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An investor’s View on North African Healthcare Opportunities

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Some North African countries, including Morocco and Egypt, have emerged as attractive destinations for healthcare investments, according to Afsane Jetha, CEO of private equity firm Alta Semper.

At a recent conference of the African Private Capital Association, held in Cairo, Jetha said Morocco has increased its appeal by expanding government universal health coverage, providing a dependable source for medical payments. Healthcare investors in Africa often face a significant challenge: many people have demand for services but cannot afford to pay due to low income levels. Health insurance is limited and government universal healthcare is only starting to take shape in some countries.

In 2018, Alta Semper invested in Oncologie Diagnostic du Maroc (ODM), a Moroccan network of clinics providing oncology, radiology and diagnostic services. From Jetha’s perspective, the Moroccan government has been a reliable partner, reimbursing providers at rates that allow for 20-30% EBIDTA margins. Further, Morocco’s high level of specialised healthcare education and stable currency add to its attractiveness.

Jetha shed light on the shift in Moroccan government policy that coincided with Alta Semper’s investment in the country. Previously, regulations prohibited non-medical professionals from owning clinics. Despite their strong financial standing, radiologists and oncologists often lacked the capital to invest in high-end medical equipment, like linear accelerators for cancer treatment. She commended the government’s decision to encourage more private sector involvement in healthcare. “I think the government was quite visionary… allowing the private sector to participate [in healthcare] could bring some of the best technology, significantly increase outcomes, [and] take a lot of pressure off the public sector.”

Deregulation sparked a flood of private capital into fields like oncology and radiology. However, Jetha now questions whether the market might be slightly oversaturated.

In Egypt, Alta Semper made an investment in Macro Group Pharmaceuticals in 2017. The company specialises in medicalised cosmetic products such as acne treatments, anti-scar gels, and hair loss solutions. Jetha pointed out that most competing products in the market were imports, often priced three to four times higher than Macro’s offerings. By adopting an import substitution strategy, Macro significantly increased its market share during Alta Semper’s investment period. In 2022, the firm proceeded to sell the majority of its stake in Macro through an initial public offering on the Egyptian Exchange.

Jetha, however, drew attention to the distinct idiosyncrasies inherent within the North African healthcare sector. She posits, for example, that Morocco still has an undersupply of hospital beds per capita. Conversely, in Tunisia, a surge of recent investment in the healthcare sector may have precipitated a surplus of hospital beds.

Several North African healthcare companies, according to Jetha, are targeting growth opportunities in sub-Saharan Africa, particularly in French-speaking West Africa. Alta Semper’s Moroccan business, ODM, is currently exploring these opportunities. The initial focus will be on smaller investments, like establishing chemotherapy and imaging centers. However, as organic demand and insurance coverage in the region grow, there will be potential to scale up these investments and consider larger capital expenditures.

Source: How We Made It In Africa

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