Perspectives on financing healthcare in Africa
Date
2016-08-25
Authors
Dube, Samukeliso
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Abstract
Following decades of under-investment, gaps in Africa’s healthcare infrastructure are
becoming disturbingly obvious. The interplay of governments’ fiscal policies of budget
imbalance reduction and other political considerations present a seemingly insurmountable
obstacle to overcoming the backlog in Africa’s healthcare infrastructure. The two main
objectives of this study were to understand the sources of financing and the best way to
structure the financing of healthcare infrastructure in Africa. Looking at financing arrangements
in various industries; and how healthcare sectors in developed countries have been financed,
the report draws on perspectives from the financiers on how the healthcare infrastructure gap
should be filled in Africa.
This study, which utilised survey questionnaires and in-depth interviews, identified
government revenues, regional development banks, private equity and donor financing
numbers as dominant funding sources for the financing of healthcare infrastructure in Africa.
Further, the study explored various ways in which finance could be structured and found that
within those various models of financing, donor financing and government revenue were
statistically significant on structuring the finance, especially within public-private partnership
arrangements. These include sale and lease back arrangements (p=0.0022), complete
ownership of projects by the private sector (p=0.003), management operation contracts
(p=0.00034) and other forms of PPPs.
More perspectives were obtained on enablers and barriers to improving investability of the
healthcare sector. Africa’s economic growth and the improving ease of doing business were
major enablers for healthcare sector’s investability. However, the role played by government as
both a financier and a regulator seemed a barrier. Some structural models that would need
government back-up include subordinated debt; with pricing at marginal cost and matching risk
and return recovered through the taxation system. The latter continues to characterise much of
Africa’s publicly provided healthcare infrastructure.
In conclusion, investments in healthcare may not be separated from a country’s level of
financial deepening. As the sector develops, it then becomes possible to utilise the models
aforementioned. It is recommended that any governments’ investments in healthcare be more
catalytic, to unlock value that allows the private sector to compete, both as financiers and
innovators in healthcare. Furthermore clear strategies on PPPs are urgently needed for
healthcare in Africa including policy consistency in financing and regulating healthcare.
Description
Wits Business School
University of Witwatersrand
Johannesburg, South Africa
Master in Finance and Investment (2014)