Business and Finance
Philips approves “aggressive” Africa growth strategy
Long dominant in traditional markets of South Africa, Egypt, Morocco and Kenya, Philips is turning attention to new markets in Africa
Africa’s disease burden is changing. While infectious diseases still account for around 69 percent of deaths, age-specific mortality from chronic disease is now higher for both men and women than in most other regions. In 2010, the World Health Organisation projected that over the current decade, the continent will experience the largest increase in death rates from cardiovascular disease, cancer, respiratory disease and diabetes. “Where you used to see very Africa-specific diseases such as malaria, you are now starting to see diabetes, heart disease, stroke and cancers,” says JJ van Dongen, CEO of Philips Africa, the Netherlands-based healthcare, consumer lifestyle and lighting company.
In part, this change reflects a broadly positive shift in terms of longer life expectancy and the decline in mortality from tropical diseases. But rapid urbanisation and pollution are also contributors. Worryingly, the healthcare sectors across most of Africa are resolutely failing to accommodate the new realities. Around 80 percent of regional health budgets have been allocated to communicable diseases over the last 10 years, and ministries have few plans for dealing with chronic disease. Hospitals lack equipment and few health workers have specific training. While public initiatives are underway – in July, Bill Clinton opened a new cancer centre at Butaro Hospital in rural Rwanda, the first of its kind in East Africa – the challenge involves skills as well as equipment. Rwanda, for instance, has only a handful of professional oncologists.
As far as technology goes, the outlook is more positive. While tropical diseases failed to elicit much commercial interest from Western companies, chronic disease is an area where substantial knowledge and technology has already been developed and deployed. Philips, previously dominant in South Africa, Egypt, Morocco and Kenya, is now turning its attention to a wider range of markets. “We’ve had approval for a very aggressive growth strategy for Africa. Over the next three to five years we will ramp up our performance as an organisation,” says Mr van Dongen.
In low-income countries in Africa, there is growing desire for world-leading healthcare technology such as magnetic resonance imaging technology and CAT scanners. “You are seeing traditional first world healthcare with high-end diagnosis being available for the general population, and that’s exciting.” Philips’ own restructuring, he argues, enables a flexible approach to new markets. “At one stage we had factory facilities in many countries, but with the globalisation of the consumer part of our business, we moved back and took a global approach to consolidation,” he explains.
“Philips is focusing much more on being locally relevant rather than pushing global standard products into global markets,” adds Mr van Dongen. “If we focus on the market, on being locally relevant and entrepreneurial, this is what will drive growth for Philips.”
This sentiment was echoed by executive vice president Ronald de Jong, who has publicly declared Philips’ high ambitions for Africa, aiming “to gain a strong presence in this continent by building on local talent and organisations, setting up distribution and route to market and, above all, by developing solutions and innovations which are relevant to local needs”.
Philips has oriented its African expansion around its contribution to the Millennium Development Goals, especially those related to mother and child health, highlighted in its third pan-African 11 country, 17 city ‘Cairo to Cape Town’ road-show in 2012. Dialogues were established with customers, governments and NGOs, and innovations in imaging technology and bedside monitoring were showcased, marking the successful winning of public tenders, including for hospital equipment distribution in Zambia and ultrasound system distribution in Kenya’s 60 Ministry of Medical Services district hospitals, beginning in the Kadjiado District Hospital, predominantly visited by Maasai women. Additionally, Philips provided clinical trainings to over 1,200 healthcare practitioners during the road show.
Globally, more than two billion people struggle to get access to basic imaging services. At the same time, complications during pregnancy and childbirth contribute to 358,000 maternal deaths each year, 99 percent of which are in developing countries. Ultrasound technology will prove vital to identifying and correctly diagnosing pregnancy-related complications. Philips joins a wider group of international technology companies whose products can markedly impact health outcomes for those in low income countries, including Hewlett Packard, whose SMS-enabled printing of HIV diagnoses is helping quicken test response times and, potentially, reducing the pass-on of the virus.
The social benefits of their technologies, and the need for lower-income African countries to attract diverse investment, means development finance institutions, donors and NGOs, including FMO from the Netherlands, and JICA, the Japanese agency, are acting as facilitators. “In more developed markets, financing has never been an issue for us, either from a private or a government perspective. It’s in the smaller markets where we still see lack of good financing. If you take Kenya, Uganda, Rwanda and Burundi…to have a standard approach in those countries is quite difficult. If you want to finance a doctor who wants a 50,000 Euro ultrasound machine, it takes as much negotiations with banks as a 5m Euro project. So the trick is: how do we make that more routine and standard? At the same time, how do you bring aid funding to support the mega projects needed in health?”
Philips has a strong historical foothold in Africa, but they are competing hard. “We are not operating in isolated markets,” says Mr van Dongen. “Our competitors are here as well.” GE, Siemans, Toshiba and Sumatsu are all present in Africa. Siemens’ presence stretches back well over a century, and they are rapidly increasing their presence as a capable agent to support the technological challenges – in terms of energy, infrastructure and health – of Africa’s urbanisation. GE’s Africa office remains relatively small by its global standards – accounting for 2 percent of global revenue and less than 5 percent of employees – but former asset management head Jay Ireland was last year installed as chief executive of GE Africa, as part of the company’s increasing focus on fast-growing emerging markets.
When quizzed about how strongly Philips is performing against these, Mr van Dongen laughs. “I respect our competitors but don’t like talking about them!”. While Philips has comparative strengths in cardiovascular care and patient monitoring, building their presence and beating their competitors is about having a valued, trusted brand, he says. “A lot hinges on the relationship and on having trust. This is a global game. It requires a proactive business strategy rather than waiting for things to come to you.”