Africa: The Lost Continent No More - Pharmaceutical Executive


Africa: The Lost Continent No More

Pharmaceutical Executive

Healthcare problems

Healthcare outcomes in sub-Saharan Africa remain the worst in the world. Even though its population is around 11% of the world's total, it bears a quarter of the global disease burden; less than 1% of the global health expenditure is spent here, and it has just 3% of the world's health professionals.

Infectious and parasitic diseases form the bulk (42.4%) of the disease burden in Africa, but this is rapidly being compounded by the sharp rise of NCDs, particularly diabetes, chronic respiratory diseases, cancers and cardiovascular diseases.

A major problem is the sorry state of the majority of Africa's public health systems. Billions of aid spent on improving Africa's health systems has yielded poor results. Health systems are grossly understaffed, have crumbling and decaying infrastructure and are short on medical supplies. In addition, being built, equipped and trained to handle mainly parasitic and infectious diseases, Africa's health systems are ill-prepared for this extra epidemic of NCDs.

Mark Swai, former hospital director of the Kilimanjaro Christian Medical Centre, talking to Pharm Exec in 2013, said "the beds of our new HIV/AIDS were filled with HIV patients whose diseases were not under control. Since the introduction of affordable anti-retroviral drugs that decreased the disease burden, those beds are now filled with diabetes ­patients."

Due to these chronic problems, most Africans flock to the private sector, not through choice but because in most cases, it remains the only option.

But the private sector is also bedevilled with its own serious issues; poor managerial competency and regulatory oversight mean that prices for essential drugs cost hundreds more than the trade costs, services are poor, staff are badly trained with questionable ethics, the sector is plagued with excessive fragmentation, and medicines are either poor quality, expired or counterfeited.

Opportunities for growth

The problems listed above, though posing huge issues, point to a low-hanging-fruit market that is ripe for innovative disruption and presents huge opportunities.

Figure 2: Breakdown of private health investment opportunities in sub-Saharan Africa, 2007-2016 %, $ million (11,300-20,300)
Faster economic growth signals that the healthcare market is sure to grow; the International Finance Corporation estimates that the pharmaceutical market will expand to $35 billion by 2016, and $40 billion in 2020, surpassing the UK. Spending on healthcare has increased by a compound annual growth rate of 9.6% since 2000. This demand for better healthcare presents several different bankable opportunities (see Figure 2).

The IFC estimates that $25-30 billion in new investments will be needed to meet the demand for medical care between now and 2016, of which up to 40% is expected to come from the private sector; Robertson, writing in The Fastest Billion, expects a real increase of 72% in health expenditure through 2020.

Table 1: FTSE sector performances, the six worst performers in 2012
Investing in healthcare also makes financial sense; in stark contrast to the 9.6% CAGR in the African healthcare sector from 2000, the healthcare, drug retailing, and pharmaceutical market growth were all in the six-worst performing sectors in the Financial Times Share Exchange (FTSE) 350 in 2012 (see Table 1).

However, private investment into the healthcare sector in Africa has been strikingly low:

» EY's African Attractiveness survey revealed that, of the $587 billion of FDI that Africa attracted in 2011, only 1% went to healthcare projects.

» In one of McKinsey's often-quoted studies on Africa, "Lions on the Move (2010)," healthcare is not in the top 12 sectors for attracting investment.

» According to an EY study, of private equity in Africa, healthcare accounted for only 5% of exits by sector; even though 70% of FDI was in the services sector, healthcare did not even make the top ten.

» In the three best-selling books, Africa Rising (2008), Africa, the Ultimate Frontier Market (2012), and The Fastest Billion (2012), healthcare does not feature in the listings of the sectors most attractive for investment.


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