African access to healthcare and medicines impact investment fund december 2015

0 African access to healthcare and medicines impact investment fund

African access to healthcare and medicines impact investment

fund

December 2015

An innovative purpose-driven blended capital investment vehicle delivering socio-economic

development impact by increasing availability of affordable, good quality healthcare and

medicines in Southern Africa through loans to sustainable enterprises operating at critical

points of the health value chain

©

1 African access to healthcare and medicines impact investment fundAfrican access to healthcare and medicines impact investment fund

AFRICA: The growth story is real and the private sector is

participating

Source: Ernst & Young


PROBLEM: Sub-Saharan African faces a disproportionate

spend on healthcare to the burden of disease

11%

24%

1%

Sub-Saharan Africa

Rest of World

World’s

Population

World’s

Disease

Burden

World’s

Healthcare

Spending

2.2x more

disease

10x less

resources

Burden 1: Sub-Saharan Africa has

2.2 times more disease per capita

than the rest of the world combined

Burden 2: Healthcare spending in

Sub-Saharan Africa is 10 times less

per capita than the rest of the world

leading to tremendous healthcare

challenges

Source: IFC


OPPORTUNITY: The private sector delivers quality healthcare

and medicines but growth is constrained by lack of funding

Private, for-profit healthcare providers already

serve a large portion of the population…

4445

53

64

48

61

67

51

EthiopiaNigeria Uganda Kenya

Source: IFC

Population (%) receiving care from private, for-

profit providers of modern medicine

Highest Income Quintile

Lowest Income Quintile

…but are currently limited by a

severe lack of funds

Market surveys indicate lack of financing is

impeding the growth of heath care providers

• A market research study of private providers in Zambia

in 2007 found that almost 90% of respondents had not

applied for a business loan in the last three years.

• In Nigeria only 15% of surveyed physicians and patent

medical vendors and 10% of nurses/midwives have

applied for business loans in the past three years.

• A study in Ethiopia identified financing as one of the top

two constraints in the development of the private health

sector.

Situation is unlikely to change due to

established barriers to entry

• In many countries, financial institutions don’t

lend to the health sector in a significant way.

• High risk, public good, lack of market

information, collateral, poor quality applications.

• In some countries the regulatory environment

restricts lending.


OPPORTUNITY: Funding private sector healthcare and

medicines represents a lucrative investment opportunity

Numerous investment opportunities

have been identified

Source: Promoting Sustainability of Health Markets: Financing Private Health Providers in Africa – Shops presentation; IFC; IMS Health Market Prognosis;

• The IFC estimates the SSA private investment

opportunity between $11-20 billon

• IMS Health has identified $3.6 billion of

investment opportunities in SSA’s 10 largest

cities alone

There is a market opportunity for impact investors to fund the

development of the SSA healthcare and medicines sectors

The African healthcare industry

is growing at a tremendous rate

Morocco

$1.2B

6%

Nigeria

$1.8B

13%

S. Africa

$3.7B

8%

Botswana

$56m

12%

Kenya

$659m

17%

Egypt

$3.0m

14%

Country

2011 Sales

’11-’16 CAGR

Algeria

$2.8B

9%


ENTERPRISE REQUIREMENTS: Capital and technical

assistance are vital throughout the business cycle

Proof of Concept Incubation Growth StageScaled

businesses

Commercial

Blended

Social Grants / CSI

Impact Investment /

Blended CapitalImpact Investment /

Blended Capital

Private Equity /

Commercial

Finance

IPO / Commercial

Finance

Grants / CSI

Angel Funding /

Venture Funding

Impact Investment /

Blended Capital

Grants / CSI

Impact Investment /

Blended Capital

Grants / CSI

Technical Assistance

Self Funding /

Angel Funding

Unique asset class dynamics demands bespoke

capital allocation and technical assistance design

Ca

pit

al

Source: Ubuntu Capital & Advisory


An impact investment

advisory & technical

assistance facility for

financial intermediaries

developing investment

products with

development impact1

objectives in sub-

Saharan Africa. The

project is to be grant

funded but financial

intermediaries need to

demonstrate meaningful

financial commitment to

the product

development process.

