Healthcare demand spurs opportunities in Egypt

03 February 2022
Changing regulations, rising population levels and demand for universal access to quality healthcare is creating an attractive environment for investment in Egyptian healthcare
On 12 January, a live webinar hosted by MEED, Mashreq and JLL provided an overview of market developments and sector insights in the Egypt healthcare sector. The summary below captures key highlights from the broadcast.

Watch the full webinar here

The Egyptian healthcare market is undergoing massive changes.

With a rapidly growing population and strong economic growth, demand for healthcare services in the region’s most populous country are set to surge in the coming years.

It is starting from a low base. Egypt has one of the lowest healthcare spending rates in the Middle East and North Africa (Mena) region, with only 5 per cent of GDP spent on healthcare in 2018.

As of 2019, the bed density per 1,000 population stood at 1.28, below its Mena counterparts. A significant increase in investment is needed.

“The high prevalence of diseases, including lifestyle induced issues, along with a growing population, is driving the need for robust healthcare infrastructure in Egypt,” says Sandeep Sinha, head of healthcare at JLL Mena. “A rise in mid- and high-income groups is boosting demand for quality services.”

In a drive to attract private-sector investment and to improve access to quality healthcare services across the country, Cairo is implementing a wide-ranging programme of reforms.

The Universal Health Insurance Law No.2 was introduced in 2018 to modernise the country’s outdated health insurance system.

“In the previous system [in Egypt] not everyone was covered under ‘catastrophic financial risk’ – if somebody got sick on a serious level, it was always seen as a burden,” explains Ashraf Mowafi, chief claims officer at the Universal Health Insurance Authority (UHIA) in Egypt. “But when you pay a premium, you are covered in advance and [have] financial and medical protection. We wanted to create formal equality in treatment for everyone.”

The new law is being implemented in six phases, with the aim of covering all governates by 2030. The law is also designed to change the way healthcare is provided in Egypt. Instead of approaching hospitals directly, patients will now have to consult a general practioner first, which is expected to clear up resources within hospitals for more critical care.

With its new single-payer system, the Egyptian government can also contract accredited private sector healthcare providers and insurers.

“We encourage private sector providers to come forward, meet our standards and set up in Egypt,” says Mowafi. “Nobody can cover the sector alone and we expect the private stakeholders to step up and join this journey to 2030.”

“On the insurance side, we are talking to private insurance providers,” says Mowafi. “We are discussing our relationship with them, looking at complementary and supplementary insurance services that they can provide, and how they can benefit in this scenario where we assume most of the risk which will allow them to create the right products and services.”

Supporting private firms

In other programmes, the International Finance Corporation (IFC), the private sector development arm of the World Bank, is working with the Egyptian government and private firms, to invest in the development of Egypt’s healthcare sector.

“We work with companies to make them more bankable and sustainable,” says Yasmine el-Hini, country officer for Egypt, IFC. “For instance, in the healthcare sector we work with service providers to help improve their quality standards and thus gain international accreditation.

“We also work with governments to create more investment-friendly environments; this is done through cross-cutting, general business environment work but also sector-specific engagements,” she says.

Since 2007, IFC has invested $400m in the Egypt healthcare sector, with plans to inject $400m more in the next 2-3 years. Majority of the investments have been focused on services such as hospitals, clinics and diagnostic centres.

Pharmaceuticals and insurance services are other areas that IFC is investing in. El-Hini notes that the pharma sector will require greater development in Egypt, both from a manufacturing perspective and in terms of medicines imported.

“A nascent but very important area moving forward will be medtech,” says El-Hini, emphasising the issue of limited primary care in Egypt. “Medtech can help bridge the gap of general practioners at an early stage.”

IFC’s three-year advisory programme launched in June 2021 has worked with 36 healthcare providers in Cairo and Alexandria as well as in other governates in Egypt struggling with gaps in quality services. Criteria including feasibility standards; environmental, sustainable and governance (ESG) benchmarks; and quality practices are used to qualify companies for investment.

Impact of emerging reforms

Private healthcare players in Egypt recognise the worrying gap in demand and supply and are keen to support the government.

One such entity is Cleopatra Hospitals Group, Egypt’s largest hospital group and a listed firm on the Egyptian stock exchange (EGX).

“Egypt does have a big supply-demand gap, when you look at the global benchmarks,” notes Samia el-Baroudy, board member, Cleopatra Hospitals Group and partner, RMBV. “There’s a big gap that we need to close in terms of supply provision. There is a need to improve capacity and utilisation of services.”

El-Baroudy sees the Universal Health Law aiding in better utilisation and improvement of healthcare capacity, especially when it comes to providers working with insurance payers.

“When we first built our unified group and acquired hospitals in Egypt, we found that most of the patients – nearly 60 per cent – were not covered by insurance,” she says. “Over time, we built a relationship with payers and grew with them. This is important in terms of being able to widen access to the right healthcare service across our facilities.”

Lending opportunities in Egypt healthcare

As opportunities mature in the sector, banks are keen to lend to players in the space too.

“Historically, it has become a bit of a cliché to say that healthcare is a defensive sector,” says Karim Amer, senior vice president – head of healthcare and education at Mashreq Bank.

“But [the events] of the past two years have shown how resilient the healthcare sector is.

“Since Covid, investments in healthcare have risen in priority. It is now on everybody’s radar –investors are looking to diversify their risks and presence and grow alongside economies such as Egypt which show promising signs of sustainable growth. Demand for healthcare in Egypt is expected to grow sustainably for the foreseeable future.”

Amer notes that banks in Egypt are highly liquid and ready to look into funding healthcare projects, provided requirements regarding feasibility are met.

Watch the full webinar here

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