Paul da Rita, Principal of PdR Infra Advisory, discusses opportunities and barriers to financing healthcare infrastructure across Africa.
In looking at the potential for investment, and the need, it is helpful to contextualise the situation across many African countries. For instance, relative to OECD countries, countries in Africa spend little on healthcare: an average of 100 USD per capita, just a quarter of the average OECD country spend. And more than 70 per cent of the healthcare spend across Africa comes from out of the pocket expenditure (OOP), pockets which are often emptied by other basic necessities such as food.
Healthcare systems across Africa were already under significant stress before the pandemic and the post-pandemic recovery cannot simply be business as usual.
Where significant proportions of a health economy’s expenditure is financed by the state or by social or private health insurance programmes, data can be gathered and revenues modelled to forecast demand upon which financing decisions can be based. The absence of that feature is a significant inhibitor to large scale development of healthcare infrastructure, or indeed healthcare systems more broadly. Investment, whether public or private, is greatly hindered by the absence of stable healthcare systems.
The need to develop such stable systems is recognised and we see social health insurance schemes being developed in many countries across the continent. A good example is in Rwanda where a community based social health insurance has been significantly expanded as a key feature of its progress towards Universal Health Coverage (UHC). The commitment made by the government in Rwanda to support the health system has also encouraged private sector financing.
Among the examples of the strides being made in Rwanda, and the benefits of social insurance in attracting inward investment and expertise, is the 2020 partnership between the Rwandan government and Babylon Health under which Babyl, Babylon’s Rwandan focussed subsidiary, will provide primary care, via digital consultations, to all citizens, funded by social health insurance. This enables Rwanda justifiably to claim to offer Africa’s first universal primary care system. Another example of Rwandan innovation and success is the increase access to healthcare by delivering medical supplies via drone supported by USA headquartered Zipline.
Paul da Rita, Principal of PdR Infra Advisory, points out that leapfrogging into “the most progressive technologies” gives African countries the opportunity to be pioneers in the healthcare space.
So, how exactly has Rwanda managed to attract the interest of multilateral organisations and Silicon Valley entrepreneurs?
“The government takes their healthcare obligations seriously,” says Paul. “They have a stable plan with a progressive outlook, which produces progressive outcomes.” The importance of political will and a political consensus cannot be stressed enough. When it comes to financing and delivering healthcare infrastructure, long term commitments mean that relative certainty and the ability to manage political and other risks is a major issue.
The need for policy and regulatory environments
Sub-sovereign state actors are often in control of healthcare initiatives across many countries, which leads to a lack of consistency and creates risk for private investment. In order for finance options to become available to projects throughout Africa, national governments need to commit to long term policy and regulatory environments.
The Rwandan experience demonstrates the ability to create long term partnerships between the public and private sectors. In order to create successful PPPs (which can be structured and financed in a variety of ways), governments need to carefully consider the fiscal impact of a project for the lifespan of the contract, as well as a demonstrable long term interest in prioritising healthcare.
Internationally, there is a wealth of investment available for infrastructure projects, “billions of dollars can be made available,” says Paul. However, the lack of focus on healthcare infrastructure is clear.
Healthcare and economic growth
Most investors and governments tend to focus on economic infrastructure as a first priority. This is beginning to change – for instance, the Global Infrastructure Facility, hosted by the World Bank Group and one of the largest project preparation facilities, is now able to consider the financing of early stage health projects. Alongside that Multilateral Development Banks (MDBs) and others are now developing blended finance options in order to assist with long term affordability and long term fiscal sustainability.
So-called economic infrastructure has always taken precedent; focus has remained on transport and energy, with the social sectors some way behind. In order to attract more attention, healthcare needs to be billed as an essential building block of economic activity. “Investing in healthcare provides not just economic output in terms of healthy people, it actually provides economic stimulus in the location it is built,” Paul adds. The importance of healthcare as a key factor of economic activity must be recognised, whether it be as directly in local job generation or as indirectly by increasing population health and long term productivity.
In order for this to happen, governments need to recognise healthcare as a pillar of economic growth at a national level. A shift in focus to allow healthcare to take a seat at the national table would bring wide reaching benefits across Africa.
Challenges to investment
One of the largest roadblocks to getting more private investment into health infrastructure, continues with the lack of well-prepared and developed projects. The development of good feasibility studies and business cases and the capacity to design and manage complex procurements and to manage long term contracts will be an essential feature of any successful programme. For progress to be made, initial stage finance must be accessible to carry out these feasibility studies and build capacity within the public sector. MDBs, such as the World Bank, have a critical role to play in this area.
The lack of capacity is not the only hurdle to generating a project pipeline. Instability of the regulatory environment causes huge uncertainty and exposes investments to high levels of risk. There is a desperate need to move from opaque processes to following clear, transparent procurement processes.
In order to access available financing, governments need to buy in to these schemes and follow in the footsteps of Rwanda. One lesson we must take from Rwanda is the recognition of private, foreign investment providing skills, knowledge and technology as well as financial support. Digital tools, telehealth networks and the use of innovative technologies such as drones alongside artificial intelligence can tackle some of the issues faced by countries all over Africa. E-learning initiatives and the integration of AI can work towards addressing workforce issues acutely felt by many healthcare systems – it is important to recognise that building infrastructure alone is unlikely to solve the issues. Moreover, many geographical barriers can be overcome by innovative delivery systems, allowing access to medical care to reach through conflict areas and the most rural villages.
A national commitment to long term healthcare systems, and the infrastructure needed to operate them, as an economic tool, bringing technology partners and international private investors, will allow African countries the opportunity to become world leaders in health. But for this to work, it is equally important that the conditions conducive to attracting investment are also in place.
Contact:
pauldarita@pdrinfraadvisory.co.uk