Making Health the Driver to Realize the Promise of the Summit on the Financing of African Economies

health

 

By Laird Treiber

 

In mid-May, French President Macron hosted two remarkable international events.  On May 17, he hosted the International Conference on Sudan, which resolved most of the outstanding issues required to allow Sudan to return to international capital markets.  On May 18, he hosted 29 African leaders and additional international allies for the Summit on the Financing of African Economies.  The Summit was remarkable for getting so many important international partners, including the U.S., France, UK, Germany, China, Saudi Arabia and the UAE, to commit to support a comprehensive list of important and innovative recommendations for the IMF, World Bank and regional development banks to implement this year to help Africa accelerate its economic recovery from the COVID-19 pandemic.   

There is a lot to unpack from the impressive Summit on the 18th.  Most of the headlines focused on the call for the IMF to quickly approve an “unprecedented general allocation” of $650 billion in IMF Special Drawing Rights (SDRs), of which $33 billion will increase African government reserves.  This by itself will be a welcome innovative response to help African governments recover economically.  The Summit further called on the IMF to set up mechanisms to allow developed countries to “on-lend” SDRs through the IMF’s Poverty Reduction and Growth Trust, as well as through development banks to support inclusive recovery programs and projects.  The Summit also emphasized the importance of countries supporting more private sector investment, including by greater use of risk sharing instruments.  The Summit’s communique argues persuasively about the need to promote “sustainable, circular and low carbon development pathways,” build human capital, and address critical infrastructure needs, particularly in expanding information communication technology (ICT) networks.  The communique also commits the signatories to supporting efforts to help African countries make their government budgets more sustainable, including improving the efficiency and transparency of public spending. 

This Summit represents an important shift in thinking in presenting support for Africa’s sustainable economic recovery as a shared urgent priority.  That shift will be even more significant if we focus on health as the primary driver of the better policy the Summit seeks, rather than grouping it together as one of several SDGs that are all equally urgent.  Arguably, African countries will not truly be on the road to recovery until they have done more to address the underlying vulnerabilities exposed by the COVID pandemic, which requires a much stronger health sector as the basis for efforts in all other sectors.  The economic recovery from the pandemic offers an opportunity to shift thinking about public investments from an annual bill that Finance ministers resent paying to a strategic investment in a country’s future security and prosperity. 

No sector is better poised to make the case for a new partnership paradigm than health, for several reasons:

  • Health is key to the long-term structural soundness of African economies that the Summit seeks to promote (more so than even electricity).  Health crises, including Ebola and the ongoing campaign against HIV/AIDS, have disrupted African economies both on a short term and on an enduring basis (in the case of AIDS, malaria and TB).  Putting in place measures to support more secure and sustainable health systems will not just help African nations recover from the COVID pandemic.  It will also begin addressing one of Africa’s biggest long-term unfunded liabilities, namely the need to address the rapidly growing number of Non-Communicable Disease (NCD) cases (including diabetes, heart disease, cancer among others).  Taking steps today to set up the information collection and disease management systems that can help manage all kinds of disease, incorporating better awareness programs, and funding the development of new and innovative detection and monitoring devices will all help flatten the fiscal impact that is predicted related to effectively managing both communicable and non-communicable diseases in Africa.
  • There are more opportunities in health than in other sectors to promote greater transparency and efficiency of spending.  UNECA sees significant opportunity for increased private sector partnerships to dramatically reduce out of pocket health expenses (which account for up to 40% of health care spending today, a huge drag on growth potential) through risk pooling (e.g., insurance) measures.  Significant efficiencies can be gained in disease management and maternal and child health, particularly by expanding collaboration between the private and public sectors. 
  • Getting health right in Africa will create significant economic growth opportunities.  The Business and Sustainable Development Coalition estimated in 2018 that Africa’s health care market could be worth $259 billion by 2030, representing 14% of the global total, behind only the United States at 21%.  Developing these opportunities would create 16 million jobs by 2030, a significant contribution to the 20 million jobs a year Africa needs to create to keep pace with new entrants to the labor market. 
  • The health sector is the best placed to make compelling investment cases for countries to meet the Summit’s call to increase ICT investment based on the significantly improved health service outcomes, expansion of access, and reduced cost that telemedicine and e-health programs have already shown.  The World Bank has singled out health sector responses to COVID as a key driver of the sector’s rapid expansion in 2020.  They estimate that Africa developed 13% of the world’s digital health innovations to fight COVID last year.  The health sector is likely to succeed in convincing governments to act urgently where other sectors (like education and e-commerce) have encountered obstacles over the last decade.
  • Health offers the most compelling case to develop effective means to create scalable models to increase capacity development programs on the continent.  While there are lots of calls to increase Africa’s capacity development, it is notoriously hard to build effective programs to do so absent a clear connection to market demand that creates real jobs at the end of the course.  While the World Bank estimates that Africa suffers 24% of the world’s disease burden, it has only 3% of the world’s health workers, helping make a strong investment case.

The Summit participants and other partners can meaningfully support Africa’s post-COVID recovery by taking several important steps, including:

  • Working with African governments to structure guarantees and other risk mitigation efforts that that are better targeted to improve specific health outcomes.  Only 6% of social impact bonds are currently in health.  The Summit partners can help address one of the roadblocks, namely the lack of sufficient amounts of good data, the development of which will help reduce risk perception and crowd in more investors.  The Summit partners are well placed to help think through these challenges, and develop solutions that can be implemented this year to strengthen the base for sustainable private sector investments.    
  • Helping African governments provide the right regulatory environment to let PPPs in health develop.   Particularly in sectors like ICT, it is important to put in place the right kinds of regulations on cross-border information flows that will allow telemedicine and e-health to reach their potential (including supporting entrepreneurship, a Summit goal).  This should be combined with liberalizing the health service sector to allow more participants from different sectors to bring new innovations.   The Summit partners can also encourage African governments to stand up the African Medicines Agency (AMA) and support its staff development.  This will provide harmonized rules and regulations to guide the sector, while also expediting medical device and medicines registration, which in turn will also boost investment across the medical spectrum.

U.S. Treasury Secretary Yellen made some very welcome remarks at the Summit, including reaffirming America’s commitment to “support African economic recovery from the pandemic through helping mobilize the financing needed to fund vaccines, meet debt obligations and support economic development.”  She also indicated U.S. support for the “structural transformations needed to make African economies more inclusive and resilient to future shocks, including climate change.”  She also called on African countries to focus on domestic resource mobilization and improving the investment climate to promote a green recovery and support low-cost health financing.   These comments provide a great framework for more active U.S. engagement in this sector, including working with African Governments and the African Union to help put in place regulatory improvements to achieve a number of these goals. 

CCA’s Health Security and Resilience Initiative is focused on addressing exactly these kinds of problems, bringing private companies together to see how they can help governments address challenges and improve health outcomes.  CCA stands ready to engage with U.S., African and other international partners to begin implementing some of these exciting areas for follow up, while putting in place the conditions for much greater health security in Africa as a key support for sustainable prosperity and greater partnership between the U.S. and Africa.