Private Equity | |
Private Equity | |
929 VIEWS | |
![]() |
Monday, May 11, 2020 / 12:22 PM / By
Olubunmi Abayomi-Olukunle / Header Image Credit: Global Times
"We think that it may not be
altogether sustainable for Nigeria to continue to rely on philanthropic
contributions and /or public funds to scale Nigeria's ability to diagnose,
isolate and care for COVID-19 cases. The context for this view is in part, guidance
from the World Health Organisation (WHO), that, (a) COVID-19 indeed has a
distinct capacity for explosive spread and has overwhelmed the most resilient
health systems and that (b) countries need to scale their ability to rapidly
identify, test and treat patients.
"Speed,
scale, and equity must be our guiding principles. Speed, because the explosive
nature of the virus means every day lost in implementing effective
response capacities and behaviours costs lives; scale, because
everyone in society has a part to play in building the capacities required
to control this pandemic; and equity, because everyone is at
risk until the virus is controlled everywhere in the world:
collective resources must be directed to where there is greatest risk..." World Health Organisation
To scale its national healthcare
capabilities, Nigeria needs to articulate a more coherent legal framework
for managing the diagnoses, isolation and caring for all cases of COVID-19.
That framework, has to be resilient in the sense that, it is able to attract
and channel private capital into the operation of COVID-19 isolation, testing
and treatment facilities. This is especially, true as we are now re-opening the
economy.
Based on a recent client engagement, here
are some considerations that we think are useful for both government, private
investors , philanthropists and other concessional funders.
1.Clear & Standardized Guidelines
on Establishing and Operating Isolation, Treatment and Caring Facilities
It's important for the NCDC to now publish
and enforce clear operational guidelines that specify the minimum
standards for setting up private and public isolation and treatment centres.
The operational guideline will provide predictability, a critical driver of
private capital. Amongst others, an operational guideline would provide a
level-playing field for operators and aim to standardize the operation of these
facilities. More importantly, the guidelines will provide a firm legal basis
upon which ethical and professionally acceptable behavior can be objectively
measured and enforceable. There could also be other health implications,
arising from the absence of nationally applicable standards, as would be
the case in the event of nosocomial or other hospital-acquired infections [1]. A number of recent developments in Covid-19
isolation and caring facilities in some northern areas of Nigeria also
highlights the need for nationally applicable guidelines for operating COVI-19
isolation and treatment facilities.
2.Government Contracts
Private investors will have to look to the
cash flows from isolation and treatment of patients in terms of medical bills.
The "free" treatment approach may not be sustainable for private
capital without a defined subsidy scheme that has a legal backing and ensures
that only the patients that can't afford treatment get access to the subsidy.
This approach should deal in part, with the moral hazard, that
a free
COVID-19 treatment approach may engender. Additionally,
Nigerians who want and can afford private treatment should have access to it at
the right price. We think that using the right contractual structures, private
investor can look to the cash-flow from the "private" treatment of COVID-19
patients. The primary consideration for private capital here is for Government
to enable a contractual framework that will drive the efficient flow of private
capital and protect private capital from transaction and counter-party risks
that the Government is better able to manage within the context of the COVID-19
outbreak. Joint venture structures are one of the common structures that used
to balance private interests and the government's strategic interest in driving
public health and safety. Such joint ventures could be incorporated or
unincorporated, depending on the peculiar requirements of each transaction. We
generally recommend unincorporated joint ventures for partnerships of
this nature, especially where parties are keen on flexibility and second-level
limited liability. As a primary structuring consideration, such structures
would ideally and by design embed the key motivations and risk tolerance of the
respective financial investors and/or strategic investors.
3.Procurement Risk
It's important for both local
philanthropic funders and concessional financers to be aware that certain
existing structures may be caught by the provisions of the Procurement Act and
the relevant procurement laws in states of the Federation, like Lagos State.
Specifically, philanthropic funders and concessional financers may be exposed
to legal risk arising from a breach of the respective procurement federal and
state procurement laws. Most procurements laws have clear provisions on the
standards that procurement agencies and private contractors/service providers
must comply with in emergency situations and those provisions typically capture
emergency situations like disaster, catastrophe, war, insurrection or an
act of God. The risk of legal exposure here may depend on the
type of structure adopted in a particular situation, although structures that
envisage transfer/sale of isolation and caring facilities to government will
most likely require a legal review from a procurement standpoint. More
importantly, the Bureau of Public Procurement recently published COVID-19
Guidelines relating to emergency procurements and concerning contractors,
procuring agencies and funders, here.
4.Blended Finance
Nigeria should contemplate formal blended
finance strategies for scaling national structures for detection, isolation and
treatment of COVID-19 patients. Perhaps, the most important point to note about
designing formal blended finance structures is that blended finance structures
are grant or grant-like resources aimed at removing the barriers to mobilizing
capital flows and private investment. Guaranteeing the availability of land or
other physical infrastructure for use by a private investor for the operation
of a COVID-19 facility may achieve some blending objectives as well as more
formal market interventions like advance market commitment structures (AMC).
Using AMC structures, the government or other local philanthropic funders can
guarantee the future purchase of or payment flows for a service/product if
delivered at a certain price and standard, using measurable indices. AMCs can
be used to accelerate innovation around COVID-19 detection, isolation,
treatment and caring in many other respects. Suspension of import duty on the
importation of medical products as the Nigerian government has done recently,
can also be used by the Nigerian government, to create capture commercial value
within the context of formalised blended finance structures.
[1] Recently, it
was announced that a driver employee of the National Centre for Disease Control
in Nigeria contracted the corona virus on duty.
For additional inquiries, please reach out through your Balogun Harold
contact or via support@balogunharold.com
Related News
1.
Ahead of
Tomorrow on WebTV: Discussions on COVID-19; Increasing Private Capital
Investment
2.
IOSCO Report
Provides New Data on Global Hedge Fund Industry
3.
Lekki Port
Receives $221m China Harbour's Equity Infusion
4.
COVID-19:
Ventures Platform and Lagos State Government Partner in Fight Against
5.
Venture Capital
Firms Will Play Key Roles In Africa's Economic Growth - Dr. Ola Brown
6.
Venture Capital
Can Work Despite Economic Slowdowns - Dr. Ola Brown
7.
Branch
International raises $170M Series C Financing, led by Foundation Capital and
Visa
8.
Nairobi Hosts
Africa Private Equity Conference with Investors Managing Over US$1.5trn in Assets
9.
Network Intl,
Middle East and Africa Pyt Processor Plans London Floatation - Private Capital
Update
10. An Overview of
AI for Wealth Management – What’s Possible Today?
11.
Why Private
Investment Works And Government Investment Does Not
12. Investec
Aviation's New Fund To Target Up To $2bn Of Aircraft Acquisitions
13. Airtel Africa
Raises $1.25 Bn From SoftBank, Five Other Investors
14. Leading Emerging
Markets Team of Tom Trimble and John Bryant Joins Winston
15. Advisory
Services Of Meristem Capital Has Raised N80bn For Firms Since inception
16. Kuramo Capital
To Provide Series A Funding for Green Africa Airways
17.
A Practical
Guide To Capital Raising For African Companies And Entrepreneurs
18. LeapFrog Takes
Stake In One Of Nigeria's Largest Pension Companies, ARM Pensions
19. Abraaj Files
Petition For Provisional Liquidation
20. Argentil Capital
Partners acquires 20% stake in Tempo Housing Nigeria