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What Ails Health Systems in Africa? An Economic Perspective
AHETI plans to achieve its mission to ramp up local production of pharmaceuticals in Africa through four (4) main programs:
There is hardly any doubt that failing health systems result in poor health outcomes and hamper progress towards the attainment of the Sustainable Development Goals (SDGs) and Universal Health Coverage (UHC). In Africa, health systems are hobbled by leadership and governance challenges, extreme shortages of health workers, corruption in procurement systems for medical products and technologies, poor information systems, and health financing constraints. This brief discusses ways in which decision-makers can hurdle these challenges.
Attribution: Daniel Mwai & Theresa Ndavi, “What Ails Health Systems in Africa? An Economic Perspective,” ORF Issue Brief No. 431, December 2020, Observer Research Foundation.
Most African countries gained independence between the 1950s and 1960s. In order to build their economies, import substitution policies were encouraged as a conduit for economic growth and industrialisation. Advocates of import substitution argued that developing countries should promote domestic industries and reduce their dependence on foreign trade. However, this view would soon lose favour as restrictive trade policies resulted in economic costs. Moreover, it was noted that the benefits of a more outward-looking, export-oriented approach to trade and development far outweighed the costs of import substitution. Between the early 19th to mid-20th century, due to the consequences of slavery and colonisation, Africa was left behind when other countries industrialised their economies. When African countries finally moved into the international trade space, a majority of the commodities from the continent were raw materials traded for finished products. This meant that African countries gained little from trading with other countries, and because of slow industrialisation, these countries had to continue to import finished products at a higher price. This was due to lack of skills, capital, infrastructural support, technology and markets—which encouraged inefficiencies in the industries, exacerbated by a high degree of monopolistic or oligopolistic production. That notwithstanding, exports still provided the foreign exchange used to pay for imports of capital goods that were essential for domestic investment.
Estimates say that Africa will account for 80 percent of the projected four-billion increase in the global population by the year 2100; the accompanying increase in its working-age population creates a window of opportunity, which if properly harnessed, can translate into higher growth and yield a demographic dividend. Analysts observe that the significant interaction between human capital and the magnitude of the demographic dividend suggests that improving and increasing access to education is critical to improve the productivity of workers and support a transition to higher valued-added sectors. Moreover, structural transformation fostering a shift away from agriculture could help Africa reap its demographic dividend. As such, policies that remove impediments to private sector development and enable labour-intensive manufacturing could help position Africa to make the most of its resources.
The health of a population drives economic growth, and vice versa. Robust economic growth provides more fiscal space for public allocation of resources for social sectors and for prioritising healthcare. After all, it is estimated that Africa faces a financing gap for healthcare of US $66 billion per annum. The existing—and widening—gap between the growth rate of Sub Saharan African (SSA) countries and other developing regions can be explained by various factors, foremost among them, health inequality. The region needs to engage in and encourage innovative and cost-effective health interventions that will help improve allocative efficiency and production of health, with the ultimate goal of making possible health-led economic growth and development. Studies that explore the impact of healthcare on economic growth in Africa have established that both health expenditures and health outcomes have a direct and positive impact on economic growth. In particular, achieving reduction in maternal mortality, infant mortality and child mortality are all growth-friendly.