SOLUTION: Catalyse impact investment products by

‘subsidising’ components of the development process

Impact Hypothesis

Development & TestingInvestment

Products

Financial

Intermediaries

Investors

Impact

Capital $

Product Development &

Structuring

Market Assessment &

Development

Impact Investment

Advisory & Technical

Assistance Facility

Private Sector

Enterprises

ESG & Impact Management

Strategy & Process Design

Technical Assistance Strategy

& Programme Design

Fundraising & Promotion

Governance & Oversight

Investment Support

& Capacity Building

Project

1. Development impact = the potential for an investment to result in positive social; economic and/or

environmental impact


SOLUTION: Provide loans to enterprises to increase access

to healthcare and medicines in Sub-Saharan Africa

Fund Investor

A

Fund Investor

B

Fund Investor

C

Africa

access to

healthcare

& medicines

fund

Fund Investors PPP Fund Management JV Beneficiaries & Co-investors

Board of

Directors

Advisory

Panel

Investment

Manager

Impact M&E

Manager

Capital Invested

Principal &

Interest

Increase Access

Market

Intelligence

Market

Development

Manufacturing

Distribution

Procurement

Diagnostics

Rational Use

Capital Loaned

Principal &

Interest

Tech Assistance

Increase Access

Technical Assistance Fund

Cre

dit

Gu

ara

nte

e


OBJECTIVE: Catalyse investment into the health private

sector to achieve socio-economic development impact

• Socio-Economic Development Objectives

– Increase access to healthcare and medicine:

To deliver measurable social and development impact by increasing access to

affordable, good quality healthcare and medicines in Sub-Saharan Africa…

– Local economic growth:

…through the growth and development of sustainable private sector enterprises

operating at critical points along the health and medicines value chain,…

– Pro-Poor:

…targeting investments that benefit the base-of-the pyramid.

• Financial Objectives

– Market related investor return:

Target a net portfolio return of 4-6% per annum.


STRUCTURE: Funding structure crowds in private financing

through 1st loss and credit guarantee risk mitigation tools

Investment Class

• The capital of the Fund consists of:

• 1 non-redeemable ordinary share

which will be held by the promoter

of the Fund;

• Class A Shares providing for 1st

loss capital

• A limited recourse secured

debenture programme providing

for senior debt participation

1. SME – Small to medium enterprises;2. MFI – Micro finance institution and non-banking financial institutions3. Public Private Partnerships

Legal Structure

• The investment company is a Mauritius

domiciled open ended private company

with limited liability

• The company holds a Category 1

Global Business Licence issued by the

Mauritian Financial Services

Commission

Investors Investors

Equity Debentures

SME’s1 MFI’s2

Board of Directors

Credit Guarantee

Loans

Investment Manager

African access to healthcare and

medicines fund

PPP’s3

Investor Portfolio

Committee


BLENDED CAPITAL STRUCTURE: balance reaching the

poorest populations with ensuring acceptable risk levels

SHAREHOLDER CLASS A SHARES DEBENTURE

RISKS

1st Loss1 Tranche Yes No

FINANCIAL RETURN

1st Distribution (capped at 4%) 2nd preferential distribution 1st preferential distribution

2nd Distribution

Equal distribution based on

investment holdings and

remaining income

Equal distribution based on

investment holdings and

remaining income

Notes:

Loss refers to any losses incurred on an underlying investment that stems from a default or non-performing debt instrument that the

Fund holds in its portfolio. This does NOT apply to any expenses incurred by the Fund in its on-going operational business or under-

performance stemming from exchange rate fluctuations etc.


INVESTMENT THEMES: Two core corporate investment

themes have been identified

–Companies looking to scale their operations: Start-up

companies that have successfully used grant or venture capital

funds to develop and prove their operating model and now want

to grow into new locations.

–Companies struggling with high cost of debt: A number of

established companies have a disproportionally high cost debt

given their low risk profile. By accessing lower cost debt the

companies will be able to pass savings onto their customers

(either the local public sector, aid agencies or directly to local

consumers) or expand their operations.


25

100

180

140

145

160

6050

200

80

50

220

60

45201510 55

40

120

20

0

403530

Nigeria

Madagascar

Kenya

Ghana

Zambia

Malawi

Botswana

Ease of doing

business ranking

Tanzania

Lesotho

Population living on

less than $2 per day

(Millions)

Ethiopia

Rwanda

Uganda

Zimbabwe

South Africa

Congo, Dem. Rep.

Mozambique

Namibia

INVESTMENT UNIVERSE: balance reaching the poorest

populations with ensuring acceptable risk levels

Requires grant or

equity funding

Suitable for

debt funding

Note: Doing business rankings adjusted to reflect advantages AMIIF will enjoy through links to ministries of health etc.Source: World Bank; doingbusiness.org, Internal Analysis

Poor vs. Least DevelopedIt is important to note the difference between poor beneficiaries and LDC's. Middle income

countries still have many poor people and from a population size perspective actually

offer relatively large poor populations where investments can have dramatic social impact


TECHNICAL ASSISTANCE: Human capacity development and

business development support services alongside capital

Healthcare

Fund

Financial

Intermediary

Donors Investors

Investment $

Monitoring and

Evaluation

Healthcare Investment Companies

Business

Development Support

Human Capacity

Building

Technical

Assistance

Investment $Grant $

*Including AMSCO

14 African access to healthcare and medicines impact investment fund

IMPACT SUMMARY: Fund Activities and objectives aligned

with the Sustainable Development Goals

African access to healthcare and medicines impact investment fund december 2015

Economy & Finance

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