Inflow of FDI by Tech Sub-Sector in Africa: Why is Health-Tech Lagging Behind?
I came across a tweet which showed the percentage of foreign direct investment that went into several tech sectors in 2019 and among the 6 sectors health tech took up the rear, things got a bit better in 2020 with the pandemic and healthcare moved to 3rd (9%). These stats got me thinking and a few theories popped up in my head.
Access to healthcare has been described as a basic right and this is the thought behind the World Health Organization’s goal of achieving Universal Health Coverage (UHC) around the world. Too often healthcare has been seen as a social intervention that needs to be implemented rather than a sector with a strong business component.
In the context of the African continent, Healthcare can be big business and has the ability to create immense economic value. There is a continent-wide demand, with a vast majority lacking access to basic health services, supply is limited and fragmented with lots of inefficiencies and high costs which further amplifies the potential value of technology adoption and innovation.
In Asia, Europe and the Americas the contribution of healthcare to GDP is very significant with huge government spending, strong manufacturing sectors, distribution and working health insurance systems. On the contrary, healthcare in Africa is funded with meagre government spending, donor funding, out of pocket payments and very little manufacturing.
On a positive note, where challenges exist opportunities abound and like in other sectors there have been a plethora of start ups seeking to solve specific problems. The rise of start ups around the world has been driven by a desire to solve the most pressing problems in very efficient and innovative ways especially via tech adoption while building profitable companies.
Africa has had its fair share of exciting startups. From Fin-Tech, E-Commerce, Agric tech, Clean tech, Ed-Tech etc. They are playing incredible roles in pushing Africa forward amidst the very many systemic and structural barriers posed by poor governance and political instability.
Back to my theories on why health tech is getting the least amount of foreign direct investment
Health is so important to the survival and prosperity of a society and tech has a unique ability to drive better health outcomes while creating huge economic value at the same time, this further solidifies the healthcare-as-a business model.
Could Healthcare professionals themselves be responsible?
The foundational problem affecting the influx of capital into health tech is a pervasive idea of healthcare simply as social intervention and not a value/ profit creating sector. This paradigm though not totally wrong produces an inefficient system that doesn’t drive innovation or greater efficiency that can ensure good returns for investment.
The very clinical and humanitarian nature of medical training for health professionals might be partly responsible. We swear oaths to serve humanity and put welfare of patients first above any consideration so it’s probably not a surprise that we are not so akin to the business side of healthcare especially on a systemic/policy level that is not our personal business or practice.
Many of the health professionals would later go on to work at policy level on a national, regional or institution level and might simply find themselves not being as open to innovation as the health system needs especially when technology is involved. This socialist view of healthcare in Africa that shuts down the idea of healthcare as business seems to have been imbibed by investors who might see investment in health tech as more of a charity than a sound business decision. So, health tech might seem to be receiving support from humanitarian or donor agencies as against the venture capital that is routed to Fin-tech.
Is there too much regulation or too numerous barriers to entry for health tech?
It’s important to note here that fin-tech though also tightly regulated tops the list for inflows of FDI, so perhaps its not just an issue of regulation. However, regulation can still be a limiting factor and that can be influenced by the way healthcare is viewed at a system level and this underscores the need for professionals at the policy level to be more in tune with technology
How about the training of health professionals?
The training of health professionals in Africa is mostly below international standards. Health professionals who migrate discover they never had access to the latest cutting-edge medical technology. In addition to this the training of health professionals doesn’t integrate mainstream technology, of course I’m not necessarily advocating for coding or programming classes but there needs to be a way to teach health professionals to understand the basics of tech.
This can help health professionals drive the emergence of health technology solutions that solve the most pressing healthcare needs in Africa. In lay terms we need to know what to tell the coders to build, product development, systems design, branding, marketing and customer acquisition will all be key in health tech.
No one understands the basic workings of healthcare like health professionals themselves especially areas that involve clinical care and the other technical areas of healthcare delivery.
Do we (Health professionals) speak the language of finance and venture capital?
Back to the question of attracting capital, health professionals who want to play in the health tech space will need to understand and speak the language of finance in addition to knowing the basic workings of tech, knowledge about the use of data, business models and projections, branding, accounting, financial reporting, human resource management, sales pitches etc. are all needed to convince would-be investors about their ability to transform a health tech innovation into a profitable company in the long term.
Are there unfavorable policies stifling innovation in healthcare?
The centralized system of planning healthcare can be a factor stifling innovation, health policies that makes private sector participation limited or doesn’t incentivize investment can be an issue. For example, the funds pooling system in Nigeria’s health insurance system is not efficient and transparent and health maintenance organizations have to deal with these issues in the institutions.
A disrupter that intends to use USSD technology to ensure that everyone with a mobile phone can access health insurance will have to deal with these administrative issues that affect how enrollees can access services and have them paid for.
My concluding thought…
Can Fin-Tech and Health-Tech mount a formidable partnership that could drive Universal Health Coverage?
Especially is in the wake of fin-tech targeting the huge unbanked population who most likely would also lack access to healthcare or health insurance.