Africa shoulders 24% of the global disease burden but only accounts for 1% of the global financial resources for healthcare, according to the World Health Organisation. Now the Covid-19 crisis has concentrated the minds of east Africa’s middle classes on the need for improved healthcare, creating huge opportunities for investors in the sector.

In 2017, total healthcare spending in Kenya amounted to only 4.8% of gross domestic product (GDP) compared to 17.7% in the US, while the Organisation for Economic Co-operation and Development average is 8.8%, according to the World Bank. In Ethiopia the figure was 3.5%; in Rwanda it was 6.5%. Only South Africa – at 8% – came close to the OECD average. 


Kenya requires 70,000 additional beds to bring it up to the worldwide average of 2.7 beds per 1000 people, which would entail $6bn investment in healthcare real estate assets, according to Knight Frank, an international real estate company. It requires an additional 2000 beds and an investment of $156m just to keep up with its 2019 country bed ratio. 

Meanwhile, Uganda requires 101,000 extra beds to take it up to the global average, necessitating an investment of $11bn. It needs an additional 700 beds and an investment of $81m to maintain its 2019 country bed ratio. 

Time to build

“Covid-19 has highlighted the healthcare infrastructure gap across Africa and the importance of investing in the sector to improve access to quality care,” says Mary-Jean Moyo, director for manufacturing, agribusiness and services for the Middle East and Africa at the International Finance Corporation (IFC), part of the World Bank group. “The pandemic is playing a pivotal role in driving the public and private sector to invest in and build more health-related infrastructure.

“There are important investment opportunities across traditional health services such as expanding hospital and clinic networks including specialties such as oncology and cardiology. There is also a growing need for more diagnostics services, such as imaging and laboratory facilities to advance medical research.”

The IFC is the biggest single investor in the private healthcare sector in Africa and, as of July 2020, has invested around $500m in the industry, including funds mobilised from other financiers and investment in intermediaries such as private equity funds, debt investment vehicles and commercial banks.

In February 2020, the IFC expanded its TechEmerge Health initiative from India and Brazil to east Africa. The programme matches tech companies from around the world with leading organisations in emerging markets to drive the adoption of new technologies and spur innovation in healthcare service delivery. More than 20 private healthcare providers in Kenya, Ethiopia and Uganda have signed up. 

Funding tech pilots

Selected innovators receive funding and guidance from the TechEmerge team to pilot their tech solutions in the east African market, with the ultimate goal of wider commercial deployment of the technologies. “Leveraging innovative technology to improve both access to and quality of healthcare has interesting potential,” says Ms Moyo. 

In November 2019, private equity fund Investment Funds for Health in Africa (IFHA)-II (which is backed by European development finance organisations such as Swedfund) together with the IFC set up a $115m holding company to acquire and integrate targeted healthcare service businesses in east and southern Africa. Its investment platform, Hospital Holdings Investment, plans to grow services in east and southern Africa from one hospital and 35 clinics to five hospitals and 52 clinics within five years, and to serve up to 1.8 million patients a year. 

Population and GDP growth in several east African markets – as well as government support initiatives – have sparked health-related investment. East Africa enjoyed some of the world’s fastest-growing economies in 2019, with Ethiopia expanding 8.9% and Rwanda 10%, according to the International Monetary Fund. 

This strong economic performance is expanding the region’s middle class. The World Bank declared Kenya a lower middle income country in 2014, while Tanzania assumed that status in July 2020. The African Development Bank forecasts that the continent’s middle class will expand from 355 million (34% of the population) in 2010 to 1.1 billion (42%) in 2060. 

Investment options

Knight Frank believes foreign investors will put their money into hospital-related real estate and in hospital operating companies. Assistance from local companies that understand the local business landscape is vital, it adds.

The company says built-to-suit and leaseback transactions have more potential for investors than constructing a facility and then searching for a healthcare operator. Under the first model, the property investor builds a clinic or hospital that meets the exact specifications of an operator, who then pays rent on it.

Another option involves management agreements similar to the hospitality sector: the property investor retains ownership of the hospital building and pays a management fee to the operator. 

Under this model, the investor rather than the operator has the chance to make the most profit but bears a greater proportion of the risk if the business does not succeed. 

Healthcare interest

“We took a poll during our [Africa healthcare] webinar in June with more than 140 participants comprising all types of property investor, including commercial and industrial. Around 80% were of the opinion that Covid-19 had changed their investment strategy and they will be considering investment in healthcare, either by way of expansion or new investment,” says Shehzad Jamal, partner in healthcare and education at Knight Frank. 

“Our conversations with investors revealed that they prefer investing in established businesses and from a pure real estate point of view they would prefer to invest in an existing asset of a reputable healthcare service provider or undertake a built-to-suit project for them with a long lease.”

Mr Jamal believes that greater emphasis will be placed on public-private partnerships (PPP) in a post-Covid world where African governments will be even more strapped for cash. For example, in October 2019, under a 30-year PPP arrangement, Kenyatta National Hospital in Nairobi announced plans to construct a $140m seven-storey private hospital to fund public services in the parent institution.

Changing use

Other investors are focusing on changing large residential properties, shopping centres or office blocks into private hospitals and clinics. For example, Kenyan private healthcare company Avenue Group has converted four floors of the Nakumatt shopping centre in the city of Thika into a modern 100-bed hospital, which opened in February 2020.

“In smaller cities in Kenya and other east African countries it is possible to convert a single large dwelling or a school into a primary healthcare clinic,” says Dr Amit N. Thakker, chairman of the trade association Africa Healthcare Federation.

“In larger cities, I think we will see office blocks, shopping centres and multi-storey buildings converted. This can save a lot of money in construction costs.”

Some east African nations are likely to resume their strong economic growth once the Covid-19 crisis passes. Meanwhile, the emergency has brought home to the region’s expanding middle class the need for improved healthcare.  

This article first appeared in the August - September edition of fDi Magazine. View a digital edition of the magazine here.