Doing Business in Africa Ashleigh Theophanides FASSA, FIA Deloitte - PowerPoint PPT Presentation

Doing Business in Africa Ashleigh Theophanides FASSA, FIA Deloitte Consulting

Agenda Overview of Africa • Healthcare in Africa • Selected SADC countries • Conclusion •

Overview of Africa Perceptions on Africa are shifting In 1984 In 2012

Overview of Africa The Hype • A larger, more affluent population • Africa’s urban swell African Attraction • Leapfrogging through technology Themes • Africa’s resources potential • Maturing financial sector • Increased need for supplies and services Investment Drivers • Imports form a major part of region’s trade • Price-sensitivity • Ease of doing business

Healthcare in Africa

Healthcare in Africa Disease burden Communicable Non-communicable Western Pacific Region Injuries Eastern Mediterranean HIV/AIDS Malaria Tuberculosis Region (2009) (2009) (2010) European Region Western Pacific Region 7 126 93 Eastern Mediterranean 19 2 087 109 Region South-East Asia Region European Region 18 NA 47 South-East Asia Region 12 1 895 193 Region of the Americas Region of the Americas 19 122 29 African Region 217 21 537 276 African Region 0 500 1000 1500 2000 Age-standardised mortality rates by cause Incidence rate (per 100 000 population) (per 100 000 population) Source: WHO, 2012

Healthcare in Africa Healthcare expenditure Healthcare expenditure - SADC countries Key points 100 75 • The “out of pocket” spend on healthcare is more Health expenditure, private (% of 50 total health expenditure) than 65% in 7 out of the % 15 countries assessed Health expenditure, public (% of total health expenditure) 25 • Private Health Out-of-pocket health expenditure (% of private expenditure on expenditure exceeded health) 0 … Angola Botswana DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Seychelles Swaziland Tanzania Zambia Zimbabwe that of Public Health South Africa expenditure in 5 out the 15 countries Source: World Bank data 2011 The high “out -of- pocket” spend on private healthcare and reliance on donor spending in Africa suggests a need for sustainable funding mechanisms and creates an attractive opportunity for foreign investment.

Healthcare in Africa Millennium Development Goals • The 8 MDGs are derived from the United Nations Millennium Declaration, signed in 2000 - The Declaration commits world leaders to combat poverty, hunger, disease, illiteracy, environmental degradation, and discrimination • MDG1, MDG4, MDG5, MDG6, MDG7 and MDG8 are health related • Progress globally varies significantly: - The world has met the MDG target relating to access to safe drinking water (MDG7) - Countries with the least progress are those affected by high levels of HIV/AIDS, economic hardship or conflict - A number of countries (esp. in Africa) are not expected to achieve the 2015 target across the board

Healthcare in Africa Millennium Development Goals – Progress for Africa? • MDG 4: Reduce child mortality - Annual rate of decline in the mortality rate for children under 5 years old has increased from 1.8% during 1990-2010 to 2.8% during 2005-2010 - However births attended by skilled health personnel during 2005-2011 remained below 50% • MDG 5: Improve maternal health - Annual rate of decline in maternal mortality of 2.7% during 1990-2010 • MDG 6: Combat HIV/AIDS, malaria, and other diseases - African region still accounts for 70% of global HIV/AIDS infection - However the incidence rate for HIV/AIDS has decreased from 338 (per 100 000 population) in 2000 to 217 in 2009 - 50% reduction in either confirmed malaria cases or malaria admissions and deaths Source: WHO, 2012

Healthcare in Africa Reform – Where on the road are we? • Pressures of reform are intensified by high burden of disease, poor living conditions and lack of access to quality care • Efforts for reform are problematic given the typical issues faced by low and middle income countries • However, although African countries may be starting off on the back foot, they benefit from rapid economic growth + + - and the ability to learn - from the experiences of other countries.

