Health enterprises must now list on SME segment of bourse
A trading board at the NSE. Health businesses can list on the SME unit. PHOTO | FILE | NATION MEDIA GROUP
What you need to know:
Judging from the activity in the stock exchange and oversubscription in the bonds market for the recent bonds, it seems there is suitable liquidity in the market.
Judging from the discussions among doctors, in the next five years the private health sector will register a phenomenal growth. Many are thinking of venturing into ‘jua kali’ than before. For those of us already in the field, a lot of capital is required to gain market visibility and compete.
Fundraising options are, however, narrow. Many of us still raise funds from relatives, colleagues and banks.
With many top hospitals and practices undergoing massive expansion in high specialty areas like cancer care, specialised diagnostic and intervention care units, we are facing a cash crunch from these capital-intensive purchases.
Take an MRI or CT scan, for instance going for more than Sh200 million. Even for small practices funding for an X-ray at or setting up theatre units needs considerable funds. Some of these investments are, however, too heavy to rely on bank loans.
With prevailing loan interest rates averaging at 20 per cent, such a business would lose almost half of its profit to the lenders as interest charges. Traditionally, the banking channel has been the easier route for hospitals, but is it the best for us?
Perhaps it is time we cast our nets wider and targeted other sources. Judging from the activity in the stock exchange and oversubscription in the bonds market for the recent bonds, it seems there is suitable liquidity in the market. There are many people with idle amounts of up to Sh100,000.
The challenge for us health entrepreneurs is how to tap into these public fundraising avenues. At this time, no single health enterprise is listed on the stock exchange. Yet the SME segment has been open for over a year or so now. This could be the reason the public and institutional investors have not taken a keen interest in this sector as an investment destination.
Fund managers and unit trust managers are perhaps people we should be engaging on how to attract cash. A look at returns from current investment vehicles shows how health businesses are not thinking outside the box.
Take the fixed deposit account, which is quite popular with many people. The average returns on this model are in the single digit. Though it is a safe bet it does not offer you maximum returns. Some health care investments can be both safe and give better returns.
The money market and unit trusts are the other kind. A look at the performance of the 12 unit trusts reveals an average annual return of just 9.56 per cent, slightly higher than the interest in a fixed deposit account.
These two routes have low returns because your investment returns have to pay salaries first. By the time they get to you a significant amount has been lost to the firm handling the investment.
Treasury bills are perhaps the only investments devoid of such losses. However, because their returns are fixed and allocation is on a pro rata basis you cannot earn more than what you are allocated.
What health entrepreneurs should do is to engage money markets on how to raise funds and how they can channel some of their funds to the sector. Guidance and guarantees are what the public needs to invest in health.
