Global Health Policy
« Chronic Diseases Hit Hard in Developing Countries | Main | Child Health in Egypt and Iraq: Our Tax Dollars at Work »
May 03, 2007
Harnessing the Commercial Health Sector in Africa: The Devil is in the Details
Posted by April Harding at 09:34 AM
Andrew Jack at the Financial Times reports that the International Finance Corporation (IFC) is "in discussions" to create a $500 million fund to finance commercial healthcare projects in Africa.
The project draws on a $2.6m research project conducted by McKinsey, the management consultancy, which is being finalised and was funded jointly by the Bill & Melinda Gates Foundation and the IFC.Bringing the local private health sector in to help solve the profound health problems in Africa is an exciting idea. Despite the significant role of private spending for and delivery of healthcare services in poor countries, most development assistance focuses almost exclusively on the public sector. So, engaging the private sector is surely needed. Nevertheless, the FT article reveals nothing new on this score...yet. The IFC has been investing in and lending to health sector companies in developing countries for 12 years (23 projects since 1995). But a brief look at their portfolio reveals the considerable challenges they face in using bankable investments to pursue health development objectives.
For the IFC, or any investor, to make an investment, it must be large enough to cover the cost of preparation and supervision. IFC equity investments in health average about $10 million. In order for the IFC to minimize the risk associated with their investment, they need to have other co-investors or lenders -- so the total project size must be even larger (in the range of $30 million). The projects must also yield a rate of return sufficient to merit the investment bankable. For the IFC health projects, this has entailed expected rates of return in the range of 12-20%. And the IFC needs to have the ability to liquidate their investment.
As part of the World Bank group, the IFC only operates in low- and middle-income countries. However, under these requirements the majority of their investments have been to build or upgrade hospitals that are primarily used by the better-off inhabitants. In most cases, the anticipated development impact is constrained to "enhancing standards," by showing the kind of care that can be delivered in poor countries, even if only in very well-resourced facilities. And only three investments are in Africa. This is not a criticism of IFC staff, who are no doubt looking very hard to find investments that could make a difference for the poorer people in these countries. The focus of the portfolio comes directly from the requirements about the soundness of the investments.
The FT mentions a $50 million pool of funds for some form of technical assistance. It's tempting to speculate what exactly McKinsey proposes could be done with $50 million that would enable such a paradigm shift in the business model to get investments into Africa, and in such a way as to achieve a real development impact by improving access to or quality of services and/or reducing out-of-pocket payments health services and products for the poor.
Will the McKinsey report really reveal a new approach to investment which will allow the IFC, or the to-be-created fund, to invest in or lend to ventures that serve the poor? Or even ventures that bring up the quality of the health products or services used by the middle class in poor African countries? Stay tuned. But one thing's for sure: the devil is in the details, and so is the development impact.
Trackback Ping
TrackBack URL for this entry:
/mt/mt-tb.cgi/857
Comments
I am a trustee of all private physicians in Nigeria and I have practiced medicine in Nigeria for 29 years (19 in private). Having been involved in several health committees of the Nigerian Health Ministry, representing the private sector for ten years, I am in a good position to speak on Nigerian health services. I have had discussions with several officials of IFC in Nigeria.
I have maintained that the healthcare in Nigeria, as in other sub-Saharan Africa, will not improve significantly if investment capital is not available to local professionals, who are ready to PROVIDE SERVICES TO THE RURAL POOR. I know the two health companies, in Nigeria, that IFC have provided facilities. They basically serve the rich people of Lagos. They have not made and cannot make any significant impart on the health of people in Lagos or Nigeria following from the statement above.
Anybody who genuinely wants to improve healthcare in sub-Saharan Africa should help in providing micro venture health capital in the range of $150,000 to $250, 000 per local health professional, who is ready to work in rural areas, at low interest rates. Their professional expertise shall be their invisible assets and service as collateral for these micro loans.
Developmental agencies, in whatever form, that continue to neglect the local private health professionals miss the opportunity to engage in participatory progress in Africa and by design guarantees the devil a prime place both in concept and details.
Posted by: Dr. Gabriel Ogah at May 8, 2007 11:29 AM
The mammoth task of improving healthcare across Africa, warrants a multi-dimensional approach encompassing better government stewardship of the public health sector in tandem with broadening the role of major stakeholders like the private health sector. Private health sector efficiency and in some instances commitment to social return models often allow innovations in quality and affordability to be more easily realised. Resource constrained nations like Sierra Leone are often torn between allocating meagre funds (generated from weak revenue collection and taxation systems) to much needed infrastructure like roads, electricity, education and various health projects. As a capital investment the fund will complement existing efforts to enhance at least health infrastructure. As such this initiative is a welcome boost and the IFC is to be commended. There is sub-optimal utilization of the private sector potential in Sierra Leone and it is hoped that the IFC fund to finance commercial healthcare projects in Africa would augment formal engagement of the private sector in healthcare delivery.
Posted by: Mohamed Yilla at May 21, 2007 03:19 PM
Most of the developed countries believe in the policy of the blame. That is to say I am like that because there is an impact on my policy and economy. However, the real development comes from the inside. We should look for a local investment in order to boost the necessity of the inhabitants.
Armand Rousso
http://health.armandrousso.biz/
Posted by: Armand Rousso at August 31, 2007 08:21 AM