11 June 2015 by

Cliffe Dekker Hofmeyr acted as legal counsel for Busamed in relation to debt funding of two private hospitals

Mashudu Junior Mphafudi, and Preshan Singh-Dhulam, directors in the Finance and Banking practice at Cliffe Dekker Hofmeyr, acted as legal counsel to Busamed in relation to the debt funding provided by Standard Bank of South Africa Limited and FutureGrowth Asset Management, for both the Busamed Paardevlie Private Hospital (100 bed facility) and the Busamed Modderforntein Private Hospital (170 Acute Facility and 50 beds Sub-Acute facility).

Busamed Holdings (Proprietary) Limited (Busamed), is one of South Africa's first black owned healthcare groups. Busamed has obtained hospital licences to develop four private hospitals in Johannesburg, Western Cape, Bloemfontein and Harrismith. The private hospital group is led by Dr Diliza Mji, a medical surgeon with more than 30 years of medical practice experience. He is also the former chairman of the Industrial Development Corporation of South Africa Limited and a non- executive director of Telkom SOC Limited.

Accordingly to Dr Mji, what sets Busamed apart from the other black owned private hospital groups is that fact that, "Busamed identifies a suitable land for development, rezones the land, obtains the required licence, provides its own required equity into the projects, and commissions and operates its own hospitals". 

Busamed opened their first hospital in Strand in the Western Cape and, in the process, created over 300 permanent jobs (approximately 400 were created during the construction stage). It is Busamed's intention to establish its own nursing school, which will ensure a supply of high skilled, locally trained nurses for the various hospitals within the group.

“Traditionally, the financing of hospitals in South Africa has been based on Public Private Partnership (PPP) arrangements or corporate financed by the healthcare groups.  Busamed private hospitals are the first project financed, private sector hospital developments in South Africa. The funding of this new entrant to the market by Standard Bank and the various development finance institutions has demonstrated that private banks and development finance institutions can bridge the gap and make it possible for projects of these nature to be co-financed, despite these institutions having divergent interests,” explains Mashudu Junior Mphafudi, Director, Finance and Banking practice, Cliffe Dekker Hofmeyr.

“It is important to note that, in order for the development finance institutions (DFIs) to facilitate access to the market, and particularly the much required finance for potential industrialists, the tendency to use similar financial terms as those employed by commercial banks does not necessary yield positive results, as the mandate of the DFI is not limited to achieving the commercial return on their investments,” he adds.

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