The Critical Role of Local Expertise in Healthcare Due Diligence Across Africa
Africa’s healthcare sector presents a landscape of tremendous opportunity intertwined with complex challenges. While the continent’s healthcare market is projected to reach $259 billion by 2030 [1], critical gaps persist: less than 2% of Africa’s $1.2 trillion impact investing market currently targets healthcare [2], and official development assistance for health has plateaued at just 22% of government health expenditure since 2011 [3]. Further, African region was hit hardest by World Health Organization (WHO) budget cuts, losing over $150 million in funding after the US withdrawal and a decline in global health spending [4].
The private sector remains hesitant to invest due to regulatory uncertainty and infrastructure gaps [5], weaker exit opportunities, and the smaller deal sizes typical of many healthcare markets. Furthermore, volatile geopolitical systems necessitate a more complex, customized risk assessment that requires deep local knowledge to conduct effectively. This hesitancy persists even amid growing momentum in digital health solutions which attracted $167 million in investments in 2023 alone [1]. Digital health is projected to grow at a 23% Compound Annual Growth Rate (CAGR) between 2024 and 2030 [6], outpacing traditional sectors such as pharmaceuticals (6–9% CAGR) [7] and medical devices (5–7% CAGR) [8,9].
For investors and operators navigating this space, effective due diligence is not just beneficial, it’s essential. This process must be tailored to the specific nuances of the healthcare sector, as it evaluates the operational, regulatory, and market viability of healthcare assets, and serves as the critical bridge between investment potential and success [10].
In a survey with 150 C-suite-level and other senior executives, 18% of respondents identified due diligence findings as the most significant factor in failed negotiations [11].
Case Studies
Unlocking Value in an East African Healthcare Service Provider
Consider an investor evaluating a healthcare service provider with a significant footprint in East Africa, grappling with underutilised services and mounting operational costs. A due diligence team at Africa Health Business (AHB), with a unique combination of deep financial analytics and on-the-ground healthcare operational expertise conducted a comprehensive analysis that went beyond financials to assess referral patterns, licensing compliance, and supplier contracts.
The process delivered key insights, including:
- Staffing models initially misaligned with patient volumes: AHB’s deep dive revealed a critical gap, Africa’s health workforce density sits at only 1.55 health workers (doctors, nurses, midwives) per 1,000 people, compared to the WHO’s recommended minimum of 4.45 per 1,000 for essential services [12]. These figures highlight that, although workforce-to-patient ratios look weak compared to developed markets, redeploying lower cadres through task-shifting (such as clinical officers) is a validated and cost-effective strategy rather than a red flag
- Marketing channels were refocused: Instead of relying on expensive digital campaigns, AHB reshaped marketing around what genuinely drives patient acquisition in local contexts: community networks, word of mouth, and radio outreach. This reflects the realities of the high trust placed in grassroots communication channels.
- Supply chain strategies adapted for local resilience: Supplier contracts were restructured to prioritize local vendors, which reduced exposure to foreign exchange volatility and frequent medical stock-outs. This approach acknowledged the logistical and financial vulnerabilities of relying on global supply chains in African healthcare markets.
Additionally, new revenue streams were identified based on evolving reimbursement policies, including service packages structured to align with government insurance coverage. What initially appeared as operational weaknesses were reframed into opportunities grounded in the realities of the local market.
Preventing Costly Errors Through Informed Market Entry
The value of localized insight proves particularly critical in market expansion scenarios. When a regional pharmaceutical manufacturing and supply chain company entered a new East African market following an acquisition, a comprehensive market research and commercial due diligence was essential. Combining desk research, interviews, field visits, and a strong local market intelligence, the team provided competitive dynamics, growth opportunities and operational requirements for a seamless market entry. These recommendations sought to, over time, not only prevent costly errors but establish a foundation for scalable growth.
Beyond market size estimates, the team flagged challenges in distribution networks where informal supply chains account for more than half of pharmaceutical sales. In Kenya, for example, widespread reliance on unregistered vendors and informal wholesalers fuels a parallel market, with estimates suggesting that up to 30% of medicines are counterfeit [13]. Additionally, a study in rural Uganda showed that informal retail drug outlets account for approximately 76% of all medicine sellers, with only a small fraction being licensed or formal pharmacies [14].
The value of localized insight proves particularly critical in market expansion scenarios.
Hidden Risks in a Rural Kenyan Hospital Acquisition
Equally important is due diligence’s role in preventing capital misallocation and costly investments. In one case, AHB supported the assessment of a rural hospital in Kenya that initially appeared to present a promising acquisition. However, through its understanding of the local healthcare financing context, especially insurance reimbursement systems and billing practices, AHB’s analysis uncovered financial discrepancies. These issues were not evident from standard financial reviews but became apparent through cross-checks with local insurers, staff interviews, and claims processing timelines. Based on these findings, the investor made an informed decision not to proceed with the investment, ultimately avoiding potential financial exposure.
Local Expertise: The Missing Link in African Healthcare Due Diligence
These examples highlight that due diligence is not only about validating opportunities; it is equally a tool for managing risk, uncovering operational realities, and ensuring investment decisions are grounded in accurate, context-specific information. In markets where data can be limited or fragmented, declining to invest, when guided by localized insight, can be a sign of strong discipline and long-term value protection.
In markets where data can be limited or fragmented, declining to invest, when guided by localized insight, can be a sign of strong discipline and long-term value protection.
Underlying these examples are broader lessons for healthcare investment in Africa. First, regulatory complexity is the rule rather than the exception; local advisors are indispensable for navigating licensing, compliance, and reporting requirements. Second, operational risks, from staffing models to supply chain vulnerabilities, are often invisible without on-the-ground assessment. Third, cultural nuances influence everything from patient engagement to brand perception, making market success contingent on more than financial metrics alone.
