Why investors should look into the Egyptian healthcare sector?

Cairo –  The Egyptian healthcare industry remains attractive for local and international investments, with many areas for development and expansion arising particularly in the post-COVID-19 stage, panellists agreed during a webinar organized by the British Egyptian Business Association (BEBA) on Wednesday.

The “Investment Opportunities in Healthcare” webinar was moderated by Former Deputy Prime Minister of Egypt Ziad Bahaa-Eldin, Managing Partner at Bahaa-Eldin Law Office in Cooperation with BonelliErede.

Bahaa-Eldin started the discussion by pointing to the importance of looking at the healthcare sector from an investor’s perspective after all stakeholders were busy adapting to the new coronavirus (COVID-19) pandemic.

“Investment in the Egyptian healthcare have been important even before COVID-19,” Bahaa-Eldin noted.

Dr. Ahmed Ezzeldine, CEO, Cleopatra Hospitals Group, said that his company represent a new model for investment in healthcare in Egypt, as a company listed on the Egyptian Exchange (EGX).

“Egypt is an important and attractive market for healthcare investments. The government is interested to develop the sector in partnership with the private sector,” Ezzeldine remarked.

The sector enjoys a strong workforce with a high number of doctors, specialists, and nurses, as well as attractive prices from a global perspective, which makes it a good investment opportunity for the country. But the market is highly fragmented since healthcare facilities are mostly centralised in Cairo, he added.

Ezzeldine pointed out that such “drawbacks represent an opportunity for investors,” referring to some missing specialities such as centres of excellence.

New models of investment could help achieve growth and high-profit margins, especially with the high rates of chronic diseases in the country, such as diabetes and obesity, even after a Presidential initiative addressed the hepatitis C problem, Ezzeldine explained, calling for investors to invest in many areas across the sector, such as data management.

New Models of Investment

Afterward, Sameh Gabra, Chief Investment Officer (CIO), Samcrete Investments Holding, discussed distributing roles between the public and private sectors, with the public sector driven by primary healthcare, prevention and early detection of diseases, whereas the private sector focuses on the service quality, and achieving high growth and return rates.

Moving to where to invest in the sector, Gabra referred to investing in people and technology as the top two priorities, followed by medical facilities, stressing a need to separate property, construction, and equipping from operations.

Speaking of equipment, Gabra said that “there are many unused medical equipment in Egypt,” calling for planning that is based on current needs and future demand, and increased application of remotely diagnosing, treating, and monitoring patients, especially since the COVID-19 crisis led many people to stay at home.

Another vital area in need of investments is the localization, specifically of pharmaceuticals manufacturing and warehousing, which proved vital in the face of supply chain interruptions and delays.

He followed up by highlighting the need for innovation in facing the various disruptions, from the macro-level to the possible absence of foreign investments on the short term, as well as any human resources-related disruptions.

Discussing priorities in the sector, Gabra referred to providing a decent healthcare service; readiness, as was the case with preparing the Ain Shams University field hospital; the medical staff; and reducing dependency on imports, as the main priorities for the country.

As for the investor’s priorities, the CIO pointed to ensuring the demand volume in the local market; the return on investment; manufacturing, only when it is financially feasible; and the ease of exit.

M&A Deals

In fact, we could be seeing new investments across the sector, according to Michal Perliceusz, Sector Head Healthcare MENAT, HSBC Bank Middle East, who explained that investment opportunities could be divided into two main categories: investments in new facilities, many of which could be delayed due to the COVID-19 uncertainty, while opportunities for mergers and acquisitions (M&As) could be on the rise on the short-term.

A new change in the sector is that beside “old players who could further their areas of focus,” there are financial investors who always liked the healthcare sector but viewed investment opportunities as overvalued but now are looking at it more seriously, according to Perliceusz.

However, small players are more likely to be impacted by COVID-19 and accordingly looking for new investments. The banks’ role could involve short or long term support for capital investments, from providing credit facilities or loans to accessing capital markets and financing working capitals, he explained.

In the area of M&A deals, banks could advise on such transactions, as well as provide the needed financing, Perliceusz indicated.

In addition, developing public hospitals could be through private management or public-private partnerships, he noted.

African Perspective

Bringing a different perspective into the discussion, Samer Yassa, Private Equity Managing Director, EFG Hermes, discussed expanding in healthcare investments geographically with an eye on the entire continent.

The need for healthcare investments in Africa is driven by a number of key performance indicators (KPIs), such as the high child mortality rate, combating infectious diseases, and the increase in noncommunicable diseases (NCDs), including diabetes, cardiovascular diseases, and cancer.

The situation is unfortunate and the continent needs sustainable growth for the healthcare sector, Yassa emphasised.

In Egypt, the area of medications remains a major destination for investment, especially as Egypt already enjoys a good manufacturing base with many big pharma factories, he added.

Yassa called upon investors to roll up their sleeves and invest in the healthcare sector’s talent across Africa, and in infrastructure, where opportunities are quite substantial, stressing the importance of corporate governance and warning against expecting high returns in a short period of time.

Replying to a remark about expecting a 20% internal rate of return (IRR), Sameh Gabra, Chief Investment Officer (CIO), Samcrete Investments Holding, said that any rate above 10% is considered good in the healthcare sector.

However, the CEO of Cleopatra Hospitals, Dr. Ahmed Ezzeldine disagreed and mentioned that IRRs could go as high as 25%.

The panellists then pointed to the importance of Egypt’s healthcare strategy, which aims to gradually apply universal healthcare across the country.

Cleopatra Hospital is participating in the training and development of medical workers in Port Said, where applying the new healthcare programme began, Ezzeldine noted.

Referring to Cleopatra’s experience in facing the pandemic, the CEO said that as the group owns six hospitals, it was able to dedicate two to COVID-19 cases, while the other hospitals were operating normally.

Legislative Reform

Moderator Ziad Bahaa-Eldin then called for a comprehensive legislative reform that involves what he calls the big four healthcare laws. Namely: the medical establishment law, the pharmaceuticals law, the universal healthcare act, and the medical profession law.

These laws now need to be reviewed more than ever before, he underlined, noting that the legal environment needs a big push.

Bahaa-Eldin and Sameh Gabra then agreed on the need to lift barriers and limits facing foreign investment inflows into the Egyptian healthcare sector.

Second Wave of COVID-19

Thanks to government efforts we are now in a better position to face the virus outbreak in case of a possible second wave, which will not be as aggressive as the first, Ezzeldine remarked, assuring that there is no need to panic since only those who need intensive care should go to the hospital.

Panellists then agreed on the importance of public awareness in following preventive measurements, such as wearing face masks and social distancing, especially with the current availability of medications.