Investors Rush for Slice of Kenya's Healthcare Sector
Kenya’s private healthcare is attracting a gold rush of its own kind as international and local investors scramble for a piece of the country’s sick. Driving the appeal is the growth of health insurance, and a loss of public confidence in the under-staffed and under-equipped public health facilities.
World Bank is leading a global army of investors in the privatisation of healthcare in the country, a tracking of investor activity in the sector by People Daily shows.
Last year, the World Bank—through its private sector lending arm International Finance Corporation (IFC)—signed a deal with three Kenyan doctors to set up a Sh1.9 billion, multi-speciality, 130-bed hospital in upmarket Nairobi’s Ridgeways estate.
Besides the Kenyan doctors, IFC on its website says the new hospital will be operated jointly with a Strategic Operating Partner (SOP). People Daily has established that the SOP is an Indian hospital chain operating under the brand name Narayana Health.
From the investment, Sh500 million will be used to put up a two storey building that will house the hospital while the rest will cater for the hospital’s initial operational costs. The project is currently operating as Iso Health Limited and the financing was released in May last year.
In September, a Malaysian private hospital chain, Columbia Asia—owned by US investment firm Columbia Pacific Management—also announced that it was setting up in Nairobi. The chain, which operates 27 hospitals in Malaysia and Vietnam, said it was investing Sh300 million in a clinic that would be refereeing complex cases to its hospitals in Asia.
But it is the acquisition of Goodlife Pharmacy with its 19 branches at a price of Sh2.2 billion by UK private equity firm Leapfrog that marked the biggest investment in private healthcare in Kenya during the year.
In the nine months to September last year, private hospitals, dispensaries and pharmacies collected Sh18 billion from insurance companies.
Besides, they also collected Sh5.52 billion from the National Health Insurance Fund. However, the biggest source of income for hospitals in Kenya is out-of-pocket payments by patients, which are estimated to be about 80 per cent of total healthcare financing in the country.
As the billions of shillings pour in, a less-spoken-about trend has emerged where healthcare workers are abandoning the public system for a taste of the new gravy train in town.
Today, 73 per cent — equivalent to 55,028 of all health workers in the country — work in private hospitals that arguably serve only those with steady incomes, while government facilities are left with just 27 per cent, or 20,352 workers.
This could explain why there has not been such a huge outcry, especially in urban areas — even as the doctors strike, which started in December, has paralysed public health services. The government has the highest number of health facilities at 4,189 against 3,784 operated by the private sector.
This means that a person with limited income has a 73 per cent chance of not getting the attention of a qualified health worker. On the other hand, a financially-stable person has 73 per cent chance of getting quality medical attention from a qualified health worker.
Through IFC, the World Bank started scouting for private health investment opportunities in 2010. And with good measure of success. In 2015, IFC had pumped billions of shillings into Kenya’s private hospitals through Abraaj Group, a private equity fund formerly known as Aureos East Africa Fund.
The funds invested by Abraaj Group are part of two funds that the IFC pooled from international investors worth Sh20 billion for investment in Africa hospitals and pharmacies. The money is spread in two funds, namely; Investment Funds for health in Africa and Africa Health Fund which are invested through private equity funds that demonstrate ability to pool more funds.
Abraaj, which runs Africa Health Fund, and which is currently the biggest single investor in Kenya, has already put Sh20 billion into Kenya’s healthcare. Nairobi Women’s Hospital received investment worth Sh600 million while AAR Group was given Sh340 million to improve and expand its 28 clinics.
In between, other foreign investors have taken the IFC cue and are investing heavily in the country. They include Fanisi Capital headed by a Kenyan techprenuer and which draws the bulk of its financing from Norwegian government-owned Norfund.
In 2013, Fanisi acquired Haltons Pharmacy chain at Sh255 million to boosts its expansion drive across the country. Catalyst Fund, another foreign-owned private equity fund, acquired Mimosa Pharmacy chain at Sh500 million.
American-owned Acumen Fund acquired Miliki Afya, a chain of medical clinics for an undisclosed amount while TBL Mirror Fund acquired majority stake in Meridian Hospital, giving it the financial muscle to expand to 24 clinics across the country and three hospitals.
- People Daily