At AHB, our years of pan-African healthcare business advisory work have revealed consistent patterns and one fundamental reality: effective due diligence must be deeply contextual to unlock value that traditional financial analysis, an often-one-dimensional exercise, cannot capture. Standard approaches often fail to account for Africa’s unique complexities, making locally informed projects more effective in achieving sustainable outcomes, reducing unexpected risks, and uncovering untapped potential.
For investors, this shifts the key question from “What are the potential financial returns vs. risk?” to “Who can provide the local expertise to interpret what these figures truly mean in reality?”Only through local perspectives does the complete picture emerge, distinguishing impactful investments that yield both financial benefits and social impact
References:
1. “Africa Corporate Data | Investment in Africa | Africa Companies,” Africa Corporate Data | Investment in Africa | Africa CompaniesShort, 2025. https://www.asokoinsight.com/content/market-insights/mapping-africa-s-healthcare-needs-and-value-chains
2. Adva Saldinger, “New funds aim to tackle gaps in African health financing,” Devex, May 30, 2023. https://www.devex.com/news/new-funds-aim-to-tackle-gaps-in-african-health-financing-105616(accessed Jul. 16, 2025)
3. “Enabling Sustainable Health Workforce Investments for Universal Health Coverage and Health Security for the Africa We Want PRIORITISE • ALIGN • INVEST • SUSTAIN AFRICA HEALTH WORKFORCE INVESTMENT CHARTER,” 2023. Available: https://www.afro.who.int/sites/default/files/2023-08/Africa%20Health%20Workforce%20Investment%20Charter_v6_May%202023.pdf
4. “D. Shetty and S. Anderson, “African Nations Ask WHO for Increased Funding as Global Health Aid Hits Decade-Low,” Health Policy Watch, 22-May-2025. [Online]. Available: https://healthpolicy-watch.news/african-nations-ask-who-for-increased-funding-as-global-health-aid-hits-decade-low/. [Accessed: 08-Sep-2025]”.
5. “Africa’s Health Financing in a New Era,” Africa CDC, Apr. 2025. Accessed: Jul. 16, 2025. [Online]. Available: https://mesamalaria.org/wp-content/uploads/2025/04/Addressing-Health-Financing-Challenges-in-Africa-Through-Domestic-Resource-Mobilization-and-Innovative-Financing-Mechanisms_7-April-2025.pdf
6. “Africa Digital Health Market Size, Share & Trends Analysis Report by Technology (Tele-Healthcare, mHealth), Component (Hardware, Software), Application, End Use, and Segment Forecasts, 2024–2030,” Grand View Research, Report ID GVR-4-68040-201-8, 2025. [Online]. Available: https://www.grandviewresearch.com/industry-analysis/africa-digital-health-market-report. [Accessed: 08-Sep-2025].
7. “African Pharmaceutical Market to Grow at 6–8% CAGR by 2029, Driven by Rising Demand and Investment,” PharmiWeb, 28-May-2025. [Online]. Available: https://www.pharmiweb.com/press-release/2025-05-28/african-pharmaceutical-market-to-grow-at-6-8-cagr-by-2029-driven-by-rising-demand-and-investment. [Accessed: 08-Sep-2025].
8. “Africa Medical Devices Market Size & Share, Trends, COVID-19 Impact & Growth Analysis Report – Segmented by Type, End-User & Country, 2024–2033,” Market Data Forecast, last updated August 2025. [Online]. Available: https://www.marketdataforecast.com/market-reports/africa-medical-devices-market. [Accessed: 08-Sep-2025].
9. “Africa Medical Devices Market Projected to Reach USD 7.786 Billion, with a Robust 7.10 % CAGR Till 2032,” iC CrowdNewswire, 19-May-2025. [Online]. Available: https://icrowdnewswire.com/2025/05/19/africa-medical-devices-market-projected-to-reach-usd-7-786-billion-with-a-robust-7-10-cagr-till-2032/. [Accessed: 08-Sep-2025].
10. “The Importance of Financial Due Diligence in Saudi Arabian Investments | Insights KSA,” Insights KSA, Feb. 27, 2024.https://insightss.co/blogs/the-importance-of-financial-due-diligence/(accessed Jul. 15, 2025)
11. “Doing Deals in Sub-Saharan Africa 2024,” assets.kpmg.com, 2024. https://assets.kpmg.com/content/dam/kpmg/ng/pdf/2024/11/Doing%20Deals%20in%20Sub-Saharan%20Africa%202024%20FINAL.pdf(accessed Jul. 23, 2025).
12. World Health Organization, “Chronic staff shortfalls stifle Africa’s health systems: WHO study,” WHO Regional Office for Africa, 22-Jun-2022. [Online]. Available: https://www.afro.who.int/news/chronic-staff-shortfalls-stifle-africas-health-systems-who-study. [Accessed: 08-Sep-2025].
13.. T. Wanzala, “Why fake drugs remain an economic pain for Kenya,” Business Daily Africa, [Online]. Available: https://www.businessdailyafrica.com/bd/economy/why-fake-drugs-remain-an-economic-pain-for-kenya-5085086/. [Accessed: 08-Sep-2025].
14. D. L. Buchner, F. E. Kitutu, D. E. Cross, E. Nakamoga, and P. Awor, “A cross-sectional study to identify the distribution and characteristics of licensed and unlicensed private drug shops in rural Eastern Uganda to inform an iCCM intervention to improve health outcomes for children under five years,” PLoS ONE, vol. 14, no. 1, p. e0209641, Jan. 2019. [Online]. Available: https://doi.org/10.1371/journal.pone.0209641. [Accessed: 08-Sep-2025].
