African health tech is a hard business. Everyone across the continent faces the same challenges: funding, scaling and making profit. No one seems to have hacked it, and the problem is not a lack of innovation.
2021 was a record-breaking year for African startups, and depending on who you ask, they raised between $4.5 billion and $5 billion. But health-tech startups got less than 10% of the pie. The same thing happened in 2022. However, it’s not just a ‘tech’ problem. Public healthcare is one of the most underfunded sectors in Sub-Saharan Africa.
In 2001, African heads of state and governments under the African Union (AU) pledged under the “Abuja Declaration” to allocate at least 15% of their annual budgets to healthcare. Twenty-two years later, only a handful of them have reached that target. Nigeria — which hosted that meeting — allocated less than 6% of its 2023 budget to this sector.
Health tech has become a pressing need in Africa because governments haven’t treated public health with enough urgency, even though the demand has been high. Supply has also been shrinking since health professionals have migrated to seek better opportunities abroad. A UN article from 2017 found that, on average, surgeons in New Jersey earn $216,000 annually, while their counterparts in Zambia make $24,000, and those in Kenya make $6,000.
According to Salient Advisory, a healthcare consulting firm, their pan-African research found nearly 350 innovators digitizing African health supply chains. Yet private funding seems cautious towards them. Why? The short answer is that the market is complex. The long answer, however, is threefold.
Building health-tech startups requires more than great products. No innovation circumvents business fundamentals. So, the market’s attitude towards health tech, or even healthcare in general, will always take the fore in funding conversations. And that’s where the first challenge comes in: many Africans would rather be their own doctors. A research paper from 2022 by Richmond Opoku et al. found that the prevalence of self-medication in West Africa’s biggest economies — Nigeria and Ghana — was 69.4% and 53.7% respectively. While this partially reflects the broken state of institutional healthcare, it also shows that consumers are passive by default. That makes hyper-growth, which VC funding seeks out, more difficult to achieve.
The second problem is data. In 2019, the World Health Organisation (WHO) reported that only 14 out of 47 African countries had achieved at least 80% completeness and timeliness of reporting on key health indicators. It also stated that only 11 countries had conducted a national health survey in the past five years. That makes it hard to accurately determine market readiness for health-tech products and services.
In September, TechCabal reported that 54Gene, one of Africa’s most-funded health-tech companies, was shutting down operations. It had raised $45 million in two years. That brings us to the third challenge: profit. Investors look for the quickest way to generate maximal returns. But healthcare in general often requires patient capital, and there’s still no guarantee. The reason why six out of Africa’s seven unicorns are fintechs is not that financial inclusion is Africa’s biggest problem. It’s just the most profitable to tackle. Most fintech startups operate asset-light models that can lead to quicker and richer exits for investors. With health-tech, it’s often the opposite.
Many startups have made headway in health-tech, and many more will. But the poetic bitter pill for health-tech to swallow is that building businesses in this field is a tougher assignment. And investors will only up their stakes based on how easy the market has become to navigate. For now, there’s a long ride ahead.