Africa is experiencing consistent economic growth. As McKinsey puts it, the "lions are on the move", resulting in increased urbanisation, social mobility and increased life expectancy.

50% of Africans will be living in cities by 2030, and by 2034, 1.1 billion Africans will be of working age, resulting in urgent demand for increased infrastructure (see, for example, our previous article on affordable housing in Africa), including improved healthcare provision.

Challenges and opportunities are plentiful in the African healthcare sector, a market the International Finance Corporation (IFC) estimates is currently worth $US35 billion. A vibrant and educated (and growing) middle class will demand better quality healthcare. Increased life expectancy and lifestyle changes will place an increased focus on non-communicable diseases such as diabetes and cardiovascular conditions.

Existing market constraints are being considered and, in some cases, addressed, whether through regulation (and deregulation) of the industry, increased private sector involvement in the development and operation of healthcare facilities, greater investment in pharmaceutical production and the supply chain, and on new technology and innovation.

So what are the key developments in the healthcare sector in Africa and what are the opportunities in this expanding new market?

Supporting the private sector

Various African governments are starting to work together across their regional trade bodies and organisations - such as the West African Private Healthcare Federation and the East African Healthcare Federation - to tackle the challenges faced by players in the African healthcare sector, whether that’s through encouraging investment in facilities, or protecting trademarks and innovation.

Drafting law and regulation which attracts and sustains investor interest for healthcare projects is a priority for many governments. The Kenyan Government is focused on private sector involvement in healthcare provision, and has ensured the correct legal and regulatory framework is in place. While the country is currently grappling with how best to ring fence budgetary funds for healthcare provision by the County Governments, Kenya plans to tender for $US600 million worth of new contracts for facilities and equipment, including 300-bed hospitals, oxygen plants and IT systems.

Meanwhile, Nigeria has passed a law committing to a minimum spend of its annual federal Government revenues on healthcare. The IFC and World Bank are advising governments on health policy, and the IFC led a consortium of investors to invest $US70 million in Nigeria's largest healthcare group, Hygiea. There is a focus on reversing the outflow of over $US1 billion spent by Nigerians on medical tourism.

The implementation of PPP policies and passing of new legislation will open the market to private investors, helping governments to meet the demands of a new, upwardly mobile, generation. Many investors will have witnessed the same trends in their home jurisdictions in Europe or North America.

Production and Innovation

The value of the African pharmaceutical market rose from $US4.7 billion in 2003 to $US20.8 billion in 2013, and is expected to reach approximately $US60 billion by 2020.

The African Union, and its members, are focused on supporting local pharmaceutical manufacturing in Africa, increasing access to affordable quality medicines and reducing the cost of medical imports. Governments are also offering tax exemptions, reduced land prices and other incentives to help bring manufacturing plants to Africa. Naturally, these will help healthcare companies looking to enter or expand their operations in Africa.

Urbanisation and a rapid increase in the number of new universities in Africa will help address skill shortages within Africa, as will the "human energy advantage" (Africa has and will maintain the world's youngest working population for decades to come). Firms such as General Electric have spotted the opportunity, and have committed to training 10,000 healthcare professionals from Kenya and East Africa by 2020.

Africa's communication technology "leap-frog" is well documented, and at a time when distributed services and digital health are emerging trends, advanced connectivity provides numerous opportunities by combining healthcare, communication and technology. We are witnessing advances in the access to healthcare, electronic care records, remote monitoring and personalised medicine. Digital health has the potential to significantly reduce costs and inefficiencies, to improve quality and to facilitate the burgeoning industry around wellbeing and people's interest in monitoring their own health.

As the market develops, law and regulation must also – to ensure suitable quality standards, a level but competitive playing field, and an appropriate framework that attracts investor interest but safeguards public interests. Our experience in Africa has taught us the value of clear legislation and regulatory guidance, and we are used to guiding our clients through the legal framework of a given jurisdiction, and when required, drafting or amending relevant law.

Supply Chain

Investment in African infrastructure is at an all-time high as result of greater support from Governments (see our previous article: Reasons to be positive about the roads sector in Africa) including on roads, rail and ports. The political will to reduce trade barriers and transit times through harmonising regulation, streamlining border processes, and investing in regional transport corridors is strong. While pharmaceutical logistics chains have specific requirements, closing the infrastructure deficit is an important first step to increasing the feasibility of a sustainable and good value medical manufacturing industry.

Over the last five years, we have worked on a number of projects in the transport sector in East Africa, and have seen at first hand the public sector's desire to link regional ports, major population and trading centres, trunk routes, multi-modal hubs and logistics facilities. In Africa, there is a growing trend to increased accessibility, and where the "last-mile" proves difficult, mobile phone technology is finding innovative ways of connecting Africans to goods and services.

The ability to conduct a health check by tablet, order prescriptions over a smart phone and receive them by drone may shortly become a reality.

Three tips to investing in healthcare in Africa

So what does this mean for investors looking to expand into Africa?

  1. Do your research. Look at which countries are offering incentives for investment in healthcare, as well as investment in other areas that are directly linked to healthcare (such as infrastructure, housing and education). Our team has a good overview of how a variety of African countries are focusing their development efforts.
  2. Be prepared to partner. Local businesses will have sufficient knowledge of particular markets and consumers as well as brand recognition, but may lack investment and capacity.
  3. Get the right advice. We combine a highly experienced and innovative healthcare team with a track record of advising on transactions in Africa over the past twenty years. Whether it's hospital construction or operation, manufacturing, medical supplies, manufacturing or e-health, our experts' pragmatic and informed advice will be critical to your business.