With government support gradually declining, the health sector in Egypt has become even more attractive to private players who have trooped to the scene to fill gap. Although opportunities abound, challenges still exist, and investors have to get their strategy right if they are to have a chance of succeeding.
Egypt is the most populous country in North Africa and 2nd most populated country in the Middle East and North Africa region with over 100 million people. It ranks 14th in the world in terms of population, accounting for 1.3% of the global population. The population, which is growing at a 1.8% annual rate, contributes to increased demand for infrastructure and services, including healthcare. The country has attempted to increase healthcare access in recent decades with significant strides. The most glaring milestone is a generally healthier population enjoying longer overall life expectancy, which has increased from 64.5 to 70.5 years over the past two decades. The journey of healthcare transformation has not been a smooth ride either because of numerous obstacles, a good example being the 2011 Arab Spring which had cataclysmic effects on healthcare provision in the country.
In 2014, Egypt adopted a new constitution that emphasizes health as a fundamental human right and commits to expanding coverage and access to quality services for all Egyptians. In 2018, the Egyptian government focused on providing Universal Health Coverage through the Universal Health Insurance Law. It intends to restructure the system by providing coverage to all citizens and making health care more affordable. The new law is being implemented in six stages, with the goal of encompassing all states by 2030.
A national emphasis has also been placed on public health interventions to improve all health indicators. These initiatives have received international acclaim, and Egypt continues to receive humanitarian aid from a variety of organizations around the world to improve public health. However, there are still significant challenges facing Egypt’s healthcare system with the disease burden worsening a situation that is already compounded by equity and social injustice. Lifestyle diseases form the bulk of the disease burden and collectively they contribute negatively to the citizenry through loss of independence, years of disability, or death, and impose a considerable economic burden on health services. Non-communicable diseases (NCDs) are the main cause of death estimated to be over 82% of total deaths in Egypt.
Mental health and substance use are becoming one of the most serious and rapidly growing phenomena in Egypt. A 2018 report by the Ministry of Health and Population showed that one-quarter of Egyptians have mental health problems. According to the report, there is a high prevalence of depression and anxiety disorders, with nearly 44% of the population experiencing mental health issues. Around 31% of Egyptians suffering from mental health conditions “suffer from depression linked to substance abuse.” Mental health progress is hampered by a lack of mental health awareness and high treatment costs.
Low physician-patient ratio an impediment to quality healthcare delivery
According to the World Health Organization’s most recent data, Egypt had 445,000 physicians working in the country in 2018, nearly five doctors for every 10,000 citizens. That ratio is too low by regional standards when compared to Saudi Arabia’s 26 physicians per 10,000 people, Jordan’s 23, Iraq’s and Morocco’s seven, and Turkey’s 17. Brain drain further compounds the already dire situation causing concern that the quality of healthcare in the country could deteriorate further. The Economist reported that there were fewer than five doctors for every 10,000 people in 2018, compared to 11 per 10,000 in 2014. During the same time period, the number of doctors working in public hospitals fell by one-third. According to a mid-2019 study conducted by the Supreme Council of Universities and the Technical Office of the Egyptian Ministry of Health, only about 82,000 — or 38% — of Egypt’s 213,000 registered physicians are still in the workforce.
COVID-19 exposed the weakness in Egypt’s healthcare system. To many, it was ironical that the country with the largest population in the Arab region and one of the region’s most prolific medical schools has one of the region’s lowest physician-to-population ratios. The Egyptian Centre for Economic Studies ECES), links the country’s significant shortage of healthcare personnel in Egypt to doctors emigrating. Approximately 7,000 doctors left Egypt to work elsewhere during the first wave of the pandemic, while 400 died from Covid-19. Many doctors have blamed the government for failing to follow the provisions of the 2014 Egyptian Constitution, which require the state to spend 3% of its annual GDP on healthcare. The dissatisfaction on the part of doctors has seen Egypt face an unprecedented wave of emigration, causing concern that the quality of healthcare in the country could deteriorate further.
According to the Egyptian Medical Syndicate, a body that represents the country’s doctors, the doctor-to-citizen ratio improved to 9.2 doctors for every 10,000 citizens by March 2022 but remained far below the global average. The syndicate also notes that 11,536 doctors resigned from the Egyptian public health sector between 2019 and March 2022. Though these figures represent less than 5% of all practicing physicians in the country, they have prompted many members of the public to call on the government to improve working conditions and pay for doctors in order to prevent any doctors’ emigration – real or imagined – and any acute shortages that could harm the health system. In response to these public calls, the government has increased the number of Medicine Faculties in recent years in order to graduate more physicians. It has also increased spending on health to EGP 128 billion (US$ 4.32 billion) in the FY 2022/23 budget, up from EGP 108 billion (US$3.64 billion) in 2021/2022, an 18.5 percent increase.
Funding-gap renders care in public hospitals precarious
Despite the incremental funding allocation for health witnessed in recent years, Egypt’s healthcare system lags behind its MENA counterparts. In the 2021 worldwide Health and health systems ranking of countries by Statista, Egypt with a score of 67.5 was outperformed by fellow MENA countries Libya (67.7), Tunisia (71.4), Morocco (71.7), and Algeria (72.5). Egypt’s poor performance vis-à-vis its neighbors can be directly linked to meager spending on healthcare. With only 5% of its GDP spent on healthcare in 2018, Egypt has one of the lowest healthcare spending rates in the Middle East and North Africa (MENA) region.
The level of government health expenditure is low, accounting for only 2% of GDP. With government spending on healthcare being extremely low, people still have to pay large out-of-pocket expenses for all types of care. Out-of-pocket health spending is a pressing issue in Egypt, accounting for more than half of total health spending and jeopardizing Egyptian households’ economic viability and long-term sustainability. A 2022 peer review paper on healthcare financing published in the Journal of the Egyptian Public Health Association reported that 60% of primary healthcare financing came from out-of-pocket (OOP) spending. The level of OOP payment also suggests that many of the Egyptians who may be covered under government schemes opt instead for private treatment where they can afford to. While universal health insurance is the talk of the town in Egypt currently, private healthcare groups, which serve up to 40% of the population in both the insurance and out-of-pocket markets continue to play an important role.
In other programs, 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. In 2020, Investment Fund for Developing Countries (IFU) invested DKK 290 million (US$38.9 million) in Humania, which builds and operates private hospitals in Egypt and Morocco, on behalf of the Danish SDG Investment Fund. The investment is meant to increase capacity and introduce high-quality healthcare in accordance with international standards. When fully implemented, it will add approximately 600 hospital beds and serve 1.6 million patients per year.
The private sector’s indispensable role in Egypt’s healthcare market
Private healthcare players in Egypt are aware of the worrying gap between demand and supply of healthcare services and are eager to assist the government. Cleopatra Hospitals Group, Egypt’s largest hospital group and a publicly traded company on the Egyptian stock exchange, is one such entity. Since 2018, the Group has acquired both greenfield and brownfield sites, and it now has six fully operational hospitals, three polyclinics, an in-vitro fertilization (IVF) center, and a rehabilitation and physiotherapy facility. Cleopatra manages 1,200 beds across all of its facilities. Alameda Healthcare is similarly dominant, with approximately 1,000 beds spread across 128 clinics, four hospitals, a home healthcare brand, and eight centers of excellence. Furthermore, the healthcare system is becoming more privatized, with the government encouraging further privatization. Between 2005 and 2019, the number of government hospitals in Egypt fell by 40.7%, from 1,167 to 691. In contrast, the number of private sector hospitals increased from 652 to 1,157, a 77.4% increase, according to the Central Agency for Public Mobilization and Statistics’ 2019 health bulletin.
With privatization on high gear, the number of public hospital beds has declined by thousands over the last decade. Comparatively, the number of private sector hospitals increased by 20%, from 942 to over 1100 between 2009 and 2019, increasing their market share from 58.8% to 63.4%. Private beds increased by nearly 70% from 21,000 in 2009 to just under 36, 000 in 2020. Cumulatively, the country currently has a bed capacity totaling 130,000 out of which about 36,000 are available in the private sector, with nearly half of these concentrated in greater Cairo. This total number of beds translates to about 1.28 hospital beds per 1,000 people, which is less than half of what planners consider ideal and considerably lower than the MENA counterparts. This significantly low number of hospital beds per 1,000 population pits Egypt in a low cadre against developed countries and even the global average of 2.9 beds/1,000 population, suggesting room for growth. Canadian-based investment management company, Colliers International projects that Egypt will require approximately 38,000 new beds with an estimated investment of US$8 to US$13 billion by 2030. This represents a lucrative market share opportunity for private investors to tap into.
Attracting private investors to bridge the funding gap
Egypt has one of the lowest healthcare spending rates in the Middle East and North Africa (MENA) region, with only 5 percent of GDP spent on healthcare in 2018. To make up for its low public spending, the country is implementing a wide-ranging program of reforms to attract private-sector investment and to improve access to quality healthcare services across the country. For instance, the Egyptian government has proposed a number of hospitals affiliated with the Ministry of Health for private sector investment, including the right to usufruct, manage, or develop. Among the hospitals available for private-sector investment include Coptic Hospital, Heliopolis, and Sheraton. This privatization move by the government is meant to attract private-sector investment to the state-owned hospitals as part of a larger plan to open up the healthcare sector to private-sector players.
The offering comes as the government seeks to double private sector participation in the economy over the next three years and exit up to 79 industries. Over the next four years, the strategy aims to raise US$40 billion by selling stakes in state-owned assets to domestic and international investors. An early draft of the state ownership document identified healthcare as a strategic sector in which the government wants to maintain a strong presence, while also encouraging the private sector to increase its involvement.
Government’s push for greater private participation in healthcare is already bearing fruits. According to government figures, the private sector’s investment in healthcare in FY2018-2019 reached EGP 9.3 billion (US$0.31 billion), accounting for 42% of total investment in the sector during the fiscal year. Total implemented investments in the private healthcare sector increased 1.5x between 2015-16 and 2018-19 in nominal terms, totaling EGP 9.3 billion (US$0.31 billion) in private and EGP 9.8 billion (US$0.33 billion) in public investments in 2018-2019 according to a joint report by Dcode Economic and Financial Consulting and The American University in Cairo.
More investments are expected over the next decade, as evidenced by the surge in healthcare M&A activity in 2020 and the first quarter of 2021. For instance, in 2020, 19 healthcare transactions were completed, making it the most active sector after banking and finance, which had 32 transactions. Some of the top deals included Al-Ahly Capital’s acquisition of El Nada Hospital and Ezdehar Egypt Mid-Cap Fund’s minority stake in Al Tayseer Healthcare Group. Al Tayseer also increased its stake in Mansoura Medical Center while Alta Semper raised its stake in Macro Holding to 80%. Companies are also bidding for the 51.4% stake in Alexandria Medical Services held by Abu Dhabi Commercial Bank. A mega-merger between Cleopatra Hospital Group (CHG) and Alameda Healthcare was also planned, but it recently fell through.
The government has also indicated that private medical providers will play an important role in the World Bank-funded universal healthcare program, which received a US$400 million injection in 2020. The Universal Health Insurance Agency, a new government agency, will contract private hospitals and clinics to provide care to Egyptians alongside public counterparts.
In addition, the International Finance Corporation (IFC), the World Bank’s private sector development arm, is collaborating with the Egyptian government and private sector firms to invest in the development of Egypt’s healthcare sector. IFC has invested US$400 million in Egypt’s healthcare sector since 2007, with plans to invest another US$400 million in the next 2-3 years. The vast majority of investments have gone into services such as hospitals, clinics, and diagnostic centers. IFC is also investing in pharmaceuticals and insurance services.
Between 2005 and 2019, the number of government hospitals in Egypt fell by 40.7%, from 1,167 to 691. In contrast, the number of private sector hospitals increased from 652 to 1,157, a 77.4% increase
The rollout of UHC attracts private investors
Egypt has implemented a number of reforms in recent years to encourage start-ups and private investment in healthcare. The country has announced plans to implement universal healthcare coverage by 2032, which is expected to fuel the sector’s growth even further and create a flood of opportunities for private healthcare providers and start-ups. The UHC would provide all Egyptians with access to affordable health care by directly subsidizing care for low-income households, which account for roughly one-third of the population, according to the World Health Organization. The UHC has a mandate from the Universal Health Insurance (UHI) Law of 2018 to provide health coverage to citizens with implementation having begun in July 2019. When fully implemented, it is expected that all Egyptians will be covered under the UHI scheme, with a benefits package of quality health services and financial security. Egyptian citizens can obtain insurance through private insurers with government assistance. Because of the high penetration of the insurance market, as well as the rollout of the universal healthcare plan, an investor’s potential market in the sector will grow. This ensures the demand for — and return on — healthcare services. In addition, significant organized investment has been made in infrastructure and the development of new cities that will require medical services. Having more people covered by insurance and new areas in need of healthcare services translates into increased demand, which bodes well for investors’ returns-on-investment (ROI) expectations. However, a fundamental issue persists: some governorates continue to be underserved in terms of healthcare services, owing to a lack of talent outside of cities with university medical faculties, and private investors failing to meet ROI targets beyond urban centers such as Cairo and Alexandria.
A thriving pharmaceutical industry
The push for Universal Healthcare Coverage creates a glut of investment and business opportunities in the Egyptian healthcare market. This has encouraged industry players to be optimistic about Egypt’s private healthcare system, which has grown steadily in recent years. According to the Egypt private sector diagnostic, the universal health care law could be a catalyst for public-private partnerships in hospital construction, diagnostic services, specialist care, information technology, and insurance claim administration. As Egypt moves towards universal healthcare coverage for its 100 million-plus population, the country has become the fastest-growing pharma market in the Middle East and Africa region with a value of US$6.3 billion. Pharmaceutical sales have already increased from US$2.3 billion in 2017 to US$5.2 billion by 2028. According to the MoHP, approximately 80% of pharmaceuticals are manufactured locally, positioning Egypt to become the leading manufacturer and exporter in the MENA region.
Conclusion
The healthcare market continues to grow in Egypt, primarily due to the demand from the rapidly expanding population which is expected to reach 151 million by 2050. With its large population and prevalence of chronic diseases such as high blood pressure, diabetes, and Hepatitis C, Egypt is a market primed to absorb healthcare services. With the growing population and legislation shifting toward a greater proportion of citizens having access to health insurance, the demand for hospital services and space will rise, creating opportunities for new market entrants. At the same time, Egypt’s healthcare infrastructure requires significant investment in both general and specialized medical facilities. It is expected that the privatization move by the government will attract new investments and particularly make it easier for private investors to enter Egypt’s healthcare space. This represents a significant opportunity for investors in the medium to long term. Attracting new market participants will be critical in meeting new demands caused by changing hospital visit patterns as the government implements universal health insurance coverage. In order to improve the healthcare services in Egypt both in terms of quality and quantity, Egypt needs to increase the beds ratio per 1,000 population and physician-patient ratio. Lastly, the surging demand for healthcare will create a need for more “Doctor’s Clinics” in Egypt. According to Colliers research, Egypt will require approximately two million square meters of medical clinic space by 2030, at a cost of US$1 billion, providing opportunities for developers to develop and sell clinics to doctors/investors.
Egypt in figures
Health Indicators
Fertility Rate: 3.3 live births per woman
Life Expectancy (Female, Male): 75, 70
Infant Mortality Rate: 13.2 deaths per 1,000 live births
Child Mortality Rate: 16.9 per 1,000 live births
Maternal Mortality Rate: 37 deaths per 100,000 live births
Ethnicities
Egyptian Arab: 95%
Other: 5%
Age Structure
0-14 years: 33.62% (male 18,112,550/female 16,889,155)
15-24 years: 18.01% (male 9,684,437/female 9,071,163)
25-54 years: 37.85% (male 20,032,310/female 19,376,847)
55-64 years: 6.08% (male 3,160,438/female 3,172,544)
65 years and over: 4.44% (male 2,213,539/female 2,411,457) (2020 est.)
This feature appeared in the June 2022 issue of Healthcare Middle East & Africa. You can read this and the entire magazine HERE
