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

• A larger, more affluent population
• Africa’s urban swell
• Leapfrogging through technology
• Africa’s resources potential
• Maturing financial sector
• Increased need for supplies and

services

• Imports form a major part of region’s

trade

• Price-sensitivity
• Ease of doing business

Overview of Africa

The Hype

African Attraction Themes Investment Drivers

Healthcare in Africa

Healthcare in Africa

Disease burden

Incidence rate (per 100 000 population) Age-standardised mortality rates by cause (per 100 000 population)

Source: WHO, 2012

500 1000 1500 2000

African Region Region of the Americas South-East Asia Region European Region Eastern Mediterranean Region Western Pacific Region Communicable Non-communicable Injuries

HIV/AIDS (2009) Malaria (2009) Tuberculosis (2010) Western Pacific Region 7 126 93 Eastern Mediterranean Region 19 2 087 109 European Region 18 NA 47 South-East Asia Region 12 1 895 193 Region of the Americas 19 122 29 African Region 217 21 537 276

Healthcare in Africa

Healthcare expenditure

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.

• The “out of pocket” spend
• n healthcare is more

than 65% in 7 out of the 15 countries assessed

• Private Health

expenditure exceeded that of Public Health expenditure in 5 out the 15 countries

Healthcare expenditure - SADC countries Key points

Source: World Bank data 2011

25 50 75 100

Angola Botswana DRC Lesotho Madagascar Malawi Mauritius Mozambique Namibia Seychelles South Africa Swaziland Tanzania Zambia Zimbabwe …

%

Health expenditure, private (% of total health expenditure) Health expenditure, public (% of total health expenditure) Out-of-pocket health expenditure (% of private expenditure on health)

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

• 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

Healthcare in Africa

Millennium Development Goals – Progress for Africa?

Source: WHO, 2012

• 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

+

• +
• Healthcare in Africa

Reform – Where on the road are we?

• 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

• ther countries.

Implementation of NHI/SHI of some form

• Ghana
• Nigeria
• Tanzania
• Zambia

Design of Social/National Health Insurance

• Kenya
• South Africa
• Namibia

Decentralisation & strengthening of district health systems

• Tanzania
• Zambia

Sector-wide approaches (SWAps) as a framework for undertaking health reform

• Uganda •Zambia
• Tanzania •Ethiopia
• Ghana

Some of the key strategies adopted by various African countries

Healthcare in Africa

Reform – Where on the road are we?

• 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.

Considerations for investment

Selected SADC countries

• South Africa
• Namibia
• Botswana
• Zimbabwe
• Lesotho

Selected SADC countries

Healthcare expenditure

South Africa Namibia Botswana Lesotho

Total expenditure on health as %

• f GDP

8.5 5.3 5.1 12.8

General government expenditure

• n health as % of total

expenditure on health 47.7 57.1

60.8 74.1

Private expenditure on health as % of total expenditure on health 52.3 42.9

39.2 25.9

Out-of-pocket health expenditure (% of private expenditure on health)

13.8 17.9 12.7 69

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 urban areas(2010) 61 38 61 27 38 Life expectancy at birth (2009) 53 years 57 years 61 years 48 years 49 years

Source: WHO, 2012

South Africa Namibia Botswana Lesotho Zimbabwe Physicians 8 3.7 3.4 NA NA Nursing & midwifery personnel 41 27.8 28.4 NA NA Hospital beds 28 27 18 NA 17

Health workforce (Density per 10 000 population)

Selected SADC countries

Health Status

South Africa Namibia Botswana Lesotho Zimbabwe Communicable Diseases 983 670 739 1255 1552 Non-Communicable Diseases 635 791 606 774 622 Injuries 72 160 107 141 73

Source: WHO, 2012

HIV/AIDS is the leading cause of burden of disease

% of total DALYs Age-standardized mortality rates (per 100 000 population)

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% South Africa Namibia Botswana Lesotho Zimbabwe

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
• peration of the healthcare system

South Africa

Challenges faced

• Major challenges in the Private sector:
• Price negotiating power
• A number of factors have been blamed for the cost growth rate (leading to

unsustainable increases in funding), including:

• Supply-induced price inflation (i.e. limited supply of healthcare

resources)

