October 2022

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The sub-Saharan African region accounts for 33% of global cervical cancer deaths, even though the region accounts for only 14% of the global female population.

Africa’s Outbound Medical Tourism: Turning Problem into Opportunity

The Meat

Africa’s Outbound Medical Tourism: Turning Problem into Opportunity

The number of Nigerians seeking medical help, especially tertiary healthcare, outside Nigeria has seen a steady increase. In the past decade, the annual cost of foreign medical trips has averaged $1.6 billion. Across Africa, the figure is estimated at $6 billion annually. The narrative on these numbers centers on its impact on each country’s foreign reserve and, consequently, the stability of its currency. But this only tells part of the story. It fails to capture the impact of the continent’s inefficient healthcare system on long-term development as well as the number of lives lost due to the inability to afford these expensive medical trips. More so, the narrative fails to capture the significant market opportunity in the African tertiary healthcare space. This article addresses the latter.

Today’s Realities

Africa is almost synonymous with infectious diseases; for good reason. The continent accounts for nearly 95% of global malaria cases and 96% of malaria-related deaths. The World Health Organization reports that malaria accounts for one in five deaths of African children aged under 5. Beyond malaria, other leading causes of death include diarrhoea, respiratory infections, neonatal conditions, and HIV/AIDs. In addition to the number of lives lost, the economic consequences are enormous. The Nigerian government alone spends an estimated $2.4 billion annually on malaria control. Combined with a 70% out-of-pocket spending ratio on healthcare by families, there is no gainsaying the economic cost of infectious diseases in Nigeria and across the continent.

Notwithstanding the above dire statistics, the narrative belies the gradual but steady rise in chronic, non-infectious diseases across the continent; the type for which a $2 over-the-counter drug does not control. The World Bank, in its recent report on global disease burden, acknowledged the impact of the aforementioned infectious diseases. However, it also reports that between 1990 and 2010, the sub-Saharan Africa region witnessed a gradual rise in chronic illnesses, thanks to a combination of longer lifespans (vis-a-vis life expectancy in 1960), changes in dietary and lifestyle choices (including alcohol consumption and smoking), and pollution among others. These changes have led to a marked rise in non-infectious diseases, including cardiovascular diseases, various types of cancers, eye defects, and more.

The World Heart Federation reports that in 2019, deaths related to cardiovascular diseases (CVD) claimed over 1 million lives in sub-Saharan Africa; this accounts for nearly 5.4% of all CVD deaths globally and 13% of all deaths in sub-Saharan Africa. Similarly, data on cervical cancer fatalities show that the sub-Saharan African region accounts for 33% of global cervical cancer deaths, even though the region accounts for only 14% of the global female population. Other dire statistics include the scourge of cataracts on the continent, with 6 million people suffering blindness due to cataracts; a disease that could be prevented through timely surgical intervention. Suffice it to say that while infectious diseases remain threatening, chronic, non-infectious diseases pose a far more complex (and expensive challenge) for both governments and patients.

From Challenge To Opportunity?

As detailed in the previous section, the African continent faces significant health challenges from chronic, non-infectious illnesses; a trend that is expected to increase due to the aforementioned factors. Is the healthcare system prepared for this? Far from it. The statistics on the rising demand for foreign medical care, especially tertiary healthcare, pay credence to this. More so, statistics on the number of healthcare facilities in various countries show a gross level of inadequacy.

Nigeria, which ranks as the continent’s leading economy and its most populous nation, plays host to over 40,000 medical facilities (10,000 of these are privately owned). For a population of over 230 million, this amounts to just over 17 hospitals per 100,000 people. An exclusive focus on tertiary healthcare facilities (comprising federal teaching hospitals, federal medical centers, and other private facilities) paints a far worse picture. The government owns just over 54 tertiary healthcare facilities. This translates to 0.023 tertiary facilities per 100,000 people.

This presents an opportunity for healthcare investors. As previously reported, the continent spends over $6 billion annually on foreign medical trips; a figure that is expected to rise in the coming years. However, this captures only a portion of the total market size if the number of persons who fail to seek foreign medical care due to prohibitive cost, logistical concerns, and other factors, are considered. The key to capturing a sizeable portion of this growing market is a delicate combination of affordability and quality. While difficult to achieve, it is not impossible. A few successful cases from around the world have been reported. The most famous has been the Narayana Hospital and other Indian facilities where tertiary procedures including heart, eye, and cancer treatments cost 95% lower than the price in the US and other developed nations. The secret? A combination of a high volume of patients, significant pricing power for supplies, extended use of expensive equipment like MRI and CT scanners (which increases useful life profit), and the use of telemedicine and remote care to cut down on hospital stays. These strategies could be replicated in key destinations across the continent. Nigeria’s population and high demand for tertiary healthcare present a key target market.

Investors looking to enter the market have a range of options. Foremost, a public-private partnership (PPP) with the country’s teaching hospitals, federal medical centers, and specialist facilities could be pursued. Considering the dearth of advanced facilities (MRI, CT, and robotic surgery facilities), a partnership could be pursued to fund the purchase of these facilities. Secondly, investors could seek an equity infusion and/or joint venture arrangement with existing private tertiary facilities with a view to boosting the quality and range of tertiary medical procedures provided by these facilities. In addition to funding the purchase of advanced equipment, the arrangement might include possible technical assistance (if the investor group already owns tertiary facilities in other geographies), training, and access to global experts. Finally, a full market entry could be pursued. Considering the relative ease of movement among member countries of regional blocs on the continent, investors might pursue a regional strategy with a view toward situating large-scale tertiary facilities catering to each bloc. Significant investment in each bloc would help concentrate resources, ensure ample volume, increase pricing power, and help decrease costs for the end user.

What’s Next?

Africa’s healthcare challenges are multifold. Low insurance penetration, a rudimentary pharmaceutical value chain, and other economic and cultural factors remain impediments to the delivery of quality healthcare. Nonetheless, governments’ continued inability to deliver quality care, the dearth of affordable local offerings, and the scale of outbound expenditure present a multi-billion dollar opportunity for healthcare investors looking to build greenfield facilities, pursue equity/debt infusion in existing facilities, and engage the national and state governments on possible PPP.

The Kwakol markets research team can help with this. Visit our page here.  

Crystal Ball

China recently levied its first fine on Kenya for defaulting on the much-celebrated Mombasa Nairobi railway loans. But Kenya is hardly alone in this pack. A number of African countries face a combination of high debt, a wobbly economy, high inflation, and the threat of bankruptcy. With the Chinese president entering his third term, and African governments increasingly questioning the merits of China’s loans to previous governments, we may see a significant recalibration of this relationship if China remains inflexible.

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