Rising Demand, Growing Interest: Investing in Africa's Healthcare Sector
As COVID-19 imposed unprecedented pressures on global health systems, African governments recognised the urgent imperative of fortifying and investing in their health infrastructure to ensure future economic stability.
Historically, the private sector has been hesitant to tap into Africa's health sector as an attractive investment opportunity, due in part to a perceived inability to afford what can be taxing medical treatments.
The situation is changing, however. Africa is increasingly becoming a priority market for international investors eager to capitalise on the rising demand for health services across the continent. While challenges remain, this rise in investor sentiment is being driven by the rapid expansion of Africa’s middle class, even faster population growth, and the continent’s stubbornly high disease burden – especially in non-communicable diseases. This Insights explores Africa’s healthcare sector, highlighting investment opportunities, exploring persistent challenges, and shedding light on current trends and future developments.
Market Snapshot
Africa's health sector has long grappled with a dual obstacle characterised by infectious diseases and vulnerable healthcare systems.
The continent faces a formidable disease burden, surpassing nearly twice the global average in disability-adjusted life years per capita. This constraint is evident in the high number of cases of tuberculosis and malaria, with the continent accounting for a staggering 94% of global malaria deaths. Africa's healthcare systems also encounter considerable challenges, including a severe shortage of skilled health workers (in part due to a health worker brain drain) and a scarcity of intensive care unit (ICU) beds: according to McKinsey & Company, the number of ICU beds per capita in sub-Saharan Africa is just 1 to 5% of that in European and East Asian countries. Currently, fewer than five countries on the continent adhere to the 2001 Abuja Declaration, which stipulates allocating 15% of public expenditure to the health sector.
However, investor appetite for the continent is growing, with global corporations seeking opportunities to address the rising demand for health services. The rise in non-communicable diseases across the continent – including diabetes, cancer, and cardiovascular disease – due in part to changing lifestyles and urbanisation has been one trigger of this shift, along with an uptick in the demand for private health services fuelled by Africa’s fast-growing middle class. Governments are taking note: across the continent, countries are trialling public-private partnerships (e.g. Rwanda) and streamlining regulations (e.g. Kenya) to attract investment into key subsectors and facilitate the construction of key health infrastructure. A recent Fitch Solutions report hints that the African Continental Free Trade Area could have a major role to play here as well – harmonising regulations across Africa's health sector and facilitating smoother cross-border trade and investment in health services and products.
Investment Opportunities in the Health Sector
Africa’s health sector has been witnessing increased investment and growth opportunities due to the continent's growing population, rising middle class, and increasing demand for health services. Subsectors of interest include, but are not limited to:
Pharmaceuticals: At present, Africa's pharmaceutical manufacturing comprises a mere 3% of the global output, while approximately 70-80% of medicines across the continent are imported. As the demand for pharmaceutical products on the continent continues to rise, lucrative investment opportunities emerge in the production, distribution, or marketing of essential medicines.
Telemedicine and Digital Health: With the widespread adoption of mobile technology, telemedicine platforms and services can bridge the gap in healthcare access, especially in rural and remote areas. British International Investment, the UK’s development finance institution and impact investor, recently invested $100 million in Alfa Medical Group (AMG), one of Egypt's leading medical care companies.
Diagnostics and Laboratories: Laboratories are vital to health systems, playing a crucial role in disease surveillance and health services. Investing in laboratories enables countries to build integrated and resilient health systems, but there has been chronic underinvestment in laboratories across African markets, which, in turn, has exposed vulnerabilities. This was particularly evident during COVID-19 when policymakers were ill-equipped to accurately track epidemics within their borders.
Persistent Challenges
Despite the promising opportunities, Africa's health investment landscape faces significant challenges. Chief among these is the dearth of reliable data on healthcare needs across the continent, hindering investors' ability to make well-informed decisions. Moreover, navigating the intricate and occasionally ambiguous regulatory environment in various African countries poses additional obstacles when establishing and managing health facilities. Coupled with this, insufficient infrastructure and an unreliable power supply further exacerbate the functioning of healthcare facilities and the operation of vital medical equipment. Overcoming these obstacles will be essential to unlock further investment into the sector.