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Aureos launches HIV/AIDS portfolio management initiative

The emerging markets private equity firm is managing a $1 million medical risk management programme aimed at lowering healthcare costs in its East African portfolio companies.

Emerging markets private equity firm Aureos Capital has launched a $1 million (€634,600) HIV/AIDS, malaria and tuberculosis risk management program for up to 15 of its 21 East African portfolio companies. Aureos believes it is the first ever such programme, which is funded by one of its principal shareholders, Norfund, the Norwegian Investment Fund for Developing Countries.

“We are doing this for business as well as social reasons,” said Aureos African regional manager partner Davinder Sikand in a statement. “If it succeeds… the companies will see real commercial benefits in the form of healthcare savings coming through to the bottom line.”

Aureos estimates that the three-year pilot programme could lower healthcare costs by as much as 60 percent as well as decrease the turnover of skilled staff.

The firm based its programme on research funded by Norfund, which invests risk capital in profitable businesses in developing countries.

Potential financial losses for Aureos portfolio companies are estimated to be approximately $3 million for 800 HIV-positive employees, said program manager Charles Gore.

A USAID study in Uganda estimated the cost of an AIDS infected employee to be $3,750 in the last year of his or her life, more than three times normal employment cost. A World Bank study in Kenya estimated AIDS-related expenses would account for 3 percent to 8 percent of labour costs and 4 percent of profits in large companies in 2007.

The initiative includes education, voluntary testing, counselling, antiretroviral drug treatment and nutritional supplements at a cost of $36 per employee over two years, including families. The cost will be shared between the portfolio companies and the programme.

Aureos believes that low cost combined with high potential for savings will lead to the first sustainable HIV/AIDS programme in Africa for small and medium size enterprises.

Based on the results of the pilot programme and the availability of funding, Aureos intends to expand the project throughout Africa and ultimately to Aureos emerging markets portfolio companies worldwide.

London-based Aureos targets unlisted small to mid-cap businesses through regional funds for Africa, Latin America and Asia. The firm is currently raising a $100 million central Asia fund, a $300 million Latin America fund and a $400 million Africa fund, the firm’s largest fund to date.