Alex Alexander (MD, CIEL Healthcare): “It is the right time to move onto the African continent”

CIEL Healthcare is the fastest growing healthcare management company in the country. Within three years, it earned the trust of important private equity funds and development financial institutions. Its Managing Director, Alex Alexander, explains the reasons behind the rapid growth of this cluster of CIEL Group.

BUSINESSMAG. CIEL Healthcare is a recently formed organization. However, it is already operating hospitals and clinics in Uganda and Nigeria. What explains this rapid growth?

CIEL Healthcare is the healthcare cluster of CIEL Ltd and was incorporated in June 2013. He has since then adopted a very unique business model which is one of an investment company, strategically investing in growing markets and operating its own investments. We indeed manage our hospitals, clinics and Health Membership Organisations (HMOs) through CIEL Healthcare Africa, our management company coupled with a strategic partnership with Fortis Healthcare which provides technical expertise as needed. This is a key differentiator from our competitors who tend to be either investors or operators but rarely both.

Our first investment was done by CIEL in 2009 with Fortis Clinique Darné in Mauritius. We have since increased our shareholding in the Medical and Surgical Centre Limited (the company owning Fortis Clinique Darné) to 58.60% and have expanded onto the African continent. Of course, moving into new different markets may be seen as a bit ambitious. But we believe that it is the right time to move into these markets and consolidate our network. Our recent investments in the International Medical Group (IMG) in Kampala, Uganda, in June 2015 and in Hygeia Nigeria Limited, Lagos, in January 2016 now allow us to cover the Indian Ocean as well as East and West Africa with market leading private healthcare providers in the respective markets we operate in. We are now focused on consolidating our operations.

BUSINESSMAG. What were the major steps taken by the company in its development as it penetrated the Eastern African market?

As mentioned, CIEL initially partnered with Fortis in 2009 to join hands in Fortis Clinique Darné. That was the first step for CIEL to enter the arena. The partnership was very successful and CIEL realised this was a stepping stone to move into healthcare in Africa. CIEL did so first through its private equity business, the Kibo Fund which invested in IMG in 2012. I actually moved from Fortis Clinique Darné here to run the hospital in Uganda. It was a very successful venture because we turned around the operations in 18 months and this is when CIEL decided to move into healthcare more seriously as a healthcare company itself and not just as a private equity.

CIEL Healthcare was then formed in 2013. Initially, our plans were relatively small. We thought that we would actually successfully manage one or two smaller investments in East Africa. But our business model started attracting investors of the likes of the International Financial Corporation which is part of the World Bank and Proparco, part of the which is the Agence française de Développement (AFD). They wanted to invest in a healthcare company which operates in Africa and I think that this is where we realised we could become bigger and we grabbed this momentum. We then attracted other shareholders to finance our expansion.

BUSINESSMAG. What is it about your business model that is different from other operators?

What’s happening in Africa right now is that there is a real shortage of healthcare. A lot of private equity funds are investing in the continent especially in the healthcare sector right now but what is not happening is that while funds are investing, there are no managers to manage these businesses. What differentiates us from these firms is that we are managers as well.

BUSINESSMAG. How did CIEL manage to get a management contract on the continent?

It is very difficult to get a pure management contract. If we were to go into Africa and just look for management contracts, it will be very difficult, and this is the reason why we have decided to adapt our model. We invest mainly as majority shareholder to make sure we can transform businesses, create value over the long term and ultimately get a decent return on our investments. If you look at our investments in Uganda, CIEL is the majority investor and CIEL Healthcare Africa has the management contract. In Nigeria, as a consortium of all the partners, we are again the majority shareholder and CIEL Healthcare Africa again has picked up the management contract. Now, these are long-term contracts because hospital business is difficult to run; it is a complex business; it is a very capital intensive one; it takes a bit of time to run these operations efficiently and all our contracts are a minimum of five years. This is how we come in, start creating value and turn around these operations.

BUSINESSMAG. What is the biggest challenge to healthcare management in that part of the world?

This is an interesting question. Look at Clinique Darné. When Fortis came to Clinique Darné in 2009 in partnership with CIEL, the clinic was doing well but it was in a dead trap because it had taken a lot of loans to invest in the equipment in the business. The business was stagnating. If you look at Clinique Darné today, it has successfully managed to pay off all its debts and is doing very well. Now if you look at Africa, what usually happens in all these countries is that one entrepreneurial doctor will start off a hospital. He’ll have this vision that he wants his hospital to be here and it will be successful for the initial couple of years.

But as the operations scale up and as the business becomes a little bit more complex, it becomes difficult to run the show as before and that is when it can begin to stagnate. This is what happened with IMG and International Hospital Kampala, where they had reached a scale where the two businesses began to stagnate and the promoter who is a doctor himself required financial support to grow the business. This is when an operating company comes in because they have expertise of having run more than one facility in their respective markets and this is where the operating company can come in with operating procedures, with protocols, with benchmarks and actually helps run the business efficiently.

And this is why I say you do require a certain level of expertise in running larger operations because as the operations continue to scale up, it is very difficult for one or two people to run the show. You need an organisation behind you. You need support behind you. And of course you need a lot of processes to run the operations efficiently.

BUSINESSMAG. How does one can stagnate in countries recording high economic growth? What is the mistake that operators do make in the healthcare business?

They are not operators per se. They are individuals. They are one or two doctors and entrepreneurs who actually set up these businesses and who are actually living in those countries. It is not like the big groups are actually there. If you look at the big groups in South Africa like Netcare, Medi Clinics and Life Healthcare, they are only in South Africa. And the South African market is very different from the rest of Africa. I would say that even the Kenyan market is very different from the rest of Africa. But if you look at countries like Nigeria and Uganda, for the kind of population that they have, they actually do not have a lot of private healthcare companies, they do not have too many private hospitals. So what happens is that one visionary doctor who wants to move into the healthcare business without prior business acumen sets up his own clinics. Initially they do well but as the business starts to grow, it grows out of hand and it becomes very difficult for them to manage.

BUSINESSMAG. How did you s쳮d in turning around these businesses?

Healthcare businesses are a lot like other businesses. The key difference is that you are providing an emotionally weighted service. The only happy moment is when you are delivering a child but otherwise no one wants to be in a hospital. So the most important thing is to be able to provide that level of service where you keep your patients alive and you keep them well. But at the end of the day, it is like any other business. You need quality of services, financial discipline and close monitoring. At the end of the day, having good business ethics, good business practices, investing in technology and employing best-in-class medical staff is really what our mantra is about.