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Private sector eyeing opportunities in Africa’s healthcare industry

Healthcare in Africa has not had a great track record in recent decades – too many people still die from preventable diseases and it is common for African leaders to travel abroad for treatment. Despite this, many private sector companies are seeing lucrative opportunities in areas such as pharmaceuticals and medical equipment.

Private equity firm The Abraaj Group yesterday announced it has made an investment in Moroccan pharmaceutical manufacturer Steripharma.

According to The Abraaj Group, the pharmaceutical sector is currently one of the best performing in Africa. “The industry has been growing at a steady rate over the past few years and this momentum is expected to continue in tandem with overall economic growth being witnessed in Africa,” said Ahmed Badreldin, who oversees the group’s investments in the Middle East and North Africa.

With its head office in Casablanca, Steripharma manufactures and markets a range of pharmaceutical products, both in solid and liquid form. It is expected that this new investment will allow Steripharma to boost its exports to the rest of the continent.

“A consistent theme throughout Africa is the unavailability of quality healthcare goods and services at accessible price points,” commented Shakir Merali, managing director at The Abraaj Group. “This deficit presents an opportunity to invest in solid companies to build scale, increase affordability and achieve world-class quality.”

South African pharmaceutical firm Adcock Ingram has also expanded into the rest of the continent. It is primarily targeting the continent’s emerging consumers and the middle class, a group the company says is becoming more discerning. “They actually like brands, and they want quality, and they are the same anywhere on the continent,” said Kofi Amegashie, Adcock Ingram head of Africa operations, at an EY conference earlier this year.

He explained that lower down the income scale, affordability becomes vitally important, with customers demanding value for money.

Amegashie added that companies ignore the rural consumer at their peril. He said developing the right pack sizes and effective distribution strategies are crucial for companies looking to target low-income consumers. Innovative, fast-moving consumer goods manufacturers have, for example, come up with single use packets and these have underpinned the profitability of these companies.

Healthcare – a changing landscape

According to global logistics company DHL, Africa is the “next frontier for healthcare”.

Sumesh Rahavendra, head of marketing for DHL Express sub-Saharan Africa, said: “Companies are increasingly turning to Africa due to the opportunities that the continent offers as it is one of the few locations that can still obtain double digit economic growth. The life sciences logistics model in Africa is therefore changing drastically as, in the last two and a half years, we have seen major growth in hubs like Kenya, servicing East Africa, and South Africa, which plays a key role for the Southern African Development Community (SADC) countries, in addition to direct shipments into specific countries, as the capabilities grow within the region.”

Rahavendra, however, noted that there are key challenges that need to be met based on the current changes in the sector. “Increasing differentiation of supply chains and the need for companies to keep their supply chain flexible to adapt to requirements of innovative products is a key challenge.

“As innovation in the pharmaceutical industry shifts towards specialties and biotech products, so does the need for temperature controlled, and monitored, cold chain transport and storage, historically only required for shipments of vaccines and blood fractions,” he added.

In July, professional services firm KPMG hosted a conference in Johannesburg with the continent’s top healthcare leaders. In a statement following the event, Sven Byl, head of healthcare and life sciences in Africa at KPMG, said the industry faces challenges, with current models not delivering the required care at an affordable price.

“I always tell people that even if I had only one dollar to invest, I would invest it in healthcare,” Byl said. “In Africa there is ample opportunity and from the level of engagement over our conference there is a clear appetite to invest in Africa.”

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