Healthcare insurance sector in Sub-Saharan Africa to boom over the next five years

07 May 2018 Authored by Consultancy.africa

As certain key economies in Sub-Saharan Africa begin to mature, the total expenditure in the healthcare insurance segment is expected to balloon over the next three years, specifically in Kenya, Nigeria, and South Africa. According to a new report from EY, spending on healthcare insurance in these three countries is expected to surpass $60 billion by 2021. 

Nigeria, South Africa, and Kenya are among the richest economies by GDP in Africa. The three countries represent key financial centres for the western, southern, and eastern regions of Sub-Saharan Africa (SSA) respectively, and each has developed and grown to attain a unique character.

Oil is a major component of the Nigerian economy, for instance, which has been a source of prosperity in the past, but has been more of a burden to the country since the plummeting of oil prices in 2014. South Africa’s economy is relatively more diversified, but remains partially dependent on the mining sector, which has also spelled trouble for the country recently.

In the east, Kenya is the most diversified of the three economies, acting as a key trade hub for Eastern Africa and dealing in the trade of basic commodities such as tea, coffee, and fish.  Despite being more diversified, Kenya’s economy – with a GDP of just over $50 billion – is significantly smaller than that of Nigeria, at nearly $600 billion, and South Africa, at just over $340 billion.

As these economies prosper, one area where people will increasingly be disposed to spend is on healthcare insurance. Big Four professional services firm EY, in collaboration with Oxford Economics, has offered some insights into the past, present, and future of the sector in these countries in a new report titled ‘Global analysis of health insurance in Sub-Saharan Africa.’

Nigeria 

Despite being the richest country in Africa, Nigeria’s health insurance framework is described by the report as ‘piecemeal and ineffective.’ A National Health Insurance Scheme was introduced in 1999, but subscription to the scheme was not mandatory, which prompted local governments to sidestep its adoption. As a result, only 4% of Nigeria’s population subscribed to the scheme at last count in 2016.

Health Insurance Overview Nigeria

Even private insurance coverage remains low, and 95% of healthcare expenditure comes from individual savings. However, the report predicts some improvement in the near future, both in government spending on healthcare as well as private expenditure.

Between 2011 and 2016, government spending on healthcare increased at a dismal rate of 0.6% annually. Over the next three years, this figure is expected to skyrocket to a growth rate of 8.8% per annum. Private expenditure is also expected to pick up, although to a lesser extent, increasing from 5.4% growth per annum between 2011 and 2016 to 6% growth per annum up until 2021.

Total healthcare expenditure in Nigeria by 2021, according to the report, will go from just over $16 billion in 2016 to $22.5 billion in 2021.

South Africa 

South Africa has the most coverage of the three countries, but the absolute figure for private coverage amounts to a mere 16%. On the other hand, South Africans contribute 42% of their total healthcare expenditure to voluntary private insurance, which is higher than any other country in the world according to the WHO.

Health insurance overview South Africa

Between 2011 and 2016, South Africa’s spending on healthcare declined across the board, in terms of government expenditure, private expenditure, and expenditure on insurance. This is set to change over the next three years, with government health spending projected to increase at 4.8% per annum, while expenditure on private health insurance will increase by 5.1% per annum.

Total health expenditure in South Africa is expected to amount to $32.5 billion by 2021, up from $26.4 billion in 2016.

Kenya 

Kenya’s current level of coverage remains sub-optimal, given the fact that nearly 50% of expenditure on healthcare is self-funded. On the other hand, the government has established a National Hospital Insurance Fund, which has seen the number of recipients of outpatient medical care grow from nearly 4 million in 2013 to nearly 6 million in 2017.

Health insurance overview Kenya

Expenditure on healthcare in Kenya has seen the biggest increases between 2011 and 2016. Total health spending, for instance, grew by 16.1% annually, while total government spending grew by over 27%. Expenditure on private health insurance grew by over 25% per annum.

The growth is expected to be high in the near future, although to a slightly lesser extent. Government health spending will increase at nearly 7% per annum till 2021, while private health insurance spending will increase at 10.4% over the same period. Total health expenditure will go from its 2016 levels of $3.9 billion to $5.8 billion in 2021.

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