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.”