• An ageing medical scheme population
• The requirement to cover Prescribed Minimum Benefits (PMB) in full

irrespective of over-charging from healthcare service providers

• Medical advancements resulting in the use of higher cost technology
• High non-healthcare expenditure (the largest proportion of which is

attributable to administration and managed care management services fees)

• Demarcation Regulations

South Africa

Health reform

• Currently (since 2007) the reform of the South African healthcare system is

a high priority item in the form of the National Health Insurance (NHI) system

• Essentially aimed at the upliftment of the public healthcare sector and the

achievement of universal coverage while ensuring equity and efficiency

• Phased implementation over an expected period of 14 years from 2012
• NHI pilot site roll-out to 10 districts started in 2012
• Provided R150 mill conditional grant in 2012/13 budget
• Successful implementation hinges on infrastructure and management
• verhauls across health sector as well as strict regulation
• While a top priority, details regarding the implementation of NHI,

governing legislation, funding and industry impacts have been limited

• Green paper released in 2011, but White paper still yet to be released

Namibia

Namibia

Public healthcare funding environment

• The central ministry allocates funds to health regions that then manage the

funds on behalf of districts or allocate funds to districts

• Fees for the use of public health services are set by the government and differ

between the various types of health facilities

• Government focuses on the provision of primary healthcare services

Namibia

Private healthcare funding environment

Regulator - NAMFISA Medical Aid Fund Scheme Type Bankmed Restricted Namibia Medical Care Open PSEMAS Restricted Namibia Health Plan Open NAPOTEL Medical Aid Fund Restricted Namdeb Medical Aid Scheme Restricted Roads Contractor Company (RCC) Medical Aid Fund Restricted Renaissance Health Medical Aid Open Nammed Medical Aid Fund Open

• 9 Medical Aid Funds

(4 Open, 5 Restricted)

• Approx. 15% of population are

covered (2010)

• Membership dominated by

PSEMAS (> 50% of total)(2012)

• Almost 50% of employed

population remain uncovered(2012)

• PHI used to provide top-up cover

(e.g. Gap cover)

• NAMAF: Representative body

Namibia

Challenges faced

• Challenges:
• Low population density in a vast land, thereby limiting access to

healthcare

• Government has attempted to address this by making use of

mobile clinics

• Income distribution vastly skewed (10% of highest income

households account for over 90% of total household income)

• Uneven distribution of wealth results in small tax payer base

and hence less tax revenue (per capita) that can be used to improve public healthcare services

• Sever shortages in health workforce - vacancy rate of 26%

(Schrecker, Labonte)

• In private sector: High level of benefits in conjunction with

generous subsidy from the MoF for PSEMAS members

Namibia

Health reform

• The Social Security Act, No. 34 of 1994, paved the way for the

establishment of a National Medical Benefit Fund (NMBF) to provide for the payment of medical benefits to employees

• Much debate as to envisaged target population
• Could have a major impact on current private medical aid fund industry
• The establishment of the NMBF is in line with the principles of SHI
• However, Namibia faces a number of challenges regarding successful SHI
• implementation. The most appropriate solution is being sought.

Botswana

Botswana

Public healthcare funding environment

• Government raises the majority of its revenue through the international

trade of mineral resources

• Public Healthcare revenues are generated mainly through general

taxation and donor funding

• Botswana has a hospital-based system with most health sector spending

being on curative services

• The Government has adopted a primary healthcare principle

Botswana

Private healthcare funding environment

Regulator - NBFIRA Medical Aid Fund/Scheme Scheme Type Botsogo Health Plan Open Botswana Medical Aid (BOMAid) Open Botswana Public Officers’ Medical Aid Scheme (BPOMAS) Restricted Itekanele Health Scheme Open Doctors Aid Medical Aid Scheme Open Pula Medical Aid Fund Open

(Employer focused)

Etudiant Medical Aid Open Botlhe Medical Aid Open Symphony Health Open

• Approx. 17% of population are

covered (2010)

• Membership dominated by

BPOMAS (approx. 117 000 beneficiaries)(2013)

• Competition is fierce and market

is stagnating (becoming more difficult to win new lives)

• No enforced regulation currently

in place

Botswana

Challenges faces

• Major challenges:
• Shortage of healthcare workers and reliable IT infrastructure
• Geographically large country with small population making it expensive to deliver

services (WHO 2009)

