at the same time providing satisfactory returns to our investors.
“Through the Africa Health Fund, we look forward to helping populate Africa’s private healthcare sector with growing, profitable businesses, well positioned to attract further domestic and foreign investment.

Healthcare in Africa and private equity

An IFC study “The Business of Health in Africa” finds that private sources fund 60% of healthcare financing in Africa and about 50% of total health expenditure goes to private providers. The report says that “the vast majority of the region’s poor people, both urban and rural, rely on private healthcare.”
Davinder Sikand, Regional Managing Partner of Aureos in Africa says: “The provision of capital to SMEs operating in the health sector in conjunction with professional private equity support will certainly increase the efficiency of the African health market. Aureos is well aware of the effects that health issues and under-resourced health services have on businesses because we work very closely with our investee companies. The economic, productive and emotional cost of workforces in poor health can be devastating on businesses. We have regularly helped our investee companies to devise remedial strategies.”
In 2007, Aureos wIth support from Norwegian Investment Fund for Developing Countries (www.norfund.no) did an analysis of healthcare provision in East Africa, including where the critical deficiencies in the African healthcare system lie. Given its extensive experience working with dynamic SMEs in emerging markets, Aureos identified how SMEs can plug the gaps in the African health market.
The Aureos study showed that much of the African healthcare sector suffers from severe structural and systemic bottlenecks. There is severe market fragmentation; inadequate, inefficient distribution channels; high manufacturing costs; price distortions in the market; lack of effective supply chains; absence of economies of scale; low productivity levels; and, in many cases, dependence on large international health providers.
Aureos researched the structure and segmentation of the African healthcare market. In doing so, it has determined trends in consumer demand, appropriate product pricing and market gaps which suggest investment opportunities. It identified market failures as well as the scope of the distribution chains as challenges in the environment. In drafting the strategy of deploying the Africa Health Fund, Aureos expects to work in innovative new partnerships with public and private organizations, entrepreneurs as well as domestic and international regulators.
Davinder Sikand adds: “We are very well placed to support solutions to the issues we have come to understand in the African healthcare market. Having worked in emerging markets for almost two decades, Aureos understands how production facilities, distribution systems and networks can be mobilized to reach under-served and low-income groups. This particularly applies in domains vital to healthcare, such as healthcare financing, medical manufacturing, healthcare training, telemedicine and pharmaceutical manufacturing.”

5 Responses to “Africa Health Fund makes first investment”


  1. Ngoyi Bukonda

    I am an associate professor of Public Health Sciences at Wichita State University. I am also a visiting professor at the University of Mbuji Mayi in the D.R. of the Congo. I have just come back from Africa where I have completed a survey of health care entrepreneurs in Mbuji Mayi. Furthermore I am the executive director of Leja Bulela, an NGO involved in helphing victims of forced displacement in Eastern Kasai province. We at Leja Bulela have just completed the construction of a health canter for this population in Tshibombo Tshimuangi. We still need to equip and make this facility operational. I was not aware of your organization. I would be interested in networking with you to explore how we can do some work together in this province and in other places in the Congo and in Africa. Please provide me with further details about your organization and your work. Sincerely,
    Dr. Ngoyi K Zacharie Bukonda
    Associate Professor of Public Health Sciences, Wichita State University, Kansas, USA

  2. Dr Okogun Austin

    We are a private multi-specialist hospital in Warri,Niger-Delta Nigeria offering services in medicine,paediatrics(including neonatology),Obstetrics and Gynaecology(including assisted reproduction-IVF,IUI,ICSI-,Operative and diagnostic laparoscopy),General surgery,orthopaedics,family medicine,occupational medicine, Radiology,Laboratory and emmergency medical services.We plan to evolve into a chain practice using a hub and spoke model where the spokes are primary centres and doctor’s surgeries.Funds and support as you offer will help to support and actualise this vision.We will be glad to contact you and further explore this oppurtunity.

  3. Tom Minney

    Dr Okogun, I hope that some of the readers will follow through with inquiries, health investment does seem to be promising. Use the “search” functions on this website to find details of previous initiatives where people have invested in health and perhaps your IFC (International Finance Corporation) office can guide you as they have helped pioneer this sector.

  4. Professor Groesbeck Parham, MD

    Cervical and breast cancer are major killers of women in Africa and it is predicted that by 2030 1 million Africans will die from cancer each year. I am an American-board certified gynecologic oncologist, Professor at the University of North Carolina at Chapel Hill (USA) and have been living and working full-time in Lusaka, Zambia for the past decade helping to lead the development and scale of up a cervical cancer prevention program. In addition to screening over 115,000 women for cervical cancer we have trained over 300 healthcare workers from 13 African nations to do the same. As we screen more women we find more early cancers that can be cured with surgery but the lack of an adequate surgical training and care facility, and cadres of adequately trained African cancer surgeons, creates a huge bottleneck for the care of these patients. This is the case throughout the African continent.

  5. Tom Minney

    Dr Parham, it is encouraging to hear of your work. It sounds as if much more can be done to build public health systems and capacity, including training. I hope you will be able to find ways to leverage private sector energies including impact investing to boost health care capacity.