Since being founded in 2017, Humania has invested in the healthcare sector in the Middle East and other global markets. Can you describe your strategy for healthcare investments in your target geographies? Are you investing in individual countries, or do you have a buy and build strategy?
Humania’s sector focus is the entire healthcare spectrum with primary investment interest in healthcare services, technology, and other related businesses in the ecosystem e.g. specialized healthcare facilities, medical tourism and health-tech. Our geographic focus is primarily emerging markets with an immediate emphasis on the GCC, Middle East, and Africa, and a medium to long-term investment horizon which includes central, south, and southeast Asia. We seek to capitalize on our anchor investor (Bait Al Batterjee) group infrastructure in the Gulf and North Africa.
Humania follows a number of investment approaches in its different focus markets. In the GCC, for instance, the focus is on acquisitions of profitable and specialized healthcare businesses and greenfield projects in underserved niche segments e.g. mental health. In emerging markets, such as Egypt, Morocco and other African countries, the focus is on initially building tertiary care hospitals (greenfield) and bolting on acquisition opportunities to create a hub and spoke model. However, the strategy also has an opportunistic aspect. For instance, we would seek to acquire and operate a well-established hospital that offers world class services, but since such options are generally limited or the entry valuations do not leave room for value creation and upside.
How do factors such as technological advancements, demographic shifts and regulatory changes impact the healthcare sector?
Technological advancement is a key factor that impacts the health sector, and it is in this context that we are investing in healthtech venture capital with a focus on companies that have already an established product and customer base which can be globalized into other parts of the world. At an overall group level, we have over 20 large hospital assets in 5 countries with access to additional network of healthcare assets through our DFI partnerships and a very strong position to globalize technology.
In terms of general demographic shifts, we see an emerging middle-class population in the countries where we are present. Our aim is to build infrastructure that focuses on excellence in order to better serve this segment of the population.
Regarding regulatory changes, I think that the public sector is consistently limiting its role to regulating healthcare, leaving room for the private sector to become more active in the future in delivering healthcare services.
In 2020, Humania secured a USD108.5m in funding from IFC, IFU and PROPARCO to launch medical care projects in Morocco and Egypt. Can you share any specific milestones achieved in these projects since securing the funding in 2020? Are there any plans for expanding these projects to other markets in the future?
Since securing equity from the DFIs for Humania’s North Africa platform, a number of key milestones have been met. We have completed our second hospital in Alexandria. Construction of this hospital faced a number of challenges such as Covid 19, rising interest rates, and uncertain economic conditions in Egypt. The hospital is state of the art and has been designed to meet stringent environment guidelines including the IFC’s EDGE standards. During this time, Humania North Africa has also started construction on its third hospital in Morocco. We want to expand our partnership with the DFIs to enter into other markets in North Africa in the next phase of our growth.
Could you explain in more detail the co-investment model that you use with DFIs? How does this model work, and what role does Humania play in these co-investment partnerships?
The co-investment model is continuously evolving. Currently the model entails creating a common balance sheet between sponsors and other equity investors.
As we expand, we will be focusing more on third party capital to support the expansion. This could include a health infrastructure fund for Africa as well as other initiatives such as a health-tech venture capital fund and a healthcare buy-out fund.
What challenges do you encounter when it comes to staffing for portfolio companies, and in what ways do you envision technology innovation or AI playing a role in addressing talent shortages?
Humania is backed by a large healthcare group which has proven itself as one of the leading private healthcare providers in the last 35 years, giving us a significant competitive advantage. As far as hiring for portfolio companies is concerned, we always build on the strong infrastructure of our group, which enables us to leverage further platform synergies such as relationships with insurance companies and other suppliers.
We also believe that embracing technology innovation and AI within healthcare organizations can bolster the efficiency of talent acquisition and management, underpin data-driven decision-making, and promote inclusivity. This empowers healthcare institutions to address critical talent shortages and cultivate a more agile and adaptable workforce. That said, we are implementing these technologies very carefully, with a commitment to ethical practices, to ensure that they do not inadvertently perpetuate bias or discrimination in the healthcare workforce.
What is the strategy for exiting your investments? Who are potential buyers? Have you seen any significant trends in exits for the region?
Our exit strategy predominantly focuses on listing the portfolio companies, and we already as a group achieved one listing in 2016 of the Middle East Healthcare Company on the Saudi Stock Exchange. This listed entity could also be a source for exits through rights issues. Further options could be considered such as local listings as well as exiting through a trade sale. However, we are looking at our earliest exit in 3-4 years given that we have recently closed our acquisition platform and will look for value creation and growth of our portfolio companies for the next couple of years.
Additionally, although the region has demonstrated resilience compared to other parts of the world, exits have witnessed a decline that can be attributed to investors’ reluctance to accept lower valuations for their investments and venture promoters’ efforts to retain existing investors in a challenging economic and political climate.