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IFC, a member of the World Bank Group, the African Development Bank, the Bill & Melinda Gates Foundation, and the German development finance institution DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH announced June 4, 2009 that they have created a new private equity fund that will invest in Africa’s health sector.
The Health in Africa Fund, managed by Aureos Capital, will invest in small- and medium-sized companies in sub-Saharan Africa, such as health clinics and diagnostic centers, with the goal of helping low-income Africans gain access to affordable, high-quality health services. The fund will be measured not only by fiscal performance but also by its ability to cultivate businesses serving the poor.
The Health in Africa Fund will help implement key recommendations of IFC’s landmark report, The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives, which found that the private sector already delivers about half of all health-related goods and services in Africa, and that greater investment in private health companies could have major health and economic benefits for low-income Africans.
The fund will target commitments between $100 to 120 million over two closings. Today’s first closing of $57 million includes investments from IFC ($20 million), the African Development Bank ($20 million), the Gates Foundation ($7 million), and DEG ($10 million). The final closing will take place within a year.
“This is a great opportunity to provide health services where it’s needed most,” said Lars Thunell, IFC Executive Vice President and CEO. “The Health in Africa fund is a key component of IFC’s $1 billion Africa health strategy, which includes improving the operating environment for companies in addition to providing financing.”
Donald Kaberuka, President, African Development Bank, noted: “The Health in Africa Fund is likely to have considerable growth potential despite the global economic slowdown and we are committed to supporting this landmark initiative.”
The fund will make long-term equity and quasi-equity investments in socially responsible and financially sustainable private health companies with the aim of scaling up successful businesses, taking proven business models into new regions, and identifying and investing in areas where there are critical gaps. It will invest in a wide range of companies that deliver health services (clinics, hospitals, diagnostic centers, labs); risk pooling and financing vehicles (health management organizations, insurance companies); distribution and retail organizations (eye clinics, pharmaceutical chains, logistics companies); pharmaceutical and medical-related manufacturing companies; medical education; and providers of medical education.
“To fight disease and save lives in sub-Saharan Africa, it is important to improve both public and private health care options for the poor,” said Tachi Yamada, president of the Bill & Melinda Gates Foundation’s Global Health Program. “With so many low-income Africans already accessing care through the private sector, this fund will help enhance the quality and quantity of that care, while also directly supporting local economies.”
Dr. Winfried Polte, chairman of DEG’s Board of Management, said: “We are proud to support an initiative that is introducing innovative approaches to meet Africa’s health challenges and could help in reducing poverty.”
The fund plans to make about 30 investments, ranging from $250,000 to $5 million. Although viable investment opportunities from all parts of Africa will be considered, priority countries include Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, Tanzania, and Uganda. Angola, Burundi, Democratic Republic of Congo, Ethiopia, Mozambique, Rwanda, South Africa, and Zambia are expected to follow.
“Aureos is delighted to manage a private equity fund focused on bringing capital and business services to SMEs in Africa’s health sector,” noted Sev Vettivetpillai, CEO, Aureos Advisers Limited. He added that the fund manager will provide value-added services to investee companies, including HIV/AIDS management support, business development, quality control, marketing, corporate governance, and operational assistance.
The Health in Africa Fund is part of IFC’s Health in Africa Initiative under which IFC intends to mobilize up to $1 billion in investment and advisory services over five years, following publication of its 2007 Business of Health in Africa report, which focuses on how to improve people’s lives by partnering with the private sector. Besides the equity vehicle, IFC is improving access to long-term financing for smaller companies involved in health care through local financial intermediaries. Together with the World Bank and other partners, IFC is working with governments to help them better harness the private sector to achieve national health goals and is producing the first biennial report on Africa’s health care investment climate.
IFC, a member of the World Bank Group creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year.
Guided by the belief that every life has equal value, the Bill & Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people—especially those with the fewest resources—have access to the opportunities they need to succeed in school and life. Based in Seattle, Washington, the foundation is led by CEO Jeff Raikes and Co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett.
DEG, a member of KfW Bankengruppe (KfW banking group), is one of the largest European development finance institutions. DEG invests in profitable projects that contribute to sustainable development in all sectors of the economy, from agribusiness to infrastructure and manufacturing to services. DEG’s aim is to establish and expand private enterprise structures in developing and emerging countries and thus create the basis for sustainable economic growth and a lasting improvement in the living conditions of local populations. In 2008 DEG invested around 1.22 billion euros which is about 1.6 per cent more than the previous year.
Aureos Capital Ltd. is a private equity fund management company which specializes in providing expansion and buy-out capital to unlisted small to mid-cap businesses across Asia, Africa, and Latin America. Since its establishment in 2001, Aureos has increased its funds under management to over $1 billion and established 15 regional private equity funds. It has extended its geographical footprint to over 50 emerging markets covering Africa, Asia, and Latin America. Investors in Aureos funds include institutional investors, bilateral and multilateral development finance institutions, pension funds, sovereign wealth funds, fund of funds, family offices and foundations, and high net worth individuals.