Financing Africa’s Healthcare

Alyssa GovindanNews

By Vera Songwe, Executive Secretary, United Nations Economic Commission for Africa

Africa recorded average real annual GDP growth of five to six percent between 2000 and 2010 before slowing down to about three percent a year between 2010 and 2015. Current growth performance is expected to decline slightly from 3.4 percent in 2017 to 3.2 percent in 2018. Growth will be driven by external factors including strengthening global demand and a moderate increase in commodity prices. The domestic drivers include sustained investment in infrastructure, increasing oil production (due to exploitation of new fields), strong private consumption and favorable weather conditions.

This moderately good economic performance has not had commensurate effects on poverty reduction and employment creation. While the poverty headcount ratio declined from 54.3 percent in 1990 to 36 percent in 2016, the number of people in poverty since 2002 has remained relatively constant at 390 million (ECA 2017a). The rapid population growth rate estimated at 2.6 percent over the period of 1990 to 2015, driven by decreasing mortality and relatively high fertility, will slowly change Africa’s age structure and, as this report analyzes, with far-reaching implications for the disease burden and provision of healthcare.

While a number of African governments have increased the proportion of total public expenditure allocated to health, overall health financing still remains a major constraint to effective health service delivery. Furthermore, the slowdown in economic growth and high public indebtedness have restricted the fiscal space for the public financing of healthcare with average debt-to-GDP ratio increasing by 15 percentage points from 2010 to 2017. Total spending on healthcare in Africa has remained within a narrow band of five to six percent of GDP in 2000 to 2015, on average, though in per capita terms it has almost doubled from US $150 to US $292 (in constant PPP dollars). Scarce public resources and unpredictable donor aid have resulted in high private out-of-pocket expenditure that have pushed many people into poverty. Therefore, health spending in Africa remains largely inadequate to meet the growing health financing needs and the rising healthcare demands creating a huge financing gap of US $66 billion per year.

It is imperative that countries enhance funding for the health sector by identifying innovative sources of finance and accessing private financial investors. This will offer the best chance for the countries in Africa to provide the high quality, affordable and accessible healthcare their populations deserve.

There is scope to leverage the capital and capacity of the private sector to complement government financing and to increase investments. This can be actualized through enhancing the ease of doing business, issuance of health bonds, and public-private partnerships (PPP) in order to bridge the financing gap and ultimately increase access to quality healthcare in Africa. For example, in Uganda and Kenya a PPP service delivery system addressing national priorities of reproductive health services for young people using vouchers was implemented in 2012. This has enhanced delivery of key services for young people and strengthened the monitoring and evaluation of national outputs and health outcomes.

The private sector engagement in the financing of healthcare through the production of health goods and pharmaceuticals, provision of soft and hard health infrastructure, and training of health personnel contributes to employment creation, diversification of the economy and bridging the health resource gap. For example, Morocco, the second largest African pharmaceutical producer has 40 pharmaceutical units that supply 70 percent of domestic demand and export about 10 percent of their production.

The recently signed Africa Continental Free Trade Area (AfCFTA) could boost Africa’s GDP by 1 percent and total employment by 1.2 percent. This provides further potential for enlarging the scope of the private health sector in contributing to diversifying the African economies and creating employment. Significant production capacity is being developed and enriched in Egypt, Kenya, Uganda, South Africa, Ghana, Cameroon and Nigeria, among other African countries. This positive trend can only realize its full potential as we deepen regional integration, foster adoption of continental norms and standards related to health products.

This piece is extracted from UNECA’s forthcoming publication “Healthcare and Economic Growth in Africa”.

[1] This piece is extracted from UNECA’s forthcoming publication “Healthcare and Economic Growth in Africa”.

 

Alyssa GovindanFinancing Africa’s Healthcare