African Capital Markets News » Health

Aureos Africa Health Fund invests $2.5m in Kenya healthcare

Tom Minney — Mon, 21 Nov 2011 23:48:20 +0000

Aureos Africa Health Fund invested $2.5 million in a Kenyan hospital and health insurance company, the Avenue Group (www.avenuehealthcare.com), which offers affordable healthcare cover, integrated with quality healthcare provision. It has a 70-bed full-purpose hospital in Nairobi, 7 clinics through Kenya as well as in-house clinics for corporate clients, a home-based care service for elderly, terminally ill or otherwise dependent patients, rental and sale of wheelchairs and other rehabilitation equipment for home use, and First Aid training schemes.
It combines healthcare cover with quality, affordable outpatient and inpatient medical services. The group’s corporate medical schemes are designed to be accessible to businesses with as few as 10 employees and around 70% of the staff covered are in non-managerial roles. With Aureos investment, Avenue Group will expand into other regions in Kenya, building 2 more clinics in smaller towns and expanding existing in-patient facilities in Kisumu and Mombasa. The funding will ensure the group can continue non-profit activities, such as free medical camps across Kenya and public health screening days at Avenue clinics.
Africa Health Fund is managed by private equity manager Aureos Capital Ltd (www.aureos.com), which specialises in socially sustainable small to medium-sized businesses in emerging markets. It has more than 20 local offices covering more than 50 markets. It has expertise in healthcare, with investments in hospitals and medical supply companies across Asia, Latin America and Africa. It builds environmental, social and governance performance into its investments as an integral part of managing risk and generating returns, particularly in Africa where managing employees’ health is a major challenge for many of Aureos’ portfolio companies.
Africa Health Fund was established by Aureos in June 2009 with the International Finance Corporation (www.ifc.org), the African Development Bank (www.afdb.org), DEG, and the Bill & Melinda Gates Foundation (www.gatesfoundation.org) as cornerstone investors. Subsequent investors include the Elma Foundation (www.elmaphilanthropies.org) along with private investors such as family offices and a major European retail bank. Committed capital in the fund now totals $75.4m. The fund aims to help low-income Africans access affordable, high-quality health services while providing investors with good long-term financial returns. It has invested in hospitals in Kenya and Ghana.
Shakir Merali, Partner at Aureos Africa Healthcare Managers Limited in Kenya, says: “Avenue has developed strong links with the Kenyan business community that are helping to bring health cover to a wider range of workers, even those who work in smaller firms. We are looking forward to helping the Group to pursue its plans for growth and to extend its successful model and high quality care, initially within Kenya, and eventually in neighbouring East African countries.”
Diana Patel, Executive Director at The Avenue Group, comments: “We are very pleased to be working with an investor with such extensive experience of the medical sector. The support from Aureos’ strong local team will be crucial in helping us to achieve our ambitions to make affordable health cover a reality across the whole of East Africa.”
Aureos was set up in 2001and has increased funds under management to US$ 1.3 billion with a footprint in over 50 emerging markets covering Asia, Africa and Latin America, by establishing 17 regional private equity funds.

InReturn Capital invests in Kenya’s Eagle Eye Laser Centre

Tom Minney — Thu, 03 Nov 2011 08:49:11 +0000

East African venture capital firm InReturn Capital (www.inreturncapital.com) has entered a partnership with Hurlingham Eye Care Services group (HECS – hurlinghameyecare.co.ke), according to a press release issued on 2 November. InReturn Capital is an impact investing company which aims to generate positive social impact and profits by investing in small and medium enterprises (SMEs) in the East African region, from its offices in Nairobi, Kenya and Dar es Salaam, Tanzania. It has Jacana Venture Partnership (www.jacana.org) as an investor and key partner in fund management, and several Dutch and international partners.
HECS has been operating optical shops and a diagnostics centre around Nairobi since 2000 and in April 2010 opened the Eagle Eye Laser and Diagnostics Centre at the 5th Avenue Building on Ngong Road, close to the Nairobi Hospital. This aims to be a leading provider of eye-care surgery and diagnostics in East Africa, particularly long-term eye problems. The centre is the first clinic in East Africa to offer Lasik surgery, which is the most advanced type of laser surgery for vision correction. Other eye surgeries include cataract, glaucoma, multifocal refractive surgery, as well as a broad variety of eye diagnostics using modern technology. The founders, Dr. Ilako, Dr. Kimani and Dr. Kiumbura, all have a long track record in eye surgery and have teamed up with Dr. Gaeckle, one of the most successful and experienced eye laser surgeons in Germany.
InReturn already has investments in construction, infrastructure and energy and is keen to expand into healthcare. It linked with HECS in July 2011. It provides hands-on support to HECS in strategic focus, human resource management and marketing and financial administration processes, as well as joining weekly management meetings and being a member of the board. Its investment in the surgery centre will assist in expanding and improving operational capabilities while the centre prepares to expand within the region. The plan is also to set up a non-profit unit that will provide free eye-care health services such as free surgeries and consultations to the lowest income groups.
Dr. Kiumbura, CEO and co-founder of HECS commented: “There is a saying in my language that two are always better than one. The partnership with InReturn has just proven this to be true one more time! It has been a time of improvement in the organisation, from personal growth to organizational transformation, and to a more efficient and focused entity from the time we started working together. I have no doubt in my mind that together we will grow to unchartered heights in provision of quality affordable eye-care in this region in the coming years.”
Eelco Benink, Investment Manager of InReturn commented: “We are excited to invest in this state-of-the-art eye-care institute in Kenya. The doctors are amongst the best in their field and the technology available at the Eagle Eye Laser Centre is unparalleled in East Africa. Together with the optical shops it forms the only one stop shop for eye health care in greater East Africa. Our partnership will lead to further expansion of the HECS group, and it will contribute to the growth of quality medical industry in the region.”
Other InReturn investments include Vipingo Stone, Equator Shipping on Lake Victoria and an engineering company developing micro hydropowerplants.

