Start-ups tapping into Africa’s healthcare supply chain opportunities

This article is an excerpt of the “Innovations in Health Product Distribution in Sub-Saharan Africa” report by healthcare consulting firm Salient Advisory.

In the midst of the Covid-19 pandemic, the need for innovative, cost-effective, robust, technology-enabled systems to deliver health products and information has never been more clear. Across Africa, where supply chain constraints result in critical bottlenecks in the movement of essential medicines from manufacturer to end-user, leveraging technology to ease this flow holds tremendous promise.

Start-ups across the continent are developing innovative, commercial models to transform health product distribution for consumers and providers alike. With a focus on Nigeria, Ghana, Kenya and Uganda, we present an overview of market trends.

Key trends

The ecosystem is growing: More than 60 companies in the focus geographies are now working to transform health product distribution with new models serving consumers directly, easing product supply to providers, and offering product data services. The most active hubs are Nigeria, Kenya and Ghana; very few companies appear active in this space across Francophone Africa.

Consumer-facing service offerings include new services for digitally enabled direct-to-consumer models for delivery of over-the-counter and prescription products, telemedicine paired with product delivery, patient engagement via chatbots and SMS, and more. Provider-facing service offerings include inventory-management software, tech-enabled and vendor-managed inventory services, digital product marketplaces with fulfillment services, and stock financing. Product data services include methods for counterfeit drug detection, track-and-trace technology, and data analytics.

In response to Covid-19, several major shifts in innovators’ business models have emerged. Innovators are often serving both consumers and providers, are expanding services to include lending and telemedicine, are adapting to distribute products to rural customers in addition to those in urban areas, are wavering between investing in owning product stocks and operating as asset-light, and are increasingly finding themselves competing with brick-and-mortar health businesses that are developing digital channels.

Most companies are still at early stages of maturity and operating in a single country. However, around 30% of innovators appear to have found product-market fit, suggesting they may be well-positioned to scale. Though consumer services are offered by the largest proportion of companies in the data set, user retention appears low among companies in this category, while provider-facing companies report much higher levels of retention. Product data services are dominated by relatively mature companies that operate at large scale within and beyond the healthcare sector.

Unfortunately, grant, equity and debt financing for innovators remains limited and highly concentrated. Innovators report raising a total of $153 million in external funding of any type since their founding, with seven companies accounting for 82% of reported funds raised. African founders who lack ties to high-income countries face clear fundraising ceilings; most have raised less than $150,000.

For the first time, e-commerce giants like Konga, Copia and Jumia are showing a strategic interest in health. Copia and Jumia now offer over-the-counter health products on their e-commerce platforms, while Nigeria-based Konga has plans to launch a healthcare product distribution subsidiary in the summer of 2021. The entry of traditional e-commerce players into health product distribution is inhibited by lack of clear and harmonised regulations, but should these be overcome, they may be poised to transform product delivery to both providers and consumers at large scale.