• Inadequate clarity in roles and responsibilities in delivery health services (WHO

2009)

Botswana

Health reform

• Focussed on instituting appropriate governance and effective delivery of

services (Public) with the aim of meeting Vision 2016 (linked to Millennium Development Goals)

• Regulatory reform of private healthcare funding sector underway:
• NBFIRA deliberating the drafting of a new legal framework
• May include transforming Medical Aid Funds into Health Insurers
• Government initiatives in growing financial services sector will be

considered

Lesotho

Lesotho

Public healthcare funding environment

• 42% of health centres and 58% of hospitals are government owned
• The main sources of funds for the Lesotho health system are:
• Tax revenues
• Grants and loans from foreign governments
• International NGOs
• The Ministry of Health & Social Welfare purchases specified services from the

Christian Health Association of Lesotho

• Health services are currently being decentralised to a district level
• Includes budgeting, planning, implementing projects, managing health

centres and tracking resources

Lesotho

Private healthcare funding environment

• Two medical aid schemes dominate the market:
• Mamoth Health Plan (Established in 2003)
• Bophelo Medical Scheme (Established in 2004)
• Total membership estimated at less than 2000 lives in 2010
• Service provider networks in Lesotho and South Africa heavily utilised on a

fee-for-service basis

Lesotho

Challenges faced

• Major challenges:
• Managing budgetary shortfalls
• High rural population – inequality
• Weak health service delivery and performance
• In the Private sector: Rapid rise in healthcare cost is being attributed to

fee-for-service remuneration structure

Lesotho

Health reform

• Major focus on institutional strengthening, organisational development,

human resource development, increased level of health financing, service delivery and co-ordination of donors

• Mainly structural governance reform aimed at decentralizing the

management of social services

• Includes legislative reform in the health sector since 2000

(e.g. Pharmaceuticals pricing)

Zimbabwe

Zimbabwe

Public healthcare funding environment

• Recent economic turmoil has severely impeded financing available for

healthcare services

• Funding has increasingly been provided by international donors, health
• rganisations, and mission health programs
• Public healthcare facilities are allowed to collect user fees from patients with

the fee being waived for selected services

• Reduced financial assistance from Government for health services has led to a

deterioration in the quality of service delivery

Zimbabwe

Private healthcare funding environment

• Private Healthcare funding enabled through 4 main vehicles:
• Employer based funds
• Administered by employer itself or outsourced to insurer
• Medical Aid Societies
• Licensed and loosely regulated by MoHCW (29 Societies)
• PSMAS largest (restricted) society (> 600 000 beneficiaries)
• Extensive growth in number of market players in recent years
• Representative body: Association of Healthcare Funders of Zimbabwe
• Health Insurance Accounts
• Savings account for the exclusive payment for healthcare services
• Rider benefits on Life or Motor policies
• Types of benefits and comprehensiveness varies significantly

Zimbabwe

Challenges faced

• Major challenges:
• Shortage of skilled professionals and healthcare staff
• Depressed economy over recent years has led to severe erosion of health

infrastructure, particularly in the public sector

• Shortages of essential supplies, anaesthetics and sutures
• High HIV/Aids rate with very little success in taking antiretrovirals on a regular

basis

Zimbabwe

Health reform

• Health sector reform at present is focussed on the achievement of the National

Health Strategy (2009-2013)

• A major objective is strengthening the functioning of the health system by addressing

issues such as:

• Decentralisation
• Public & Private sector collaboration
• Strengthening management and organisational development
• The National Integrated Health Facility Assessment was completed in 2012 which

provides recommendations and evidence-based plans for targeting the support needed in achieving the health sector reforms on the agenda

• The development of an NHI scheme is in the very early stages of deliberation by

Government

• Hence details of synergy with current health sector reforms are unclear as of yet

Conclusion

• Economic and political instability in Africa has put healthcare on the back foot
• Lack of national policy, legislation and good governance are critical inhibitors of

health reform

• Ultimately, health reform will provide extensive benefits for the upliftment of a

country as it is based on efficiency, quality, cost-effectiveness, social solidarity and governance

• Africa’s current and future potential economic growth is soliciting significant

international investment interest. Investment in the health sector is not precluded.

Doing Business in Africa

Q & A

Ashleigh Theophanides

FASSA, FIA