Oppenheimer family and Temasek SWF launch African private equity fund

Tom Minney — Fri, 19 Aug 2011 10:49:57 +0000

Reuters reported recently that South Africa’s E. Oppenheimer family and Singapore’s sovereign fund Temasek Holdings have set up a $300 million private equity fund called Tana Africa Capital to invest primarily in consumer goods and agricultural sectors across Africa. The fund will target Africa’s growing young population and also focus on agricultural production and processing of farm produce and, to a lesser extent media, education and healthcare. The prime target will be the bigger economies, but it will not avoid smaller economies.

James Teeger, group managing director at E Oppenheimer & Son, told Reuters: “The initial capital commitment is $300 million, so 150 from each partner. We felt that was an appropriate amount to help the team make 5 to 6 investments over the next few years.” He would not say when Tana Africa hoped to close its first investment but he said the fund has a strong deal pipeline.

Reuters reports that Africa is increasingly attracting interest in investment, focusing on its abundant resources, fast-growing population and rising personal incomes. Reuters said Siemens AG said last year it aimed to invest $254 m in Africa by 2012. Global private equity group Carlyle, based in Washington D.C., said in March it was entering sub-Saharan Africa, targeting investments in consumer goods, financial services, agriculture and infrastructure.

Vital impact PE fund raises $250 m and invests in Angolan housing

Tom Minney — Wed, 04 May 2011 20:23:31 +0000

A private equity fund that invests in housing, agriculture, education and health says it has raised more than $250 million for its first fund, Vital Capital Fund I. Eytan Stibbe, founding managing partner at Vital Capital Investments LP (www.vital-capital.com) and chief investment officer was reported as telling Bloomberg yesterday (3 May) the fund aimed to invest in Angola, Ghana and Mozambique.
The fund includes retired U.S. Army General Wesley Clark among its advisory board members, is a proponent of “impact investing,” a strategy that places capital in ventures with social or environmental goals.
Stibbe says Vital Capital has already invested in Kora Housing, a developer of affordable housing in Angola. It aims to raise another $250 million.

Up to $30 billion investment needed for health sector

Tom Minney — Thu, 12 Aug 2010 23:24:22 +0000

According to a recent study, $25–$30 billion in new investment will be needed in health-care assets, including hospitals, clinics, and distribution warehouses over the coming 10 years to meet the growing health care demands of Sub-Saharan Africa. The study is “The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives”, prepared by the International Finance Corporation (www.ifc.org) with consultancy McKinsey & Co www.mckinsey.com.
It notes that health care in most of sub-Saharan Africa remains the worst in the world. The region has 11% of the world’s population, yet bears 24% of the global disease burden and commands less than 1% of global health expenditure. Increased attention from outside donors has resulted in some remarkable initiatives, funneling billions of dollars to help combat HIV/AIDS, tuberculosis (TB), and malaria the worst health scourges of the region. In spite of billions of dollars of international aid, an astonishing 50% of Sub-Saharan Africa’s total health expenditure is financed by out-of-pocket payments from its largely impoverished population. Because of economic growth, the study estimates the market for health care will more than double by 2016, reaching $35 billion.
Most of the sub-Saharan Africa lacks the infrastructure and facilities to provide and deliver minimal levels of health services and products. It also faces a severe shortage of trained medical personnel, with just 3% of the world’s health workers deployed there.
The IFC report highlights the critical role of the private sector in meeting the need for more and higher-quality health care and identifies policy changes that governments and international donors can make to enable the private sector to take on an ever more meaningful role in closing Africa’s health care gap. About 50% of health-care provision already comes from for-profit companies, non-profit organizations and social enterprises, along with insurers, providers, and manufacturers. Their role is growing.
The expected improvement in Africa’s macroeconomic climate over the next decade will expand the health care gap, as higher incomes will create new demand. The biggest individual investment opportunities will be in building and improving the sector’s physical assets. Around 550,000–650,000 additional hospital beds will need to be added to the existing base. An additional 90,000 physicians, about 500,000 nurses, and 300,000 community health workers will be required over and above the numbers that will graduate from existing medical colleges and training institutions. Demand for better distribution and retail systems and for pharmaceutical and medical supply production facilities will also be strong.
An estimated $25–$30 billion in new investments will be needed to meet demand between now and 2016—of which $11–$20 billion is likely to come from the private sector. A broad range of investment opportunities exist across all components of the health care industry in the region (as described in detail in the annexes to this report). These opportunities can deliver compelling financial returns and have an enormous potential development impact.
Health care provision accounts for roughly half the investment opportunity, with the remainder split across distribution and retail, pharmaceutical and medical product manufacturing, insurance, and medical education. These investments will fund capacity expansion, new businesses, and renovation of existing assets. About half of these investments are expected to be made by for-profit entities, the remaining portion of private sector investment being equally spread between social enterprises and nongovernmental organizations (NGOs).
The vast majority of the investment opportunities in the near term will be in the SME sector. Only a quarter of the opportunities are expected to have a project size larger than $3 million. This report also highlights the availability of investment opportunities in social enterprises that, while delivering lower financial returns, can have a tremendous role in the positive development of Sub-Saharan Africa.

