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Healthcare project entrepreneurs are often physicians with clinical knowledge but who lack the training and experience to present bankable projects and ideas in order to be taken seriously by investors, banks, financing agencies and the public sector. There is a worrying trend with many entrepreneurs on the continent – businesses that are trying to raise capital lack appropriate documentation that investors require to make informed decisions. In order to attract investors and funders to your project, we help doctors and clinic founders to prepare a bankable business case document set.
In Africa, this is challenging because much of the data to produce a formal feasibility study, the likes of which are familiar to investors, is simply not that easy to produce. Much of the necessary data, codification, plans, regulations to consider, etc., simply are not written down or available for a researcher to pull it down from the Internet or some publicly-supplied / funded database.
The cost to bring a researcher to perform the necessary data gathering and interviewing is expensive, because it includes business class flights, ground transfers that often involve security vigilante guards, an appointment lead time of at least 30 days, which is always at risk of cancellation at the last moment, data that is not easily accessed and may not be cataloged, missing GPS coordinates for the parcel of land, titling challenges to ensure clear title to the land for the project, absent infrastructure capable of supporting a hospital, inadequacy of capable management and medical staff nurses, or places to get local training, and on and on. Meetings cannot be scheduled too close together, even for meeting points that, on a map, seem relatively close, because highways may not connect the points, and traffic jams can sometimes make travel of 5 miles take close to 30 minutes to negotiate. The visa application and immunizations to go to African nations is also not always a minor issue. Our last entry into Lagos, Nigeria took 3 attempts, several hours per consultant, and three courier transmissions to TRAVISA to get the paperwork through the system. Then, immunizations and medication prophylaxis cost over $600 per consultant. These things are all charged to the account of the client.
Our stay in country was five days and despite our experience and protests that it wasn’t long enough to get the required data, the client refused, to the detriment of their project. Later we found out it was because they didn’t have adequate funding or preparation to bring us there in the first place. Meetings were cancelled, officials used our presence for photo opportunities but didn’t accomplish meeting objectives that were outlined weeks in advance. Weather conditions caused flooding which unravelled plans, flight cancellations by local in-country airlines left us stranded in places without accommodation and no way to get to next appointments on time.
The feasibility study must take into consideration the usual basics, including, but not limited to scale, market, profitability, liquidity, quality of management, customers, technology, and value added preposition. One important consideration above all of this is “cultural nuances”. Another is healthcare domain knowledge. A generally-qualified business consultant trained in writing business plans may be sufficient for a retail establishment. But without the necessary healthcare background the report writer risks critical omissions and subject matter expertise to include all these subtleties for a healthcare project of any substantial magnitude.
Most hospital projects we review generally end up in the price range of about $1 million per bed to construct, sometimes more. Often we get pushback because clients, investors and prospects assume that because it is a developing nation, things will be cheaper. Not always. For example, most generally-qualified business plan writers would have no idea that it takes 300 gallons of fresh, pipe-borne water per bed, per day, to run a hospital. In order to run a delicate piece of technology, such as an MRI, stable power is required because an unexpected fluctuation could force a reboot and recalibration of the equipment that takes up to four hours (assuming it doesn’t flux again, while in the middle of the reboot and recalibration process). International accrediting bodies require that stable, uninterrupted power be available for 72 hours. Furthermore, the cost to train staff, prepare the documentation, and practice and undergo an international hospital accreditation survey from the leading accrediting bodies could cost $200,000 more than the fee for the survey and the travel costs of the surveyors.
If a business idea is a “Greenfield”, new, then in most instances, there will be a need for a feasibility study. With physicians who have been working on the public health system in Nigeria, for example, the reimbursement they are paid barely covers living and practice operating expenses. As such, there is often a lack of finances necessary to conduct the basic feasibility study or even hire an experienced healthcare industry business consultant to prepare a viable plan.
One way to solve this dilemma, however, is to appeal to the many international sources of funding available to entrepreneurs in Africa, including the following examples:
BIO, financed by regional or local intermediary structures (banks, investment funds, etc.) with a vocation to support Subject Matter Experts (SMEs) and micro-finance institutions. BIO invests by means of equity, quasi-equity and medium and long-term loans. It can also grant subsidies for feasibility studies and technical assistance programs, as well as provide for guarantees.
CDE, connects to financial resources that mainly come from the European Development Fund (EDF). Its objective is to ensure the development of professional ACP enterprises operating in the private sector.
DEG, member of KfW Bankengruppe (KfW banking group), finances investments of private companies in developing and transition countries. As one of Europe’s largest development finance institutions, it promotes private business structures to contribute to sustainable economic growth and improved living conditions.
EAIF, The Emerging Africa Infrastructure Fund (the “Fund”) is a unique public-private financing partnership initiated by the Private Infrastructure Development Group (“PIDG”), whose founding members are the UK Government’s Department for International Development (“DFID”), the Swedish Government acting through the Swedish International Development Co-operation Agency, the Netherlands Minister for Development Co-operation and the Swiss State Secretary for Economic Affairs of the Government of the Confederation of Switzerland. The Fund represents a new financing approach for the long-term alleviation of poverty in sub-Saharan Africa through combining public and private funding partners and adopting commercial and developmental principles in support of sustainable development and economic growth.
FAPA, the African Private Sector Assistance Fund (FAPA) is the private sector investment initiative of the African Development Bank.
FMO, is the international development bank of the Netherlands. Thanks in part to its relationship with the Dutch government, FMO is able to take risks that commercial financiers are not – or not yet – prepared to take.
IDC, Industrial Development Corporation (IDC) of South Africa – A national development finance institution set up to promote economic growth and industrial development in Africa.
IFC, International Finance Corporation promotes investment in developing countries by complementing, and supporting projects which are private sector-driven, are commercially viable and sustainable, have clear development impact, and meet sound international and social standards. Specific areas of service include; provision of financial products (loans, equity and quasi-equity, and risk management), resource mobilization (syndicated loans, and structured finance), advisory services (Environment, small & medium enterprises, corporate governance, investment climate, and private sector participation).
MIGA, Multilateral Investment Guarantee Agency is a multilateral risk mitigator that promotes foreign direct investment into developing countries by insuring investors against political, and non-commercial risks, mediating disputes between investors and government, advising government on attracting investments, and sharing information through online investment resources. Specifically, MIGA can cover imposition of currency controls, risk of expropriation, and loss from breach of contract with government entity, loss due to damage from war or civil disturbance.
OPIC, U.S. Overseas Private Investment Corporations fosters economic development in new and emerging markets, and helps U.S. businesses and other foreign partners invest overseas. It has a political risk offering and provides financing through direct loans, and loan guaranties for medium and long-term private investments, and supports the creation of privately owned and managed investments that make direct equity and equity-related investments in new, expanding, or privatizing companies.
SEAF, The Small Enterprise Assistance Funds’ focus is to expand and to realize value by accelerating the growth and profitability of local enterprises with capital, operational know-how, and global network.
At Mercury Advisory Group, we provide the talent that can write up your project applications to these programs, and where possible, suggesting the appropriate business model that would allow our clients to maximize returns and social benefits. To do this, we generally must perform a site inspection and conduct interviews with local government authorities to gather the necessary data to complete the loan and grant application documents.
Set a meeting to discuss your international healthcare development project today.
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