AAR to use Swedfund’s $3m for local, regional expansion

 

President Uhuru Kenyatta with the ceremonial sword, one of the instruments of power, during his inauguration on April 9, 2013. Uhuru’s priority will be to make Kenya richer, create jobs, and ensure national security. There is an easy way to do all three in one stroke — grow Kenya’s exports to the EAC.   Nation Media Group

By STEVE MBOGO Special Correspondent

In Summary

• The capital is expected to go into funding the creation of more service centres, employing an additional 300 staff by 2015.
• Swedfund said in a statement that its investment in AAR is based on ongoing increase in demand for medical services in East Africa.
• AAR is expected to use the money to set up several new clinics to reach out to new clients as it seeks to increase its revenue while complimenting governments’ healthcare services.

Swedfund has invested $3 million in AAR Healthcare, one of the two recently licensed medical insurance companies in Kenya, to finance its local and regional expansion to meet the rising demand for medical services in East Africa.

The capital is expected to go into funding the creation of more service centres, employing an additional 300 staff by 2015, said Swedfund in a statement. In January this year AAR opened the AAR Karen Health Centre in Nairobi.

AAR Healthcare has previously received funding from private equity investor, Investment Fund for Health in Africa (IFHA), which in 2010 bought 20 per cent of the company in a deal that valued the company at approximately $45 million. IFHA remains the largest single shareholder in AAR.

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IFHA is a venture capital fund that investments in private healthcare companies in Africa. IFHA is backed by FMO, the International Financing Corporation, the African Development Bank (AfDB), Pfizer, Goldman Sachs, APG pension fund and Social Investor Foundation for Africa (SIFA).

According to the IFC, healthcare in Africa is one of the least exploited opportunities by investors despite potential for high returns and social impact. The IFC projects that investment of up to $20 billion is required by the healthcare sector in Africa over a period of five years and that the sector is growing by 9 per cent every year.

East Africa Community member states have potential for public private partnerships (PPPs) on healthcare investments as governments in the bloc have shown interest in upscaling healthcare financing to improve access, quality and affordable medical services to its citizens.

Recently, the Community unveiled a $5 million programme dubbed the East African Open Health Initiative to reproductive, maternal and child health across the five member states. Successive studies have shown that private financing of healthcare is much higher per person compared with the per capita spending on healthcare by governments in the EAC.

Swedfund said in a statement that its investment in AAR is based on ongoing increase in demand for medical services in East Africa.

In Kenya for instance, the number of registered doctors has grown annually at 4.5 per cent and Registered Nurses (diploma holders) have increased annually by 33 per cent since 2008 according to Kenya National Bureau of Statistics 2012.

AAR is expected to use the money to set up several new clinics to reach out to new clients as it seeks to increase its revenue while complimenting governments’ healthcare services.

AAR Healthcare was established in 1984 by the late Bengt Beckmann, a Swedish citizen. Today the company operates 24 clinics in Kenya, Uganda and Tanzania with a staff of 350. The new investment is also expected to help AAR build on its quality, accessibility and service offerings to customers said Tomas Bie, senior investment manager at Swedfund.

“The urban population in East Africa requires high quality medical service, availability and short waiting times,” said Mr Bie.

Last year, AAR said it had entered into discussions to sell a majority stake for nearly $40 million but it was not clear how far those discussions had gone or if the current deal was part of those discussions. The company needs the capital to enter new markets such as Rwanda, Burundi and countries in West Africa.

AAR and Resolution Health East Africa are the only two exclusive health insurance underwriters in Kenya. The two companies have separately said they will be seeking to buy into new companies as part of their expansion plans across the region and West Africa.