How to Leverage the Private Sector to Improve Access to Health Care?

Tom Minney — Thu, 12 Aug 2010 23:20:59 +0000

Agenda to mobilize the responsible development of private sector health care in sub-Saharan Africa:
1. Develop and enforce quality standards. Initial efforts at enhanced regulation could have large and immediate benefits. Financial and technical support is needed to strengthen the ability of public and private regulatory bodies to develop and enforce transparent and effective quality standards.
2. Foster risk-pooling programmes. Risk pooling arrangements— such as government-funded national payment schemes, commercial insurance, or community non-profit mutual schemes—have enormous potential to improve the financing of health care in the region, thereby encouraging the development of higher-quality, more organized private sector providers.
3. Mobilize public and donor money to the private sector. Donors can help build health-care capacity by earmarking some aid to fund private sector entities directly while also assisting local governments to expand their procurement capabilities and manage contracts with the private sector. Employers can foster the development of the local private health care sector by outsourcing provision of health care for their employees.
4. Modify local policies and regulations to foster the role of the private sector. Opportunities exist to reform the regulations that inadvertently block the development of the private health sector. The primary focus should be streamlining bureaucratic processes, liberalizing human resource regulations that perversely reduce the number of active health care workers, and reducing tariffs and other import barriers that impede access to or raise the cost of health supplies.
5. Improve access to capital. Entrepreneurs and business enterprises in Sub-Saharan Africa have trouble securing financing from established institutions. Three initiatives could tackle this issue: (i) educating local banks about the true risk profile of the health care sector; (ii) using international financial backing to encourage local financial institutions to lend to health care enterprises, including small and medium-sized enterprises (SMEs); and (iii) developing equity-focused financing vehicles for health care enterprises.

Robin Hood tax on financial transactions proposed for fight against AIDS

Tom Minney — Mon, 26 Jul 2010 20:48:19 +0000

Activists are calling for a tax of 0.005% on all financial transactions worldwide, to raise some $33 billion dollars per year for development and particularly to replace dwindling funding for life-saving AIDS drugs. Protestors at the world AIDS forum in Vienna on 21 July said a “Robin Hood” tax on financial transactions would be one of a series of new funding initiatives, and said the time is right to propose it ahead of a review summit on Millennium Development Goals in September and a G20 meeting in November.
Funding from by rich donor nations to poor countries fighting HIV and AIDS fell back in 2009 to $7.6 billion, from $7.7 bln in 2008. The turnaround set alarm bells ringing for tens of thousands of people in Africa who are kept alive through expensive courses of ART drugs. Cutbacks could be a death sentence.
The 2009 decline ended 6 years of increases averaging more than 10% a year. The Global Fund to fight AIDS, Tuberculosis and Malaria is seeking $17 bln in pledges for 2011-2013, compare to total funding of $1.2 bln for anti-HIV drugs and other initiatives in 2002.
According to news reports, campaigners at the AIDS forum said it was time for innovative financing solutions for development. Dr Philippe Douste-Blazy, former French Minister of Foreign Affairs and Special Adviser on Innovative Financing for Development, said: “It is up to us to explain to the Heads of State that that they do not have any other solution because we know it only depends on political will.” His organisation UNITAID (www.unitaid.eu) has implemented a small tax on airline tickets. In its first 2 years of existence UNITAID committed $730 million of fresh funds to tackle HIV and AIDS, malaria and tuberculosis. A portion of thoe funds came from low- and middle- income countries, mostly through the air tax mechanism. UNITAID, in partnership with the Clinton Health Access Initiative (www.clintonfoundation.org) has stimulated the manufacture of new medicine formulations as well as funded an integrated package of care for HIV-positive children.

Africa Health Fund makes first investment

Tom Minney — Tue, 19 Jan 2010 14:39:53 +0000

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.”