Acute Hospital Start-Up project with 22% ROI, a kind in South Africa

Opportunity Snapshot

Investment Opportunity

The development comprises of a hospital and high density residential area: A Frail Care, Step-Down, Private Lodge, Business Centre and a Hotel.

This is a high level business concept with costing models for a high density residential and/or retirement village (including hospital staff residential buildings, medical facilities, hotel and shopping centre along with the inclusion of a Neuro science centre of excellence.

According to the National Treasury's Fiscal Review for 2011, the GDP spend on health was split as follows:

- R120.8 billion (48.5%) in the private health sector, which covers 16.2% of the population or 8.2 million people, many of whom have medical cover
- R122.4 billion (49.2%) in the public sector, which is made up of 84% of the population, or 42 million people, who generally rely on the public health care sector
- The remaining R5.3 billion (2.3%) is donor and NGO spend

Recently the government has come out very critical of the private sector, with claims that it is not affordable and serves only the rich. There is evidence that shows that in fact the private sector:
- Serves more people than just the : up to 35% of the population
- Has significantly smaller human resource than its critics claim
- Reduces the burden on the public sector
- Has less 'excess capacity' than has been claimed
- Faces input costs and barriers to market activity which drives up prices

National Health Insurance (NHI)
The introduction of the NHI serves as a great opportunity for the private sector. The NHI will allow ALL South Africans to access quality health care. According to the Minister of health, the NHI will contract with facilities that meet the standards and requirement set by the office of Health Standards Compliance (OHSC). According to a statement made by the Minister and comment posted on the Department of Health (DoH) website, less than 15% of public sector institutions met the required standard. It can be safely assumed that over 85% of private sector hospitals will meet the standard, thus making them a key player in serving the NHI.

Funding Needs

The working capital and equipment loan agreement is suggested to be carried over a period of 72 months, but will be repaid within 36 months if the projected figures are met.

Competitive Advantage

The comprehensive demographic research conducted by Demacon convinced the Gauteng Department of health and social services that the need was proven and indeed exists for a new private hospital

The plan includes promoting the hospital to international diplomats in Africa which will open a large market and provision will therefore be made for the inclusion luxury suites in all hospital wards.

Rationale for the deal

The business case is available to interested investors. For more information, please contact us on Merar.

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