Strategies for financing the African health sector

Never before in the last half century has the health landscape in Africa changed so much and generated so much interest. In fact, Africa’s healthcare sector would be worth an estimated $259 billion by 2030. While these trends highlight a lucrative opportunity for the private sector, if not well regulated, Africa’s healthcare system could end up keeping more Africans below the poverty line. As such, African countries have an opportunity to build on the success of 2021 health financing to build the resilience of this sector and people in Africa.

Out-of-pocket health expenditure (OOP) in Africa remains excessive compared to other continents – just one flaw in Africa’s health systems that the COVID-19 pandemic has exposed. Indeed, despite the devastation it has wreaked, the virus has also presented opportunities for the continent to transform its healthcare infrastructure as well as its delivery systems, driving a shift from donor and externally manufactured products to continental production systems and capitalizing on the opportunities offered by the African continent has created free trade agreements.

COVID-19 has not only caused a health crisis, but also an economic contraction at an unprecedented rate. In addition, the rise in unemployment caused by COVID is causing private sector healthcare spending to fall, while at the same time COVID is increasing healthcare costs – in a region where private healthcare spending already exceeds 50 percent of total healthcare spending in 15 countries (Figure 2.6 below). The immediate challenge for many governments is how to provide affordable and reliable healthcare in a financially constrained environment.

Before the COVID pandemic, a number of proposals had been made to increase public support for the health sector, mainly through mobilizing domestic resources. In view of the economic contraction, however, it is no longer possible to increase government revenues in the short term.

Out-of-pocket health expenditure (OOP) in Africa remains excessive compared to other continents – just one flaw in Africa’s health systems that the COVID-19 pandemic has exposed.

The immediate focus of international financial institutions is therefore to support African economies in raising additional concessional resources. As the crisis unfolded, the G-20 offered three tiered options for additional liquidity: debt service suspension, special drawing rights, and an innovative financing approach for vaccine purchases. Multilateral financial institutions also increased disbursements of new loans to countries to support additional healthcare spending.

The G-20 has adopted Africa’s proposal for a Debt Service Suspension Initiative (DSSI), building on a proposal by African finance ministers and the Economic Commission for Africa (UNECA), as the first injection of liquidity for low-income countries. The DSSI allowed countries to suspend debt payment obligations to creditors in 2020 and 2021 so governments could use the financial resources to respond to the global health crisis. These newly available resources were used to purchase personal protective equipment (PPE) and also to support local production of PPE, which helped boost part of the economy.

In early 2021, the G-20 also approved the issuance of US$650 billion in Special Drawing Rights (SDRs) – which had been requested by African finance ministers at the start of the pandemic – of which Africa will receive about 5 percent (worth around US$33). .6 billion US dollars). These additional resources increased countries’ liquidity to respond to both the health and economic crises.

Relying on African institutions to fund and combat the pandemic has served Africa well throughout the crisis. As a result, Africa has created a number of new institutions and innovative financing approaches to fund vaccine purchases.

The first such institution is the African Medical Supplies Platform (AMSP), whose strength lies in its ability to aggregate demand for medical supplies in a transparent manner and thereby achieve lower market prices. Another major innovation was the creation of the African Vaccines Acquisition Trust (AVAT) by pooling SDRs from countries such as Egypt, Nigeria and Zimbabwe. It provided early resources to the African Export-Import Bank (Afreximbank) to set up a vaccine procurement facility. Led by the African Union Special Envoy Strive Masiwiya and in collaboration with the African CDC, led by Dr. John Nkengasong and UNECA, AVAT has been able to source over 40 percent of Africa’s COVID vaccine needs (including a 70 million Moderna purchase from the UNS). With the support of a $500 million donation from the Mastercard Foundation, the cost of vaccines under the AVAT mechanism is on par with those procured through COVAX. Indeed, in 2022, a key focus for leaders must be delivery of procured vaccines: less than 10 percent of Africa will be fully vaccinated by the end of 2021. (See Michel Sidibé’s point of view for more on justice in the vaccine.)

Afreximbank has also developed the AVAT No-Fault Compensation Program for participating Member States. This program, the first of its kind on the continent, provides individuals who have experienced a “serious adverse event” resulting in permanent disability or death related to a COVID-19 vaccine administered under the AVAT framework in a are procured or distributed in the participating Member States.

The rise in unemployment caused by COVID is causing private sector healthcare spending to fall, while at the same time COVID is increasing healthcare costs.

The development of these innovative mechanisms means that Africa can now go to the market to source its own healthcare supplies, enabling Africa to transition from importing over 90 percent of its healthcare needs to manufacturing devices and medicines on the continent. This momentum has already begun with countries such as South Africa, Senegal and Algeria increasing their capacities and Rwanda, Kenya, Nigeria and Morocco developing new capacities for the production of raw materials in the health sector.

With the COVID-19 pandemic, the need for closer collaboration between health and finance ministers became even more important. Both must work together for inclusive, efficient and effective financing of health care. There is now a call for the establishment of a Global Health and Finance Board to address fundamental issues of global health governance, some of which have been so clearly exposed by the (mis)management of the pandemic.

Africa is at the forefront of this effort: Led by the heads of state of the African Union, Africa CDC and UNECA, relevant ministers have held bi-monthly coordination meetings to align resources and implementation. This new mechanism could also be used post-pandemic to build and structure funding for more affordable and improved healthcare across the continent. The World Bank, Mastercard Foundation, UNICEF, GAVI and others are already working through this mechanism to address Africa’s biggest health challenge in 2022: immunization.

Strategies for financing the African health sector

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