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IFC and Partners to Mobilize Up to $1 Billion to Strengthen Private Health Care in Africa — New Report Sees Huge Demand for Investment over Next Decade


In Washington, D.C.
Ludi Joseph

Tel. +1(202) 473 7700

E-Mail:
ljoseph@ifc.org

In Johannesburg

Houtan Bassiri

Phone:  +2711 731 3179

E-mail:  
hbassiri@ifc.org


Washington, D.C., December 18, 2007 – A new report from IFC, a member of the World Bank Group, says spending on health in Sub-Saharan Africa is expected to double over the next 10 years. Investments of $25-30 billion will be needed to meet the demand, with the private sector playing a key role.

Entitled The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives, the report says the private sector already plays a significant role in delivering and financing health care for the region’s people. On average, the private sector delivers 50 percent of health care goods and services.

The report, partly financed by the Bill & Melinda Gates Foundation, has prompted IFC and its partners to announce a new strategy for addressing Africa’s health challenges, a major aspect of the region’s poverty.  This involves mobilizing up to $1 billion over the next five years in investment and advisory services to boost socially responsible health care.  


“This is a chance to increase access to health care for millions of Africans,” said Lars Thunell, IFC Executive Vice President and CEO. “If we can get all the critical players governments, donors, investors, and providers to leverage the private health sector and integrate it effectively with public systems, we can also greatly improve the quality of care.”  Thunell added, “The private sector already provides about half of health care goods and services in the region. And a poor woman in Africa today is as likely to take her sick child to a private hospital or clinic as to a public facility.”    


“I am delighted to see IFC moving forward with this new investment strategy, which is a promising way to improve access to important health services,” said Tadataka Yamada, M.D., President of the Bill & Melinda Gates Foundation’s Global Health Program. “IFC’s report underscores the significant role the private sector in Sub-Saharan Africa plays in delivering health interventions, including critical services to the poor. It also makes a compelling investment case for private capital seeking financial and social returns on investment.”

The report had input from a wide range of stakeholders, including governments, investors, and civil society.  It makes clear that the private sector – for-profit as well as not-for-profit institutions – is only part of the solution and that it must work with the public sector to develop viable, sustainable, and equitable health care systems. But it says the private sector is sometimes the only option for people living in remote rural areas and urban slums.  


By 2016, Africa’s health care expenditure is likely to reach $35 billion, up from $17 billion in 2005. The report points out that people in Sub-Saharan Africa have the worst health on average in the world. It suggests that donors and governments consider using private providers and risk-pooling programs to reach the poor.

IFC will partner with donors, development finance institutions, and other entities to mobilize up to $850 million for development of a socially responsible private health sector in Africa over the next five years.  IFC and its partners will also mobilize up to $150 million for a number of initiatives to improve the operating environment for private health care organizations.  (See attached Fact Sheet for more information.)  IFC’s efforts form a key part of the World Bank Group’s larger health, nutrition, and population strategy, and they reflect a commitment to helping African countries reach the Millennium Development Goals by 2015.


“The report from IFC is the most comprehensive analysis to date of the private health sector in Sub-Saharan Africa,” noted Prof. Eyitayo Lambo, a leading international health economist and former Minister of Health for Nigeria, who served on the project’s steering committee. “IFC’s new strategy reflects important first steps to act on the report’s findings. It suggests new ways for health care organizations to access capital and world-class advisory services while working to strengthen the business climate.  I am optimistic that it will create an environment for change, offer practical solutions, and facilitate sustainable investment.”


Guy Ellena, IFC Director, Health and Education, concluded, “IFC is committed to supporting private health care in Sub-Saharan Africa to improve people’s health and reduce poverty, and joining forces with our partners will help us understand what works and what doesn’t. I am very happy to note that the African Development Bank was one of the first development finance institutions that supported the initiative and agreed to collaborate with us in establishing the equity investment vehicle, a key component of our strategy.”


Going forward, IFC and partners will continue to engage with stakeholders.  A series of health and investment forums in Cameroon, Kenya, Nigeria, Senegal, and South Africa and civil society meetings in Europe are planned for the first quarter of 2008.


(To read the report, please go to
www.ifc.org/HealthinAfrica).

About IFC

IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through loan participations and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit
www.ifc.org.  







FACT SHEET






The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives
is the result of a research effort jointly funded by IFC and the Bill & Melinda Gates Foundation to study the role and impact of Africa’s private health sector. (To read the report, please go to
www.ifc.org/HealthinAfrica).

Context


People in Sub-Saharan Africa have the worst health, on average, in the world.  The region has 11 percent of the world’s population but carries 24 percent of the global disease burden. With less than 1 percent of global health expenditure and only 3 percent of the world’s health workers, Africa accounts for almost half the world’s deaths of children under five, has the highest maternal mortality rate, and bears a heavy toll from HIV/AIDS, tuberculosis, and malaria.  The region lacks the infrastructure to provide even basic health care to many of its people. The scale of the challenge is driving a reassessment of traditional approaches and a growing acceptance that the private sector should be a key part of the region’s overall health strategy.

