A Kenyan doctor's $20M mission to make sure every child has oxygen

When Dr. Bernard Olayo started his career at a public hospital in western Kenya’s Homa Bay there were two things he could be certain to happen every day during the rainy season. “You are sure that the power will go out — and that you will get children with pneumonia. They came in large numbers,” he said. His hospital served communities living on 16 islands in Lake Victoria, with parents braving the cold, wet weather to travel by boat to the mainland to seek care for their babies, whose needs often included medical oxygen. Each day during the rainy season, he saw around 10 to 15 kids with pneumonia. Some days it reached around 30. But his hospital didn’t always have oxygen — the government was often behind on payments to the one oxygen supplier in town, and Olayo would be forced to beg this supplier to lend oxygen for his patients. But they would turn him away. The lungs of a child with pneumonia can fill with pus and mucus that can decrease their ability to take in oxygen. Medical oxygen can be used to support these children. “I couldn’t sleep because I imagined what I would see when I went into the hospital in the morning — a lot of those babies would be dead. It haunts you because you know that if you had oxygen, you’d have saved their lives — and that takes a piece of your heart every day,” he said. During these peak seasons a child died nearly every day because of lack of oxygen, he said. Globally, in 2019, nearly 700,000 children under 5 died from pneumonia. It’s become his life’s mission to turn this around by increasing the quantity of locally produced oxygen in Kenya. Olayo founded the social enterprise Hewatele, which is the leading locally owned medical oxygen manufacturing company in Kenya. He also founded the nonprofit organization Center for Public Health & Development, which works to address access gaps within hospitals that frequently lead to the death of women and children — through a variety of public health interventions including medical oxygen. “I’m just hoping that the people who come after me — the doctors in the same hospitals — no longer have to make that difficult call, basically deciding on who lives and who doesn’t live because you have only one little cylinder left,” he said. In this quest, his company is building a $20 million liquid oxygen plant on the outskirts of Nairobi — which is expected to increase his company’s production capacity by tenfold. “Expanding access to oxygen, so that the country becomes reliable, is good preparation for any pandemic,” he said. “We need to have a buffer. We need to have the ability to produce much more oxygen here.” Crisis vulnerability During the COVID-19 pandemic, demand for medical oxygen in Kenya more than doubled. At times, when the country had about 700 patients in intensive care units, oxygen ran out, Olayo said. “That worried me a lot — and it worries me to date,” he said. The country is a net importer of oxygen and is bringing in nearly enough oxygen into its borders for routine care, such as pneumonia patients or laboring mothers who need oxygen to access safe surgery. “But if the demand goes up a bit, a lot of people would die,” he said, adding that a net importer of oxygen becomes extremely vulnerable to external shocks and can find itself at the bottom of the queue during a pandemic. And beyond supply are concerns around affordability. The price of oxygen has increased significantly in Kenya as the local currency has depreciated nearly 20% compared to the U.S. dollar last year. The imported oxygen is bought in foreign currency yet sold locally in Kenyan shillings. About a year ago it cost about 150 shillings per liter, but now it’s between 250 to 300 shillings, Olayo said. However, hospitals that are far from Nairobi have higher prices due to transportation costs — which have increased due to a rise in gas prices. In general, oxygen available to hospitals in sub-Saharan Africa is about five times more expensive by volume than in Europe and the United States. Hewatele has been working to lower costs and improve supply issues since 2013 through local production. They use a “milkman” approach — each morning a truck leaves their oxygen plants in Siaya, Nakuru, and Nairobi, and delivers oxygen in cylinders to about 200 hospitals in about a 100-kilometer — 62-mile — radius of these plants, picking up empty cylinders to take back to the factory for filling. After a hospital receives a cylinder of oxygen they need flow meters and other breathing accessories before it reaches the patient. Hewatele provides this set of equipment to the hospitals it works with. But many African countries don’t have companies playing this role. During the COVID-19 pandemic, a lot of these sets of equipment were donated to countries but they include parts that come from multiple companies abroad — making maintenance a challenge. “What we are seeing in all these countries is that largely the equipment that was donated is not working,” he said. Either the electricity is not good enough to support