Healthcare in Africa Reform – Where on the road are we? Some of the key strategies adopted by various African countries Implementation of Design of NHI/SHI of some Social/National form Health Insurance • Ghana • Kenya • Nigeria • South Africa • Tanzania • Namibia • Zambia Sector-wide Decentralisation & approaches (SWAps) as strengthening of a framework for district health undertaking health systems reform • Uganda • Zambia • Tanzania • Tanzania • Ethiopia • Zambia • Ghana

Considerations for investment • Follow basic feasibility study principles • Understand the environment • Consider need for services • Consider affordability of services • Choice of services, e.g. state of public facilities • Demand/Supply of resources • Economic growth expectations • Understand the population • Population covered already • Target population • Burden of disease • Unemployment, income levels, disposable income • Expectations of cover • Change in lives covered, new entrants

Considerations for investment • Understand the maturity of technology platforms • How will this impact your business • Data and information is vital for success in healthcare • Evaluate current and future regulation and legislation • Health reform strategies • Health fund regulations • Capital requirements • Licencing requirements • Demarcation • Ownership structures for the delivery of healthcare, public or private • Impact on profit taking entities

Considerations for investment • Evaluate risks and derive mitigation strategies • Sustainable pricing strategy • Loss leader strategies • Capital requirements • Tariff regulation • Tax subsidies • Risk rating vs. community rating • Minimum benefits • Open enrolment • Voluntary vs. mandatory membership • Benefit design Local people are key to a successful venture.

Selected SADC countries • South Africa • Namibia • Botswana • Zimbabwe • Lesotho

Selected SADC countries Healthcare expenditure South Africa Namibia Botswana Lesotho Total expenditure on health as % 8.5 5.3 5.1 12.8 of GDP General government expenditure 57.1 60.8 74.1 on health as % of total 47.7 expenditure on health Private expenditure on health as 42.9 52.3 39.2 25.9 % of total expenditure on health Out-of-pocket health expenditure 13.8 17.9 12.7 69 (% of private expenditure on health) Source: World Bank data 2011

Selected SADC countries Health Status South Africa Namibia Botswana Lesotho Zimbabwe Population size (2010) 49 668 000 2 283 000 2 007 000 2 171 000 12 571 000 % Population living in 38 61 61 27 38 urban areas(2010) Life expectancy at birth 57 years 53 years 61 years 48 years 49 years (2009) (Density per 10 000 population) South Africa Namibia Botswana Lesotho Zimbabwe Health workforce Physicians 8 3.7 3.4 NA NA Nursing & midwifery 41 27.8 28.4 NA NA personnel Hospital beds 28 27 18 NA 17 Source: WHO, 2012

Selected SADC countries Health Status Age-standardized mortality rates South Africa Namibia Botswana Lesotho Zimbabwe (per 100 000 population) Communicable Diseases 670 983 739 1255 1552 Non-Communicable 635 791 606 774 622 Diseases Injuries 72 160 107 141 73 60.00% 50.00% % of total DALYs 40.00% HIV/AIDS is the leading cause of 30.00% burden of disease 20.00% 10.00% 0.00% South Africa Namibia Botswana Lesotho Zimbabwe Source: WHO, 2012

South Africa

South Africa Public healthcare funding environment • There are 4 200 public health facilities in South Africa • Provincial health departments provide and manage comprehensive health services, via a district-based, public healthcare model • Bulk of health-sector funding is provided by National Treasury: - R121 billion allocated in 2012/13 - Public health consumes around 11% of the Government’s budget • Primary healthcare is free for all South African citizens • The payment for hospital care at State hospitals is means-tested - Means-test not always successfully applied due to stretched administrative capacity (including human resources)

South Africa Private healthcare funding environment • Private healthcare services in South Africa are mainly financed through not-for- profit medical schemes: - Open enrolment and Community rating - Prescribed Minimum Benefits - 25% of GCI solvency requirement • In 2011 there were 97 medical schemes (26 open and 71 restricted) • Discovery Health Medical Scheme is the largest scheme with 2.3 million beneficiaries (2011) • 8.5 million beneficiaries enrolled in medical schemes in 2011 ( 16.4% of total pop.) • Regulated by Council for Medical Schemes

South Africa Challenges faced • Major challenges in the Public sector: • Severe shortages of healthcare resources: Medicines, Doctors and Nurses and Medical technology • Inefficiencies span all parts of the public health sector: - Mismanagement of financial resources - Poor provincial administration - Absence of a strong accountability framework for the operation of the healthcare system