Although much of the attention on health care in sub-Saharan Africa centers on government activity, the private sector plays a surprisingly significant and growing role in meeting the region’s health care needs. Indeed, our research, conducted in partnership with the International Finance Corporation (IFC) and the Bill & Melinda Gates Foundation, found that the increasing demand for health care due to improved economic growth across much of the region could translate into $20 billion of additional investment in the region’s private-sector health care infrastructure in the coming decade.

To understand how the private health sector (by which we mean all nonpublic health care activity¹) might better complement Africa’s public health systems, we studied the health care sectors of 45 sub-Saharan African countries.² The findings suggest opportunities for private enterprise to help improve the region’s woefully poor health outcomes.³ At the same time, the research also highlights challenges—such as inconsistent quality of care, health worker shortages, and inadequate regulation—that must be addressed if the private sector is to most effectively benefit the health of Africa’s people.

Sub-Saharan Africa’s private health sector is already large and diverse. Of the $16.7 billion in total health expenditures in 2005, about 60 percent was privately financed and about half of the spending went to private providers (Exhibit 1). Perhaps surprisingly, our study confirms that the private sector doesn’t primarily serve the wealthy. In Ethiopia, Nigeria, Kenya, and Uganda, for example, the World Bank found that more than 40 percent of people in the lowest economic quintile receive health care from private, for-profit providers. Still, the private sector’s role in individual countries varies widely because of political, historical, and economic factors. In Ghana and Uganda, for example, private-sector usage exceeds 60 percent; in Namibia it’s less than 10 percent.

In the coming decade, sub-Saharan Africa’s health care market will grow briskly, and the private sector’s share of it will increase as improved macroeconomic conditions in much of the region⁴ fuel rising demand for health care. Our research suggests that sub-Saharan Africa’s health care expenditures will more than double by 2016, to $35 billion a year. The private sector will likely garner 60 percent of this amount.

To meet the increased demand, about $25 billion to $30 billion in total incremental investment is required by 2016 to finance physical assets such as hospitals, clinics, and drug-distribution centers. Governments will certainly receive some of this investment. However, in countries receptive to private-sector activity, we expect that between 45 and 70 percent of the funds will be invested in the private sector. Regionally, this equates to between $11 billion and $20 billion over the next 10 years.

Health care provision will account for half of the total investment opportunity, with the remainder divided among distribution and retailing (for instance, of pharmaceuticals and equipment), life sciences (such as pharmaceuticals and medical-product manufacturing), risk pooling, and medical education (Exhibit 2). The largest individual investments will likely focus on capacity expansion (for example, adding hospital beds), while significant investment will also go to refurbishing existing assets, increasing working capital, expanding services, and pursuing new ventures. While most projects will be small (under $3 million), many will be financially viable (Exhibit 3).

But will the investments positively affect the health of Africa’s people? Here, our study confirms the findings of the World Bank and other researchers that suggest the private sector can play a diverse and meaningful role, say by making care more readily available to poor and rural populations, potentially raising the quality of available care, providing additional medical training capacity,⁵ and efficiently managing costs. Our study underscored the fact that millions of Africans each day choose private providers over public ones, and primary research we conducted in rural Tanzania showed that up to three-quarters of patients prefer private providers and drug dispensaries to public alternatives—citing convenience and quality of care, among other benefits. Moreover, private clinics are frequently better supplied with medicines than are their public counterparts.

Tempering this optimism, however, is our study’s confirmation of the private sector’s shortcomings, which can include inconsistent levels of care, inefficiency, and unethical business practices, such as drug counterfeiting. Such shortcomings are all too common in sub-Saharan Africa’s diverse, highly fragmented, and often unregulated private health sector.

Addressing the challenges and ensuring the responsible mobilization of the region’s private health sector will require action from public and private stakeholders alike. Governments should modify local regulations that impede the development of the private health sector (say, trade barriers that limit access to health supplies or laws that restrict the private sector’s role in medical training or its participation in risk-pooling plans) and also strengthen regulatory bodies that can work with reputable businesses to better develop and enforce quality standards. Private donors and governments should consider earmarking aid to directly support private-sector entities, and also expand risk-pooling arrangements.

Indeed, we believe that the private sector’s size, vibrancy, and potential require that the dialogue on health in sub-Saharan Africa includes innovative public-private collaboration. Our study underscores the important role that policymakers, donors, and investors must together play in shaping Africa’s public and private sectors to deliver the improvements in health care that Africans deserve.