it or the basic installation was never done. If it was installed, maintenance is an issue. Delivering liquid oxygen Hewatele currently has around 6% of the medical oxygen market share in Kenya. In January, construction on the new plant began on the outskirts of Nairobi. It will take around 15 months to outfit it. When it’s up and running, Olayo said it will be able to produce about 20 metric tons of oxygen per day. Olayo expects that when fully operational his company could hold up to 40% of the market share. They will still use the milkman approach, but the product will be different. The specialized trucks carry the liquid oxygen at minus 184 degrees Celsius and will deliver it directly to hospitals that have the right piping and other infrastructure to vaporize the liquid into a gaseous form for patients. But many hospitals don’t have this infrastructure, so the liquid oxygen will be piped into different regions of the country — and then converted into gaseous form at distribution points. Then, canisters of gaseous oxygen can be delivered to hospitals. Olayo estimates that less than 20% of hospitals have the piping infrastructure to accommodate liquid oxygen. The benefit of producing liquid oxygen is the ability to expand the volume manufactured and it's more efficient to move around — one liter of liquid oxygen, when expanded, gives 840 liters of gaseous oxygen, Olayo said. And he expects it will cost much less than the imported supplies. They would like to come into the market for around 100 to 110 shillings as opposed to the between 250 to 300 shillings that it currently costs. A $20M expansion While the benefits of a liquid oxygen plant are clear, many African nations don’t have one because they are expensive. For example, neither Ethiopia, with a population of about 126.5 million, nor the Democratic Republic of Congo, with a population of about 102.3 million, have one. Kenya does have a liquid oxygen plant already, but it’s not locally owned. It’s run by BOC Kenya — which is owned by the Germany-based multinational chemical company Linde. But the plant is decades-old, Olayo said, and has limited capacity. International funders are supporting Hewatele with this $20 million expansion through a combination of debt — a $10 million loan from the U.S. International Development Finance Corporation and a $1.1 million loan from Grand Challenges Canada. As well as equity — $4 million from the Soros Economic Development Fund, $3.5 million from Finnfund, a Finnish government development agency, and $1.6 million from UBS Optimus Foundation, a Switzerland-based philanthropic foundation. “It’s extremely difficult as an African startup to raise funds. It’s the nature of the business. There’s a very high-risk perception for African-led, African-founded organizations,” Olayo said. “We’re very grateful that despite all those challenges, they had faith in us.” He said they want to do it well so that it becomes an example for other countries that want to take a similar path to build their own liquid oxygen plant. “It’s a proof of concept,” he said. “If it works here, it can be replicated in other African countries.” When asked what he anticipates his main challenges moving forward with the expansion, he said he still faces the problem that plagued his early career: the government’s late payments. While the demand is there — patients need oxygen — it doesn’t always translate into payments. “Even right now we are owed a lot of money by the government,” he said. As a social enterprise, his company aims to serve low-resource, remote communities that have higher rates of maternal complications and pneumonia. But these communities can also be expensive to reach. “Who pays for the poor? Because a lot of poor people go to government hospitals,” he said. “But the government is very slow at paying for the product, even if we lower the price.” Serving private hospitals, which tend to be more timely with payments, can help his company’s cash flow — and Olayo said that because of this they may work to increase the number of private hospitals they serve in addition to the public hospitals. He said his company is also exploring whether they can receive partners’ support through volume guarantees, where a financier would guarantee the purchase of a certain percentage of the product they produce. For example, they may guarantee that 70% of what Hewatele delivers to government hospitals will be paid for. Then, if the government pays for 40%, this financier would pay the remaining 30%. The financier could also subsidize the cost of reaching remote areas. “We will also be encouraging the government to make sure they do the proper budgeting, they put aside money,” he said. But Olayo is confident that when this new plant is fully operational, it will be a game-changer for Kenya when another pandemic strikes. “We’ll be much better prepared,” he said. “We’ll be in a much better position to meet the demand of oxygen in our country.” Updated, Feb. 15, 2024: This piece has been updated to reflect that UBS Optimus Foundation is a Swiss-based foundation.