Investing in Healthcare in Africa: Unlocking Opportunities in a Dynamic Sector

Hamza Asumah, MD, MBA

The African healthcare sector presents a myriad of investment opportunities, driven by a rapidly growing population, increasing urbanization, and a rising demand for accessible, quality healthcare services. As the continent continues to experience significant economic growth, the healthcare industry is expected to expand in parallel. This trend has attracted attention from private equity, venture capital, and impact investing firms, as they recognize the potential for substantial returns while positively impacting millions of lives.

Africa has a rapidly growing population, which is expected to reach 2.5 billion by 2050. This demographic shift is driving an increased demand for healthcare services. In 2019, healthcare spending in Africa was estimated at $90 billion, and it is projected to reach $200 billion by 2026

Photo By Africa Development Bank

In this blog post, we provide an overview of the investment landscape in Africa’s healthcare sector, highlighting key opportunities and trends.

Private Equity Investments

Private equity (PE) is a popular investment vehicle for healthcare in Africa, as it allows investors to acquire or invest in established, profitable businesses that require significant capital to grow. PE firms typically target medium to large-sized healthcare providers, pharmaceutical companies, and medical device manufacturers. The appeal of these investments lies in the opportunity to streamline operations, leverage economies of scale, and ultimately increase profitability.

Over the past decade, private equity investments in Africa’s healthcare sector have been on the rise, with key players such as The Abraaj Group, Helios Investment Partners, and 8 Miles investing in various healthcare businesses. The African Private Equity and Venture Capital Association (AVCA) reported that from 2015 to 2020, 85 healthcare deals took place on the continent, with an aggregate value of over $1.3 billion.

Photo By The Real Deal

Venture Capital Investments

Venture capital (VC) investments in Africa’s healthcare sector target early-stage, high-growth companies with the potential to disrupt traditional healthcare models. These investments often focus on innovative healthcare technology (healthtech) startups that use digital solutions to address healthcare challenges, such as telemedicine, electronic health records, and artificial intelligence in diagnostics.

As the African tech ecosystem matures, VC investments in healthtech startups have gained momentum. According to a report by Partech Africa, healthtech funding reached a record high in 2020, with over $140 million invested across the continent. Notable VC investors in the African healthtech space include TLcom Capital, Novastar Ventures, and the Global Innovation Fund.

Impact Investing

Impact investing is an investment strategy that seeks to generate both financial returns and measurable positive social or environmental outcomes. In Africa’s healthcare sector, impact investors target organizations that directly contribute to improving healthcare access, affordability, and quality for underserved communities.

Key focus areas for impact investments in African healthcare include primary care facilities, specialized clinics, and community healthcare initiatives. The development of innovative, low-cost healthcare solutions that cater to rural and low-income populations is also a significant area of interest for impact investors.

Prominent impact investors in African healthcare include the International Finance Corporation (IFC), the Africa Health Fund (managed by the Investment Fund for Health in Africa, IFHA), and the Global Health Investment Fund (GHIF).

Photo By Iris Tech

The African Development Bank estimates that Africa has a healthcare financing gap of $66 billion per year, which presents a significant opportunity for impact investors to invest in healthcare businesses that provide affordable and accessible healthcare services to underserved communities.

The COVID-19 pandemic has highlighted the need for increased investment in healthcare infrastructure and services in Africa. The pandemic has also accelerated the adoption of healthtech solutions such as telemedicine, which presents an opportunity for investors to fund innovative startups in this space (Source: McKinsey).

Overall, the data supports the investment opportunities in healthcare in Africa, driven by rising demand for healthcare services, government support, and the potential for significant returns and social impact.

When considering investing in healthcare in Africa, there are several strategies and nuances to consider to ensure a successful investment. Here are a few:

1. Local partnerships: A deep understanding of the local market and culture is crucial to successful investments in Africa’s healthcare sector. Therefore, it is essential to partner with local healthcare providers, entrepreneurs, and experts who have a nuanced understanding of the healthcare landscape in the region.

2. Regulatory environment: The regulatory environment in Africa’s healthcare sector is complex and varies by country. Therefore, investors need to understand the regulatory landscape in each country they plan to invest in and ensure compliance with local laws and regulations.

3. Scalability: The ability to scale healthcare businesses is crucial to achieving returns on investment. Therefore, investors need to consider investing in businesses with the potential to scale and expand across multiple geographies.

Photo By UC Berkeley School

4. Technology adoption: The adoption of technology in Africa’s healthcare sector is still in its early stages. Therefore, investors need to consider investing in businesses that leverage technology to address healthcare challenges, such as telemedicine and electronic health records.

5. Access to capital: Access to capital is a significant challenge for healthcare businesses in Africa. Therefore, investors need to consider providing not only financial capital but also non-financial support, such as mentorship and business development services, to help healthcare businesses grow and scale.

6. Social impact: Impact investing in healthcare in Africa presents a unique opportunity to drive social impact while generating financial returns. Therefore, investors need to consider investing in businesses that have a clear social mission and positively impact the communities they serve.

7. Risk management: The healthcare sector in Africa presents unique risks, such as political instability, regulatory challenges, and infrastructure deficiencies. Therefore, investors need to implement robust risk management strategies to mitigate these risks and ensure the long-term success of their investments.

Photo By STAT News

In summary, investing in healthcare in Africa requires a nuanced approach that considers local partnerships, regulatory environments, scalability, technology adoption, access to capital, social impact, and risk management. By taking these factors into account, investors can make informed investment decisions that generate both financial returns and positive social impact.

Investing in healthcare in Africa offers a diverse range of opportunities, spanning private equity, venture capital, and impact investing. The potential for significant returns and social impact makes the healthcare sector an attractive proposition for investors looking to capitalize on Africa’s growth story. As the continent’s healthcare needs continue to evolve, strategic investments in businesses that address these needs will be essential in ensuring a healthier and more prosperous future for millions of Africans.

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