Photographer: Andrew Harrer/Bloomberg

India Health-Care Providers Look to Tap Africa ‘Growth Wave’

  • Narayana of India to run heart facility in Kenyan capital
  • IFC sees $21 billion health-care industry doubling in 10 years

Cash-rich Indian hospital groups such as recently listed Narayana Hrudayalaya Ltd. are setting up operations in Africa to tap a growing stream of middle-class patients from the continent seeking quality health-care.

With financing from Abraaj Group’s Africa Health Fund and the International Finance Corp., the Mumbai-listed group is partnering with Kenyan investors and will break ground on a 130-bed specialist cardiac hospital in the capital, Nairobi, in January. Another group of investors is joining forces with Gurgaon, India-based Medanta Hospital to set up a 200-bed facility in the East African nation.

“A lot of these companies have figured out that they are getting a significant number of patients from Africa,” said Biju Mohandas, who heads the IFC’s health-investment team in Nairobi. “They want to be among the first to get a toehold in Africa and ride the growth wave even as they continue to expand back in India.”

Sub-Saharan Africa’s private health-care industry is estimated to be worth about $21 billion, according to the IFC, and may double in value over the next decade. Last year, East Africans spent about $1 billion seeking medical attention in India, according to Khama Rogo, head of the World Bank’s Health in Africa Initiative. About 30,000 Nigerians went there for treatment, he said, citing a government study in Africa’s most-populous nation.

Investment Requirement

The IFC, which has invested $20 million in the $105 million Africa Health Fund, estimates the continent requires $30 billion of investment to scale up operations and meet growing demand.

Demand for private health-care in Africa is growing as wealth on the continent expands. About 34 percent of the population can be defined as middle class -- those spending between $2 and $20 daily -- compared with 27 percent in 2000, according to the African Development Bank.

Of the 272,271 Africans that visited India in 2013, about 14 percent were seeking treatment, the highest percentage of any region, according to the most recent statistics on medical travel by India Tourism. Nigerians were leading at 14,637 patients, followed by Tanzanians with 4,319 travelers.

The Indian companies putting down roots in East Africa will provide cheaper health-care than private African hospitals such as the Aga Khan University Hospital in Nairobi, according to Anil Maini, Medanta Africare’s chief executive officer. They’ll also look to provide specialist care for increasingly frequent non-communicable illnesses, including cancer, he said.

While many Africans seek treatment at ill-equipped government hospitals, most are often willing to sell family land or hold fundraisers to collect the money demanded by private hospitals for better care.

Service Gap

“There’s a gap in tertiary care providers such as oncology and these are the services that most Kenyans are going to India for,” Maini said at the Medanta-affiliated Nairobi clinic he helped to set up four years ago after moving to Kenya from The Medicity in Gurgaon.

An open-heart procedure at leading private hospitals in Nairobi could cost as much as $15,000, according to Mohandas. At Narayana, it would be $2,000.

“The difference in costs is stark,” he said. “Even if the same cannot be replicated by them here, I would guess it would be at least 30 percent cheaper.”

Medanta Africare, a joint venture between Kenyan investors and Delhi-based RJ Group of India, plans to begin constructing a 200-bed tertiary-care facility for $18 million in Nairobi in 2017, according to Maini. The company will deploy managerial and technical experts from its operations in India, where about 4,000 medical tourists seek attention annually, 40 percent of them African.

The business invested $30 million in 25 clinics across East Africa’s biggest economy since 2012.

Growing Wealth

Over the past decade, Indian brands including Apollo Healthcare and Moolchand Healthcare, have set up shop in nations including Nigeria, South Africa, Mauritius, Ethiopia, Tanzania and Zimbabwe, according to Aditi Bhalla, a health industry analyst at Frost & Sullivan.

“Owing to the increasing purchasing power, the thriving middle class in African nations is willing to, and capable of, paying for health-care services offered by private market participants,” Chennai, India-based Bhalla said in an e-mailed response to questions.

Fortis Healthcare, India’s second-biggest hospital group by market value, is partnering with Ciel Healthcare Africa of Mauritius to run hospitals in Uganda and Nigeria. Chennai-based Dr. Agarwal’s Eye Hospitals has 10 facilities in African nations including Ghana and Mozambique.

While African nations have failed to overhaul a health system bequeathed by former colonial rulers that were designed to cater for the wealthy, India’s model relies on large numbers of patients to drive profit, which has helped to reduce treatment costs.

Business Model

“That’s the business model that Africa needs, because Africa has numbers of poor people just like India has numbers of poor people,” Rogo said in an interview in Nairobi. “The African came to discover that he can go and be part of the numbers. That’s why we are boarding the planes and going there and that only reinforces their business model.”

Many of Africa’s medical tourists pay out of pocket as insurance penetration is lower than 1 percent in more than half of the continent, according to the Douala, Cameroon-based Africa Insurance Organisation. The global emerging-market level was 2.7 percent in 2014.

While they can improve operational efficiency, a combination of relatively cheap and well-trained labor, affordable medicine and medical equipment mean that Indian companies in Africa will struggle to replicate the affordable care they offer in India.

Kenyan nurses earn a minimum of 40,000 shillings ($400) a month, including allowances for housing, commuting and uniforms, according to Kenya Nurses Union statistics. Their counterparts in India take home about 2,500 to 6,000 rupees ($36-$88) a month, the Times of India reported in September, citing Arun Kadam, executive president of the Maharashtra State Nurses Association.

“It’s unlikely that they can replicate India prices in Africa and will need to adapt to the local market context,” Mohandas said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE