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Thursday, 16 July 2020

Egypt’s healthcare industry players cite legislative complexities, slim profit margins as deterrents to investments

Egypt’s healthcare investors want to see legislation encouraging investments: Legislative complexities is one of the biggest challenges for the healthcare sector, investors and industry players said in a webinar yesterday hosted by the British Egyptian Business Association (BEBA). Former deputy prime minister Ziad Bahaa Eldin pointed to how difficult the current legislative framework makes it for an investor who is not a physician or medical practitioner to invest in the industry, which is discouraging some investors at a time when the sector needs to be attractive.

Another major hurdle for the industry? Slim profit margins, said EFG Hermes’ Private Equity Managing Director, Samer Yassa. Private sector investors in the healthcare industry are after a 20% profit margin, but the average margin in Egypt runs at around 18%, he noted, which discourages some from incurring the risk of fresh investments. Egypt’s private healthcare providers had complained last month that a mandatory pricing scheme the Health Ministry had set out for covid-19 treatment across hospitals would cause them to run at a loss. The ministry eventually agreed to raise the prices by 20%.

The pandemic has shifted investment priorities, including a move towards providing medical services virtually, Cleopatra Hospitals Group CEO Ahmed Ezzeldine said. This shift entails more than just connecting virtually with a physician, he noted: Investments are piling in to better handle and organize big data, and otherwise provide complementary services and infrastructure.

There is no need to fear mergers: Participants called on the government to encourage the integration of companies in the health care sector to open the door to more sector-specific investments. "There is a fear of the emergence of conglomerates in the health sector,” said Sameh Gabra, head of the investment at Samcrete. “We must encourage integration and direct investment and not be afraid to acquire a number of beds," he said, pointing out that the number of beds in private hospitals is small compared to the total number in the country.

A second wave of covid-19 cases is all but certain — but we’ll be better prepared when it hits, considering the country’s health infrastructure has improved significantly over the past four months and is now equipped to handle cases, Ezzeldin said. According to Ezzeldin, presidential health adviser, Mohamed Awad Tag Eldin, and head of the Health Ministry’s covid-19 committee, Hossam Hosny, have suggested that the second wave could also be less infectious.

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