The problems with investing in MENA
The biggest problem with investing in healthcare in MENA isn’t returning capital – it’s raising it in the first place. But it’s not the only problem. Dr Helmut Schuehsler, chairman and managing partner for TVM Capital in Dubai and Munich, shared his thoughts about it at HBI 2018.
Schuehsler identifies several problems:
A do-it-yourself mentality
He explains: “Raising capital for a Middle East-focussed strategy today is hugely difficult. A lot of the local investors are very often are family offices, other than the sovereign wealth funds which are huge and for whom we are way too small.
“They are usually diversified businesses, and if they want to invest in the Middle East they do it themselves. And if they want to invest in healthcare, they do it themselves.”
Schuehsler explains these groups build hospitals on land that is often donated by the government, or a sheikh.
He adds: “There’s very little money from the inside because people don’t want to give me money as a private equity manager to manage it without an influence over what we do, and I think outside the Middle East, you can imagine what everyone is saying when it comes to investing there.
“You are lucky if you get an interview – if people actually listen to your story – whatever they watch, Fox or the BBC or whatever, is so bad about the Middle East that people’s propensity to listen to you is very small.”
Geography
Another problem in the Middle East is that it’s such an ill-defined area that people don’t know where to put it, he says.
“Investment teams in our field think in geographic terms. We’re not in Asia (for the Asian team), we’re not in Africa, in Europe, not North America or Europe. It’s a no man’s land in the middle.”
Change
The region is going through tremendous change at the moment which is also a problem, says Schuehsler, adding: “The speed of development is tremendous. Determining where the opportunity is has changed dramatically. I’d argue 10 years ago, long term post-acute care, was a huge opportunity because there was no long-term care in all of the Middle East and we had fast-growing businesses.
“Five to seven years later, that success has been noticed by other people and you have a wave of others coming into the market so that opportunity is gone. I think people coming into that market in the next two to four years will have a very hard time. “
Regulation
Schuehsler says: “Regulators change their minds, especially in Abu Dhabi which is a great market by anybody’s standard. You have to deal with a lot of change in terms of how the regulator looks at the world, because we’ve gone back and fourth between being invited to invest in certain sub-sectors – and at the same time being under tremendous cost pressure, which I understand, because of healthcare inflation.”
Opportunity
Despite all this, Schuehsler believes there is a tremendous opportunity in the region, especially with Vision 2030 in Saudi Arabia, the plan to reduce the country’s dependence on oil and develop public sector services like health.
He explains: “It’s not only way the biggest market in GCC but a development where you hold your breath and ask, ‘am I brave enough and is the time right to raise a fund to go into Saudi healthcare?'”
“At some point you have to make a decision. When everyone comes, it’s too late. Do we deploy big time and put all our resources into Saudi Arabia. For anybody who is in the investment business, that’s the biggest question.”
Abdul Hamid Oubeisi, CEO of Abu Dhabi and Dubai-based National Reference Laboratory, also sees opportunity in the region.
He explains: “There are great opportunities in outsourcing. Governments are interested, whether in PPP, or privatisation. The UAE Ministry of Health for example recently outsourced their entire diagnostic. We also hear they are looking at the hospital operator market.
“In Saudi, it is taking a bit longer, but we see PPPs coming. There are a lot of opportunities where providers like us could bring productivity and efficiency.”
Click here to read the presentation “Long-term growth strategies that work” by Pransanth Manghat given at HBI 2018.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
