By Marion Jeng, Associate at DAI Magister
With just 15% of the world’s population, Africa accounts for 50% of global deaths from communicable diseases. The African healthcare system grapples with a multitude of challenges that hinder the delivery of quality care to its population. One of the most pressing issues is the severe shortage of healthcare professionals. According to the World Health Organisation as of 2022, the African region has only 1.55 healthcare workers per 1,000 population, far below the WHO threshold density of 4.45 per 1,000 needed to deliver essential health services and achieve universal health coverage. This scarcity of trained medical staff puts an immense strain on the already overburdened healthcare infrastructure.
Moreover, the distribution of healthcare facilities is highly skewed, with rural areas often lacking access to basic medical services. A study by the World Bank revealed that only 43% of the sub-Saharan African population has access to essential health services in 2021, leaving the remainder to rely on traditional healers or go without care altogether.
The limited financial resources allocated to healthcare in many African countries exacerbate these issues. On average, African governments spend only 7.4% of their GDP on healthcare, compared to the global average of 11.2%. This lack of funding translates into inadequate infrastructure, insufficient medical supplies, and limited access to essential medicines.
The private sector is addressing these challenges through innovative solutions, including a rapidly growing African HealthTech ecosystem that tackles pharmaceutical and health services distribution obstacles, as well as an expanding private hospital market.
Technologies transforming pharma distribution
Fragmented supply chains remain a significant barrier to the advancement of healthcare in Africa. Traditional supply chains are plagued by inefficiencies and lack of coordination often failing to deliver essential drugs and supplies where they are most needed. With Africa importing 94% of its pharmaceuticals and medicinal needs, the continent is heavily reliant on external sources. Compounding this issue is the prevalence of counterfeit medications, which the World Health Organisation estimates make up 42% of the world’s trade – a staggering $200bn market. In Nigeria alone, fake malaria medication results in 12,300 avoidable deaths annually and nearly $1 billion of wasted expenditure.
However, the emergence of new distribution models, powered by technology and data-driven insights, are disrupting the status quo and are revolutionising the way medicines reach patients across Africa. One such example is RxAll, a Nigerian start-up that has developed an AI-powered scanner that can detect counterfeit drugs with an impressive 95% accuracy rate. Similarly, companies like Medsaf and mPharma are leveraging blockchain technology and Internet of Things (IoT) devices to provide real-time tracking and verification of medicines from production to delivery. By increasing transparency and traceability, these innovative solutions are instilling confidence in the legitimacy of drugs, thereby combating the scourge of fake medications that claim an estimated 100,000 lives annually in Africa.
Additionally, companies such as Remedial Health and Drugstoc are directly addressing the inefficiencies in the B2B healthcare supply chain by developing platforms that streamline pharmacy operations and procurement processes.
Direct-to-consumer (D2C) pharmaceutical distribution models are also gaining traction, offering a promising alternative to inefficient state-led supply chains and localised NGO efforts. mPharma, a Ghanaian start-up, has established a network of over 200 pharmacies and serves more than 40,000 patients monthly. In East Africa, Kenyan companies Goodlife Pharmacy and MYDAWA, have expanded their presence with numerous outlets the region. Meanwhile, In South Africa, BusyMed is making strides by connecting consumers directly to pharmacies. By improving the availability of drugs and offering competitive pricing, these D2C models are making healthcare more accessible and affordable for the masses.
The vital role of private hospital groups
Private hospital groups have emerged as crucial players in addressing the shortcomings of underfunded and poorly managed state-run healthcare systems in Africa. These institutions bring expertise, resources, and efficiency to the table, complementing the efforts of NGOs and charities. Netcare, a South African private hospital group operating over 50 hospitals and around 90 pharmacies across the country, and Mediclinic International, with a presence in South Africa and Namibia, are prominent examples of such groups.
By investing in state-of-the-art facilities and attracting skilled medical professionals, these hospital groups enhance access to quality healthcare services. A study by the World Bank found that private hospitals in Africa have a higher bed occupancy rate (70%) compared to public hospitals (56%), indicating better resource utilisation. Moreover, private hospital groups adopt cutting-edge technologies and best practices, setting new standards for patient care and outcomes. They invest in advanced medical equipment, electronic health record systems, and data analytics to optimise resource allocation and improve the overall patient experience.
Private hospital groups are making healthcare more accessible to a larger population by establishing quality healthcare facilities and expanding the reach of services. A study by the International Finance Corporation found that private hospitals in Africa are involved in 50% of patients’ health journeys, highlighting their significant role in healthcare delivery. Furthermore, with Africa’s urban population expected to grow to 770 million by 2030 (an increase of almost 300 million compared to 2015), urban medical facilities are becoming a growing necessity. This trend has given rise to start-ups such as CarePoint and AfyA Care, which focus on the aggregation of healthcare assets to provide a complete suit of healthcare services including private hospitals, insurance, and telemedicine.
Telemedicine as a last mile delivery system for healthcare
Despite the efforts of private hospital groups, challenges persist in ensuring equitable access to healthcare services. These groups primarily operate in urban centres, leaving rural populations underserved. Additionally, the affordability of private healthcare remains a concern for many Africans, which explains the rise of telemedicine solutions across the continent.
Telemedicine, which has seen increased adoption worldwide since the pandemic, offers a viable solution to address some of the continent’s healthcare challenges. By leveraging mobile phones and the internet, telemedicine platforms enable remote consultations, disease monitoring, and patient education. This model of care proves particularly valuable in rural areas, where access to medical professionals is limited. Telemedicine not only expands the reach of healthcare services but also reduces the burden on overcrowded healthcare facilities, allowing for more efficient resource allocation. This is especially crucial in Africa, which must tackle 25% of the global disease burden with only 1.3% of the world’s healthcare workers. Additionally, as today pharmacies serve as the primary healthcare clinic in some regions, the availability of Telemedicine arguably offers an alternative or upskilled version of the services provided locally.
The telemedicine landscape has witnessed the emergence of various players operating on both national and regional levels. TIBU Health in Kenya and Kena Health in South Africa are examples of national players, while Vezeeta, with activities across 6 countries, including Egypt, Lebanon and Kenya represents a regional player. These diverse solutions have the potential to reduce healthcare costs by up to 30% in Africa, thereby increasing the affordability of healthcare across the continent.
The Future of African Healthcare: Opportunities for Investors
As the African healthcare landscape continues to evolve, the role of private hospital groups and innovative pharmaceutical and healthcare services distribution models will remain crucial in shaping its future. By leveraging technology, expertise, and innovative business models, these entities are overcoming long-standing barriers and delivering quality care to underserved populations. In doing so they are helping to address the $2.4 trillion in annual output loss due to poor health, which amounts to nearly 80% of the African GDP.
This presents a significant opportunity for investors. On one hand, hospital groups represent an asset class akin to infrastructure. In economies plagued with macro-economic instabilities such as Nigeria, investment in hard assets, i.e. hospitals with strong fundamentals and tailwinds represented by the growing population, provides an avenue for stable long-term returns. Currently, 60% of healthcare financing in Africa comes from private sources and we expect this figure to increase as investors continue to show interest in private hospital groups with additional services linked to pharmaceuticals and telemedicine.
On the other hand, private hospital groups and pharmaceutical distribution are both verticals ripe for consolidation, as national leaders have emerged. The regional and pan-African grouping of assets is poised to deliver additional value to investors with a buy-and-build approach. This trend is illustrated by mPharma’s acquisition of Mutti’s network of local pharmacies. As a result, M&A activity in these verticals is expected to grow by 50% in the next two years.
