• Wednesday, February 28, 2024
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These health providers grabbed funds to scale despite slow capital inflows

A Revolutionary Pill for Nigeria’s Ailing Healthcare System

Some health providers are finding investments trickle in for their longstanding goals to scale services to match evolving healthcare demands, despite slow capital inflows into the health sector.

The development, marking a shift in setbacks faced by most private health institutions structured as sole proprietorships in assuring low risk to investors, has seen Nigerian providers including R-Jolad Hospital and Doctoora Health strike deals with bigger health partners.

After grinding hard to push his private practice from a 10-bed family clinic to a 100-bed multi-specialist centre in 2020, Funso Oladipo, founder and managing director of R-Jolad, partnered with Afya Care Nigeria, an investment firm that focuses on health assets that serve urban markets.

AfyA Care itself secured a $6 million investment last year from CardinalStone Capital Advisers, a West African private equity fund manager, to spread across hospital care, health insurance, and health tech.

Oladipo’s deal with the company led to the acquisition of R-Jolad Hospital and birthed the addition of a total of 150 beds spread across facilities catering to underserved outpatient needs and more specialised services often demanded by the middle-income class.

“By the time we gave up R-Jolad as a family business to be acquired by AfyA Care, it was a 100-bed hospital. But within a short span of time, we have about 250 beds today in less than three years,” the medical doctor told BusinessDay in an exclusive interview.

“I bought the vision of the AfyA Care management and entrepreneurs because our visions align. We want healthcare delivery to be accessible to the masses of this nation. We see the difficulties that people face and it’s been the driving force behind our establishing the hospital in 1982. As we grew, the need came up to also cater for the middle class, and about 10 years ago, we created an arm of the hospital R-Jolad Plus and this has grown and is still growing.”

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The hospital has a presence in four locations including Gbagada, Agege, Isolo, and Bariga at the moment. It has invested in electronic medical records technology to cut patient waiting time to less than 20 minutes across all its outlets. The new R-Jolad Plus facility, for instance, is equipped with 30 beds, laminar flow theatres for complex surgeries that some seek abroad, and critical units for children and newborns, among others.

Another move that highlighted improving investor confidence locally was the acquisition of Doctoora e-Health Ltd by Evercare Hospital, Lekki, an investor backed by a multimillion-dollar private healthcare network, the Evercare Group, Nigerian Sovereign Investment Authority, and the Bill and Melinda Gates Foundation, among others.

Doctoora rents clinical facilities to health professionals who need a consulting platform without dealing with the overhead cost of running an independent facility.

The company raised over $40,000 to put up more than 20 centres across Lagos and Abuja over the last six years preceding the acquisition, which analysts see as a beacon of the sort of opportunities open to private health companies.

“We have now gotten the business to a point where we make about $1,000 monthly and investors are starting to see that we’ve got something good going. We are now seriously considering the medical tourism market as a new focus area,” Odulana told BusinessDay earlier.

Most investors admit the demand for funding within the sector is high without a matching supply due to the high risk of loan defaults, weak corporate governance systems, poor track record of debt financing, and sub-optimal business planning and management skills on the path of private providers, a study on the Nigerian health sector market by PharmAccess Foundation shows.

It also noted that the inability to adequately leverage assets, inefficient financial structuring of the business, and mistrust of the idea of debt capital and private equity, to mention a few, often hinder health companies’ growth.

Analysts consider the outcome of the acquisitions as part of a crucial step towards overcoming these challenges and a key private sector response to fixing the inequality in accessing care demand gaps driving huge outbound medical tourism of over $1 billion.

But sustaining the wave of capital flow that was sloshed across segments particularly health-tech over the last five years would hang on innovators’ ability to drive partnerships for expansion, some say.

2021 saw a sustained funding momentum for health-tech start-ups, with notable rounds including 54gene ($25 million), and Africa Health Holdings.

Although health and biotech start-ups accounted for only 8 percent of the $4.9 billion raised by tech start-ups across the continent, with fintech start-ups mopping up about 62 percent, according to an analysis by Salient Advisory.

Last year, companies such as mPharma led the major funding round for health tech, with $35 million raised in a Series D round.

Flying Doctors Healthcare Investment Company (FDHIC) also has a Catalyst Fund – an investor collective to enable individuals and corporate organisations back promising tech-enabled health technology start-ups on the continent. FDHIC’s existing health-tech portfolio includes Helium Health, Mdaas Global, and Lifestores Pharmacy.

The sector is poised to attract more capital infrastructure investments if processes are built around efficient systems and fine-tuned for long-term continuity.

“Our ambition is to build 5,000 beds in hospitals across Africa and a good chunk of that will be here in Nigeria. The fintech space is thriving right now because you have a lot of Nigerians who looked into that space to see how they could turn it around. It’s the same thing in the healthcare space; the same thing we’re seeing in the entertainment space. A lot of private investment is what turns those things around,” Soji Osunsejo, executive director of operations at R-Jolad, told BusinessDay.