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Egypt: healthcare market potential and the lack of investor-friendly reforms

Article-Egypt: healthcare market potential and the lack of investor-friendly reforms

Egypt is targeting a 72 percent investment growth in its healthcare sector during fiscal 2020-2021 to 21 billion Egyptian pounds ($1.3 billion)

According to Ahmed Ezz el-Din, CEO of Cleopatra Hospitals, the healthcare capacity in the private sector is fragmented with fewer 100-bed plus hospitals, and a concentration of services in Cairo and Alexandria. But these drawbacks also constitute opportunities for investors from the Middle East, Africa, and Europe eyeing the Egyptian market.

However, the most populous Arab country also needs to foster a more investment-friendly environment, reform laws, and build on its competitive pharmaceutical manufacturing base to attract investments, according to panellists at a recent webinar on healthcare investment opportunities organised by the British Egyptian Business Association (BEBA).

Unfortunately for the country, its current laws and regulations are out-dated and are a pain-point for investors or companies looking to operate in Egypt. With the support of the Egyptian government and the health ministry, existing laws governing the healthcare sector should be reviewed to make them more investor-friendly.

Sameh Gabbra, CEO of Samcrete Investments Holding, spoke about public and private investments in healthcare with a focus on capacity building, technology, advanced facilities and equipment, and telehealth. He also dwelled on prioritising the improvement of service quality and delivery, reducing dependence on imports, increasing local production, and ease of entry and exit for investors.


M&A activity post-pandemic

Michal Perliceusz, Sector Head of Healthcare - MENAT, HSBC said he noted a growing investor interest in Egypt's healthcare sector in the areas of manufacturing, distribution, and services during his interactions with customers, investors, and healthcare experts across the region. He said the COVID-19 crisis had put the spotlight on the healthcare sector with 'greenfield' investments being announced in new hospitals, clinics, pharmacies, and manufacturing facilities.

“Opportunities in the fragmented market and funding requirements of existing companies impacted by the COVID-19 crisis would drive Merger and Acquisition (M&A) activity," he noted. "M&A activity has eased off recently, but as the COVID-19 situation eases, it is expected that these activities are going to accelerate in Egypt and the wider region," he said, adding that HSBC is supporting the healthcare sector with traditional loans, capital, and trade financing and M&A products.

Opportunities for investment in the African platform

Samer Yassa, Director-Private Equity, EFG Hermes said that in the healthcare sector, his firm has widened its focus beyond Egypt and is aiming to build a healthcare platform for the entire African continent.

He shared some grim statistics and mentioned that the continent's healthcare situation is also getting more complicated, with a more than 50 percent increase in non-chronic diseases like diabetes and heart diseases. Moreover, the ratios of physicians, nurses, and beds per patient are all below 1:1000, which makes for a "really scary situation."

Healthcare expenditure as a percentage of GDP in most of Africa is below five percent compared to the global average of 10 percent, a gap that could be filled by private sector investment, he noted.

"Egypt has successfully established a good base for pharmaceutical manufacturing compared to other countries in the region, giving the country a strong competitive advantage in attracting Gulf-based investors," he concluded by highlighted the growing interest of Gulf investors in Egypt's healthcare sector.

Reform or regress

The case for reforming the law to attract investments was reiterated by Ziad Bahaa-Eldin, Managing Partner of Bahaa-Eldin Law Office in cooperation with BonelliErede.

He said the government should re-examine the existing medical establishment law, which regulates investments in hospitals and clinics; the pharmaceutical law; the universal health insurance law, and lastly, the medical profession law.

He advised that instead of fearing foreign investment, the focus should be on better clarity when it comes to rules, encouraging more competition, and strengthening consumer rights. He added that in a post-COVID-19 world, Egypt needs investments across all sectors but more so in its health, education, infrastructure, and technology sectors.

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