Health Sector Financing Strategies in Africa
Never before in the last half-century has the healthcare landscape in Africa seen so much change and so much interest. In fact, the health care sector in Africa would be worth an estimated $259 billion by 2030. While these trends reveal a lucrative opportunity for the private sector, if not well regulated, the system health care in Africa could end up keeping more Africans below the poverty line. Thus, African countries have an opportunity to build on the success of health financing in 2021 to build the resilience of this sector and of African populations.
Out-of-pocket health spending in Africa remains excessively high compared to other continents – this is just one of the weaknesses of African health systems that the COVID-19 pandemic has exposed. Indeed, despite the devastation the virus has wrought, it has also provided the continent with opportunities to reshape its health infrastructure as well as its supply systems, urging a shift from donor and externally manufactured products to continental production by taking advantage of the opportunities created by the African continent. Free trade Agreement.
COVID-19 has created not only a health crisis, but an economic contraction never experienced before with such rapidity. In addition, COVID-induced increase in unemployment leads to lower private sector health spending, while COVID increases the cost of health care – in a region where private health spending already exceeds 50% of spending total health in more than 15 countries (Figure 2.6 below). The immediate challenge for many governments is how to provide affordable and reliable health care in an environment of budget constraints.
Prior to the COVID pandemic, a number of suggestions for increasing public support for the health sector had been offered, primarily through domestic resource mobilization. However, in the face of economic contraction, it is no longer possible to increase public revenue in the short term.
Out-of-pocket health spending in Africa remains excessively high compared to other continents – this is just one of the weaknesses of African health systems that the COVID-19 pandemic has exposed.
The immediate objective of international financial institutions has therefore been to help African economies mobilize additional concessional resources. During the crisis, the G-20 proposed three-phase options for obtaining additional liquidity: suspension of debt service, special drawing rights and an innovative financing approach for the acquisition of vaccines. Multilateral financial institutions have also increased the disbursement of new credits to countries to support additional health spending.
The G-20 – building on a proposal from African finance ministers and the Economic Commission for Africa (UNECA) – adopted the African proposal for a Debt Service Suspension Initiative (DSSI) as the first liquidity injection for low-income countries. The DSSI allowed countries to suspend debt payment obligations to creditors in 2020 and 2021 so that governments could use financial resources to respond to the global health crisis. These newly available resources were used to purchase personal protective equipment (PPE) and also to support local production of PPE, which helped to revive part of the economy.
In early 2021, the G-20 further approved the issuance of Special Drawing Rights (SDRs) – which had been called for by African finance ministers at the start of the pandemic – worth $650 billion. , of which Africa received about 5% (worth about $33.6 billion). These additional resources have increased countries’ liquidity to respond to both the health crisis and the economic crisis.
Relying on African institutions to finance and fight the pandemic has served Africa well throughout the crisis. Thus, Africa has established a number of new institutions and innovative financing approaches to fund vaccine procurement.
The first of these institutions is the African Medical Supplies Platform (AMSP), whose strength lies in its ability to aggregate the demand for medical supplies in a transparent way, thereby reducing market prices. Another important innovation was the creation of the African Vaccines Acquisition Trust (AVAT) by pooling SDRs from countries such as Egypt, Nigeria and Zimbabwe. It provided the first resources to the African Export-Import Bank (Afreximbank) to set up a vaccine procurement mechanism. Under the leadership of the African Union Special Envoy, Strive Masiwiya, and in collaboration with the Africa CDC led by Dr. John Nkengasong and UNECA, AVAT was able to meet over 40% of the COVID vaccine needs of Africa (including a 70 million purchase of Moderna from the US). With the support of a $500 million grant from the Mastercard Foundation, the costs of vaccines under the AVAT mechanism are comparable to those purchased through COVAX. Indeed, in 2022, one of the main objectives of leaders must be to deliver purchased vaccines: by the end of 2021, less than 10% of Africa is fully vaccinated. (For more on vaccine equity, see Michel Sidibé’s point of view.)
Afreximbank has also developed the AVAT no-fault indemnity program for participating member states. This program, the first of its kind on the continent, provides no-fault lump sum compensation in full and final settlement of any claim to individuals who have suffered a “serious adverse event” resulting in permanent impairment or death associated with COVID-19. 19 vaccines purchased or distributed under AVAT in one of the participating Member States.
The COVID-induced increase in unemployment leads to a decrease in private sector health expenditure, while COVID increases the cost of health care.
The development of these innovative mechanisms means that Africa can now turn to the market to source its own health products, enabling Africa to shift from importing over 90% of its health needs. to the production of equipment and pharmaceuticals on the continent. This momentum has already begun with countries such as South Africa, Senegal and Algeria increasing their capacities and Rwanda, Kenya, Nigeria and Morocco setting up new manufacturing capacities of basic products for the health sector.
With the COVID-19 pandemic, the need for closer collaboration between health and finance ministers has become even more important. Indeed, inclusive, efficient and effective health care financing requires the two to work together. There is now a call to create a Global Health and Finance Council to address fundamental issues in global health governance, some of which have been so clearly exposed by the (mis)management of the pandemic.
Africa is ahead of this effort: Under the leadership of the Heads of State of the African Union, Africa CDC and ECA, relevant ministers have held bi-monthly coordination meetings to align resources and execution . This new mechanism could also be used post-pandemic to build and structure financing for more affordable and improved healthcare on the continent. The World Bank, Mastercard Foundation, UNICEF, GAVI and others are already working through this mechanism to help address the biggest health challenge for Africa in 2022: vaccinations.