African e-health startups are addressing huge problems that negatively impact healthcare outcomes across the continent. But they need more support from investors and governments to help them succeed in fulfilling their potential.
Disrupt Africa recently partnered Salient Advisory, Curacel and RxAll to release a three-part podcast series – “High tech health – how African startups are improving healthcare outcomes” – on the African agri-tech space, how it works, what its dynamics are, and what is happening in the sector.
Africa ranks extremely poorly for many healthcare indicators, with major access, affordability and quality challenges that are especially pronounced in rural and remote areas. Improving healthcare outcomes on the continent is both a moral and economic imperative, and in recent years an e-health startup ecosystem has sprung up to do just that. Many of the innovators in the space are trying to solve problems they have direct experience of.
“I became a pharmacist because I was in a 21-day coma from a fake drug while I was growing up in Nigeria, and that experience made me decide that I was going to fix the pharmaceutical supply chain in Nigeria and the rest of the continent,” said Adebayo Alonge, founder and CEO at Rxall, a Nigerian startup that is building digital commerce infrastructure for independent pharmacies and related businesses.
As a pharmacist himself, Alonge is well versed in the challenges those in the business face.
“You have a lot of independent pharmacies on the continent, over 100,000 of them. They account for more than 70 per cent of retail pharmacy transactions, but most of them don’t have any kind of academic training in pharmacy. And they run their businesses in the traditional sense, using pen and paper,” said Alonge.
“They have no means to know what’s fast-moving or slow-moving; what’s about to expire on the shelf. This leads to some behaviours, because if someone has invested all their life savings into inventory, and that inventory is expired, they are desperate to change and tamper with it. So that’s how we end up with poor quality medicines that almost kill people.”
It is not just pharmacists that encounter challenges. The issues facing Africans when they come to seek healthcare are significant. Lack of insurance is a major one, with the penetration rate on the continent standing at barely three per cent. This creates a challenge around affordability, says Henry Mascot, who is co-founder and CEO at Nigerian startup Curacel, which creates APIs that enables insurers to connect with digital distribution channels and to administer their claims cost-effectively.
“People are paying out of pocket if you get sick. You go to a hospital, you pay all the bills by yourself. That doesn’t really drive that sustainability as an individual, as a family,” he said.
That’s affordability, then, but accessibility is also a major challenge. Yomi Kazeem is engagement manager at Salient Advisory, a global healthcare advisory firm particularly focused on helping healthcare stakeholders understand the biggest trends in African health and tech ecosystem. Its yearly market intelligence report is a crucial piece of work that helps inform key decisions on how to effectively engage with the leading healthcare startups on the continent. This year the report is focused on healthcare supply chains, which Kazeem says are over-stretched and fragmented.
“There are multiple players between the point where the medication is manufactured or imported to the point where it gets dispensed to a customer, and that results in several effects. So prices go higher because there are add-on costs at all of these multiple layers. It also means that key healthcare products are not as available as you typically would want,” he said.
“Ensuring that health supply chains are efficient, reliable and safe enough that Africans have consistent, reliable access to health products. One of the key problems we face on the continent is that compared to other markets there is a much higher level of fake and substandard products available in these markets, and the reason that’s the case is because the supply chains are not up to scratch.”
Whether in supply chains, insurance, or anything else, Mascot says there is a big opportunity for health-focused startups in Africa if they are able to provide the right solutions at the right prices.
“When you’re dealing with a population that isn’t super affluent, you need to figure out a way to make sure that you can deliver things at price points that they can afford. It is about massively dropping the cost of service delivery. So that’s the big opportunity that is yet to be captured,” he said.
Kazeem says technology will prove vital in improving healthcare outcomes, as it will help leapfrog several challenges.
“You’re seeing situations where you know someone in a community that doesn’t have steady access to a doctor or a physician can leverage a mobile phone to get consultations done with a physician,” he said. “I couldn’t really overestimate, and I don’t think anybody can, the importance of these solutions, particularly within the context of rural communities.”
For all their potential, African e-healthy startups are operating in a nascent ecosystem, and in healthcare, one that is subject to serious levels of regulation that vary in scope and substance from market to market. Startups need to work with these regulators in order to succeed.
“There is an uncertain level of regulatory environments across the board. So if you’re operating in Kenya as a telemedicine company, or as an online pharmacy operator, that’s going to look very differently to if you operated in Tanzania, because the regulatory environments differ significantly,” Kazeem said. “Health as an industry is always pretty tightly-regulated. as it should be, but we’re advocating for one message.”
Indeed, the team at Salient Advisory has been working with regulators from 12 African countries to guide them on effective regulation for the health-tech ecosystem, and ensure those regulations are harmonised. Until they are, scaling will be a challenge. Yet African governments are actually keen to help, and are adopting startup solutions.
“There might be opportunities for government agencies or subnational governments to actually adopt and use the solutions for public health facilities, for example, and in our research this year we tracked nearly 50 partnerships that appear to have been established between innovators and governments,” said Kazeem.
There are many ways in which government can be helpful to tech startups, Mascot said.
“Especially in the early stages of market development, where the private sector is still looking for viable models for serving that consumer base, there is a place. There is a huge place for government involvement, and either subsidising the private sector or just creating schemes. This is a big social problem,” he said.
Level of cooperation between government and startups vary across the continent, and many challenges remain when it comes to working with government.
“Governments come and go, and then we see the priorities move around a bit. But the private sector players are the experts, so it is obviously about figuring out a way for government to work with the experts,” he said.
What other types of support are on hand? One benefit of being a health-tech ventures is access to grant funding and other types of non-equity support. Kazeem said the most common source of funding for the health supply chain startups Salient Advisory featured in its research this year was a grant-issuing initiative. Equity investment still plays a key role, but there is a need for more venture capital funding for Africa’s growing e-health space.
“You can approximate that health technology startups and ecosystems across Africa probably get about 10 per cent of funding on an annual basis, which in the wider context of how much money is coming into the space isn’t enough,” Kazeem said.
Health funding has dipped following a COVID-sparked wave in 2020, and it may only get worse now given the global reset.
“The effect of COVID-19, in terms of not just investment but also innovators coming into the space, is starting to wear off,” he said.
Part of the problem the e-health sector has from a venture capital persective is that there aren’t yet that many success stories to drive VC interest.
“Venture capitalists are capitalists. They’re looking for models that can let them exit, and exit at hundred times multiples, in a decade or slightly less. What has been in their mind is whether we have seen success stories. This isn’t just a healthcare thing, there hasn’t been a lot of data around the return profile for startups within the continent,” Mascot said.
The opportunity is large, however, and Alonge wants the VC world to step up to power Africa’s healthcare revolution.
“Health-tech is like some sort of forgotten son who is on the side and gets nothing. More can be done in terms of increasing investment inflows,” he said.