Main Findings
  • The private sector already plays a significant role in delivering and financing health care in Africa. On average, it delivers 50 percent of the industry’s goods and services, with 60 percent of financing for those goods and services coming from private sources.
  • The private sector can be the only option for delivering health care services in remote rural regions and poor urban slums. Often perceived as serving only the rich and elite in Africa, private sector providers (including for-profit and not-for-profit) in fact serve all income levels and have broad geographic reach.
  • African health expenditure will continue to grow rapidly, with the private sector playing a key role.  Expenditures are expected to more than double over the next 10 years, growing from $16.7 billion in 2005 to around $35 billion in 2016. About $25-30 billion in investment will be needed to meet this demand, with 60 percent expected to come from the private sector.
  • The private sector is only part of the solution to Africa’s health challenges, but it has the potential to bring significant improvements, such as expanding access to health services for the poorest people and reducing the financial burden on governments.
  • Impediments to developing a productive private health sector include limited access to capital, burdensome regulations, shortages of skilled workers, and a lack of risk-pooling mechanisms that can mobilize revenue for providers and support the growth of a well-organized private health sector in Africa.

IFC Strategy

To respond to these findings and help Africa address its health care challenges—including improving services to the poor—IFC will work with local businesspeople, financial intermediaries, policymakers, donors, and other stakeholders in the international community to address the constraints. IFC and its partners are planning to mobilize up to $1 billion of investment and advisory services support over the next five years. IFC’s strategy includes:
  • Creating an equity investment vehicle ($100 million to start, and up to $300-350 million over five years) to provide health care entrepreneurs and businesses, including those involved in medical education, with better access to equity and expertise.
  • Partnering with local financial institutions to improve access to long-term debt for health care organizations ($400-500 million over five years).
  • Providing advisory services to build capacity within local financial intermediaries and the health care companies they lend to.
  • Expanding the activities of IFC’s life sciences team in the region.
  • Helping expand education of health care workers through public-private partnerships.
  • Encouraging development of health insurance companies.
  • Improving the environment for private health care to flourish, including:
a.        Supporting in-depth country assessments of the business environment for private health care.
b.        
Working with governments to reform private health care regulation and expand formal public-private partnerships.
c.        
Producing a biannual report highlighting the health care investment climate across Africa and successful models of public-private interactions and private sector activity.

A Changing Investment Climate

Africa’s investment climate is becoming more attractive to entrepreneurs and investors.  Dramatic increases in foreign direct and private equity investment, substantial gains in stock market indices, and improved political stability all help explain this turnaround.  Economies are also more stable: Africa has achieved an average annual GDP growth rate of 5 percent over the last seven years, with further strong growth being forecast through 2010.  Average inflation has dropped in the meantime, from 16 percent to less than 8 percent.  These factors are a winning combination for private investors in many sectors, including health care, who might have avoided Africa in the past.  IFC’s new strategy is intended to accelerate this turnaround.


Opportunities in Health Care


Investment opportunities in Africa over the next decade include improving the sector’s physical capacity as well as staffing for health care delivery. Based on recent demand trends, more than half a million hospital beds need to be added to the existing estimated base of 850,000. The region will also need 90,000 more physicians, half a million more nurses, and 300,000 community health workers above the numbers expected to graduate from existing training institutions. There is also demand for better distribution and retail systems and for pharmaceutical and medical supply production facilities. In all, $15-20 billion of new investments—of which the private sector is expected to fund around 60 percent—will be needed by 2016.  All of these factors will provide opportunities for investors in the private health sector.


Preparation of the Report


The report studied selected sub-sectors of health care provision (including in-patient and out-patient care, retail and distribution, insurance, and medical education). The countries covered were the Democratic Republic of Congo, Ghana, Kenya, Mozambique, Nigeria, Rwanda, Senegal, Tanzania, and Uganda. South Africa was also included with respect to pharmaceutical and medical equipment manufacturing. (Other dimensions of the private health sector in South Africa are considered more advanced than elsewhere in the region.)


The report was prepared by a team from IFC’s Health and Education Department and is based on independent analysis conducted by McKinsey and Company. Over the course of six months, a team of McKinsey consultants traveled throughout Sub-Saharan Africa to gather information and learn about the challenges and opportunities facing the private health sector. They developed “market sizing” approaches; consulted with almost 400 stakeholders from the private, public, and nonprofit sectors; and provided input from their experts in global public health, financial markets, and economic development.  


NOTE:
To read the report, please go to
www/ifc.org/HealthinAfrica. To receive a print copy, please send an e-mail request to healthinafrica@ifc.org. French and Portuguese versions of the report will be made available in early 2008 on the Web and in print.