Last week, shares for Al Hammadi Development and Investment became available for public trading on Tadawul as the company completed its initial public offering, which was 12 times oversubscribed. The event prompted Saad Al-Saif, the head of private equity and investment banking at Shariah compliant investment firm Jadwa Investments, to predict “significant growth” for the healthcare sector in Saudi Arabia over the next 10 years.
Al-Saif was speaking as a beneficiary, as Jadwa Investments owns 30% of Al Hammadi through Jadwa Healthcare Opportunities Fund, but as the Islamic finance industry grows and seeks new avenues for investment, the healthcare sector will remain open to the Shariah investor looking for guaranteed returns, as well as meeting their socially responsible investment requirements.
Globally the healthcare sector is in need of investment even in countries that are considered developed. According to World Health Organization (WHO) figures for 2012, UAE total expenditure on health as a percentage of GDP was 2.8%, with health expenditure as a part of total government expenditure slightly higher at 9.3%. Saudi Arabia has a beds capacity of only 21 beds per 10,000 of the population — which is growing by 3% annually. In the UK, the most recent figures from the National Health Service indicate a funding gap of up to GBP2 billion (US$3.42 billion) for 2015.
The value of the pharmaceutical and healthcare market in the GCC is expected to almost triple by 2018, growing from US$46 billion in 2012 to an estimated US$133 billion and Islamic investors are on the hunt for private equity opportunities in the form of healthcare in 2013 would have found that Asia Pacific, the Middle East and Africa were the areas with the highest volume growth according to data from the Bain & Company Global Healthcare Private Equity Report 2014.
The most recent healthcare activity in the Islamic sector has come in the form of an acquisition by UAE-based private equity firm Abraaj Group, with purchase of a major stake in Tunisian hospital Clinque Taoufik, one of the first private healthcare institutions in the country and the second-largest in bed capacity. Ahmed Badreldin, partner and head of Middle East and North Africa at the Abraaj Group, said: “Our investment in Clinique Taoufik marks our sixth investment in Tunisia and enables us to execute our wider strategy of acquiring robust and innovative businesses in critical sectors such as healthcare. We are backing a company with strong growth potential as the North African population is expected to reach 190 million by 2020, with life expectancy also on the rise, contributing to increasing demand for quality healthcare services.”
With investment from the new majority owner the hospital plans to develop patient capacity and add new services, upgrade and renovate, as well as invest in human resources and training. Healthcare is an avenue that can provide investment opportunities in established markets such as Abu Dhabi, which is awaiting the opening of the Cleveland Clinic Abu Dhabi, a partnership between state sovereign fund Mubadala Development Company and US-based healthcare provider Cleveland Clinic or an introduction to Islamic finance in as yet undeveloped markets such as Japan, South Korea or the US which have aging populations and healthcare systems in need of private investment or institutional. — RS