IFC and others fund greenfields in North Africa as markets “open up”
The IFC, European Bank for Reconstruction and Development (EBRD) and other development banks are providing $125m in Islamic financing for two greenfield hospital developments in Egypt and Morocco by a Saudi hospital group.
The consortium is pooling capital into a Commodity Murabaha, a financial structure which is compliant with Islamic law. Using the Murabaha, the ‘lender’ buys a commodity from a supplier, immediately resells to the ‘borrower’ which pays back in instalments or deferred payment. This includes a ‘premium’ alongside the principal, as a substitute for interest.
The Murabaha will finance greenfields in Alexandria, Egypt (208 beds) and Casablanca, Morocco (150-210 beds) being developed by Humania, although no firm delivery date has been set. Humania is a subsidiary of Bait Al Batterjee Medical Company Limited, the holding company of Saudi German Hospital Group, a listed Saudi and GCC hospital operator with around $500m in sales (2018).
The IFC, also the lead arranger for the package, is proving the bulk of the money ($61.5m), with the remainder from EBRD ($20m), Finnish Fund for Industrial Cooperation ($18.75m) and oil-producing-country organisation OPEC through its investment arm ($25m).
An investment advisor who knows these markets well tells HBI: “Egypt is on the up and up now that the dust has settled (from its recent political instability). The Egyptian pound is strengthening and the new president has created a positive, stable economic environment. People are really happy with how things are going. Though of course, things can change very quickly.
“They launched Universal Health Coverage in the North recently. But as with all UHC initiatives the question is whether it is economically viable. But they’re putting more money into the system and hopefully it can successfully shift to money-follows-the-patient instead of budget-based financing.”
Of the two countries, Morocco has attracted more interest from Europe recently, with Elsan and Diaverum entering. It sits geographically and culturally between the Middle East and Europe making it accessible to investors and operators from both.
“Unlike other North African countries, there is already a big public funder for healthcare in place that you can work with relatively easy, which creates interesting opportunities for the private sector. The market is de-regulating and is definitely heading in the right direction.”
But anecdotal evidence suggests that over-treatment, over-billing and fiscal opacity are rife in Morocco’s private hospital market.
Our source adds: “A transparent regulatory environment is important for these kinds of investors as there is a lot of reputational risk. These investment projects involve a bunch of ethical investment principles which cover all those things, directly or indirectly.
“Is Morocco any different from other markets? Not really. There is a lot of risk in healthcare practice generally. It can be a wild west. Would investors prefer a completely transparent stable regulatory environment? Yes. Is it getting better? Yes. And is it something which these projects can help? I think so.”
The hospital in Morocco is to be built as part of a larger development near Casablanca which requires the displacement of 31,000 people in 9,000 dwellings. 90% of the dwellings are informal according to EBRD with 24 ‘families’ on the proposed site of the hospital itself. All will be offered land or a service apartment by the government agency responsible for the development. These remedial measures will have to comply with the EBRD’s performance requirements (PRs) relating to sustainable development; if they don’t, Humania will need to come up with an alternative.
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