Gates Foundation takes leap into social investment in African healthcare1

Finance | Tania Mason | 13 Dec 2011

The Bill and Melinda Gates Foundation has contributed several million dollars to a healthcare private equity fund that plans to invest in health services for poor people in African communities.

The African Health Fund has been launched by Aureos Capital and has attracted US$105.4m from investors that also include the International Finance Corporation and the African Development Bank. Its fundraising has now closed, just ahead of its $100m target.

The Fund will spend its money on improving hospitals, distributing medicines and manufacturing medical goods while aiming to give investors a return of 8 to 10 per cent.

Cathy Pharoah, professor of charity funding at Cass Business School, congratulated the Gates Foundation for investing in the fund - an amount reported to be around $7m.

“This investment is an excellent example of how commercial and philanthropic investment can be brought together to achieve sustainable social change in a developing country,” she said.

She acknowledged it was a high-risk venture, but pointed out that with assets exceeding $34bn, the Gates Foundation can afford to take some risks.

“Only a few foundations in the UK have dipped their toe in the water of social investment,” Pharaoh added. “The Aureos Fund has a strong track record of investing heavily in management to deal with the higher risks of social investment in developing countries.”

Sev Vettivetpillai, CEO of Aureos, said private healthcare providers are responsible for about half of all healthcare provision in Africa, but their scope to reach more people is limited because they are badly undercapitalised.

The International Monetary Fund predicts that seven of the ten fastest-growing countries in the world over the next five years will be African nations. However, it still took Aureos more than two years to raise the funding for the African Health Fund.

Directory: Cass Business School | Gates Foundation
Who's Who: Cathy Pharoah

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Nana Oye Afoom
Development Economist
21 Dec 2011

I hope these monies will actually go into boosting the needed health care in Africa and not end up in a private individuals account. I hope the health care companies that will be engage in the provision of healthcare to the countries that get picked will also be fair and diligent.

Honesty and integrity is the way forward for Africa.

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