Africa’s growing pharma industry - on a path to self-sufficiency
Challenges and Opportunities
Hello everyone,
during the Covid 19 pandemic, it became all too apparent how important it is for countries to be self-reliant on medicine.
But it doesn’t have to come as far as a global pandemic. Being able - as a country, or continent - to provide medicine, vaccines and testing for the own population is essential for improving health outcomes.
And also holds immense potential for economic growth and innovation.
Therefore, this week, we dive into the current state, the challenges and opportunities within the African pharma sector, and emphasize the importance of strategic development.
🕐 In a Hurry? Here's a 1-Minute Summary:
Market Growth Potential: The African pharmaceutical market was valued at $28 billion in 2023 and is expected to grow significantly, potentially reaching $110.9 billion by 2033 due to rising demand from population growth and chronic diseases
Major Challenges: The industry faces significant challenges with fragmented regulations, inadequate infrastructure, financial constraints, skilled labor shortages, and counterfeit drugs.
Investment Opportunities: Establishing regional manufacturing hubs is viable with the AfCFTA providing access to a unified market of 1.3 billion people, reducing trade barriers and tariffs. Moreover, governments offer incentives like tax breaks, subsidies, and streamlined regulatory approvals to attract investment in local production facilities.
Successful Case Studies: Companies like Aspen Pharmacare have thrived with strategic investments and support, demonstrating the potential for local firms to succeed and expand operations internationally.
Strategic Levers for Development: Focus on capacity building through training and technology transfer, develop state-of-the-art manufacturing and supply chain infrastructure, harmonize regulatory standards, and leverage digital health platforms to enhance efficiency and market reach.
⏳ Ready for a Deeper Dive? Here's the Breakdown:
Current State of the Pharmaceutical Industry in Africa
The African pharmaceutical market was valued at approximately $28 billion in 2023 and annual growth is expected to be between 3.4% to 8.3% until 2030, potentially reaching $110.9 billion by 2033.
Key countries include South Africa, Nigeria, and Egypt, which host some of the continent’s largest pharmaceutical companies and manufacturing facilities.
Despite this, the continent still relies heavily on imports, with local production meeting only about 30% of the demand. This gap presents both a challenge and an opportunity for growth.
5 major complications facing the industry
Regulatory Hurdles: The regulatory landscape in Africa is highly fragmented, with each country having its own set of regulations. This fragmentation can delay drug approvals and complicate cross-border trade.
Infrastructure Deficiencies: Many African countries lack the necessary infrastructure for efficient pharmaceutical manufacturing and distribution, leading to high production costs and supply chain issues.
Financial Constraints: Access to capital is a major barrier for many local pharmaceutical companies, limiting their ability to scale up production and invest in new technologies.
Skilled Labor Shortages: There is a significant shortage of skilled professionals in the pharmaceutical sector, including pharmacists, researchers, and manufacturing experts.
Counterfeit Drugs: The prevalence of counterfeit drugs undermines the market and poses serious health risks to the population. Strengthening quality control measures is essential to address this issue.
Despite these challenges, the potential for growth in the African pharmaceutical sector is immense.
Growing demand
The African pharma market is projected to grow to over $100 billion within the next 10 years, driven by population growth, and a rising incidence of chronic diseases.
There is a high demand for essential medicines for diseases such as malaria, HIV/AIDS, tuberculosis, and non-communicable diseases.
Regional market access
The establishment of AfCFTA creates a unified market of 1.3 billion people. This significantly reduces trade barriers and tariffs, making it easier for pharmaceutical companies to expand across borders.
Investors can leverage this free trade area to set up regional manufacturing hubs that serve multiple countries.
Local Manufacturing Incentives
Many African governments are offering incentives such as tax breaks, subsidies, and easier regulatory approvals to attract pharmaceutical investments. This support is aimed at boosting local production and reducing dependency on imports.
Investors can enter into partnerships with governments and international organizations to co-invest in infrastructure and technology, sharing risks and benefits.
Companies like Aspen Pharmacare in South Africa have shown that with the right support, local pharmaceutical firms can thrive. Aspen has expanded its operations significantly and now exports to multiple countries.
💡💡 Spotlight: Aspen Pharmacare
Aspen Pharmacare, founded in 1997 by Stephen Saad and Gus Attridge, is Africa’s largest pharmaceutical manufacturer. The company expanded through the acquisition of South African Druggists in 1999, enabling significant growth.
Aspen sold its infant nutrition and Japanese generics businesses in 2018 to focus on high-potency drugs like anesthetics and oncology medications. It invested in an $80 million facility in Gqeberha, enhancing its capacity to produce 3.6 billion tablets annually.
Aspen has been crucial in global health, supplying generic antiretrovirals (ARVs) under the U.S. President’s Emergency Plan for AIDS Relief and producing the Johnson & Johnson COVID-19 vaccine. The company reported revenues exceeding $1.1 billion in early 2024 and continues to expand its sterile manufacturing capabilities.
Focus on capacity building, infrastructure development, and digitalization necessary
Focus on Capacity Building
Investments in training programs to develop a skilled workforce capable of operating advanced pharmaceutical manufacturing technologies are needed. Partnering with local universities and technical schools can ensure a steady pipeline of qualified professionals.
Collaborations with international pharmaceutical companies can bring in the necessary expertise and capital. For instance, partnerships between local firms and global giants like Pfizer and Novartis have led to the successful introduction of new drugs and technologies in Africa.
💡💡Spotlight: Cipla and Uganda's Quality Chemicals
In 2005, Cipla, an Indian multinational pharmaceutical company, partnered with Quality Chemicals Limited, a Ugandan company, to form Cipla Quality Chemical Industries Limited (CiplaQCIL).
The partnership enabled the local production of antiretrovirals (ARVs) and anti-malarial drugs, crucial for treating HIV/AIDS and malaria, two of Africa's most significant health challenges.
The facility in Uganda is equipped to manufacture drugs compliant with international standards, reducing reliance on imported medications and ensuring a stable supply of essential drugs in the region.
The establishment of CiplaQCIL has had a substantial economic impact by creating jobs and contributing to the local economy.
Infrastructure Development
The establishment of state-of-the-art manufacturing plants with the capacity to produce high-quality pharmaceuticals, with a focus on building facilities that can adapt to produce various drugs as market needs evolve, will be crucial.
Especially also investments in robust supply chain infrastructure, including transportation, storage, and distribution networks, to ensure efficient delivery of pharmaceuticals across the continent.
Leveraging of Digital Health
Investors can explore digital health platforms to improve access to pharmaceuticals, particularly in remote and underserved areas. Telemedicine and e-pharmacy solutions can complement traditional distribution channels.
Utilizing data analytics to understand market trends, predict demand, and optimize production schedules can lead to more efficient operations and better resource allocation.
Sources to learn more:
World Economic Forum - In Africa’s free trade area, investment in pharmaceuticals means impact and profit
McKinsey & Company - Should sub-Saharan Africa make its own drugs?
Grand View Research - Africa Pharmaceutical Market Report
Persistence Market Research - Africa Pharmaceuticals Market Report
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Thanks for reading,
Carolin
Disclaimer: All information provided is not intended to serve as investment advice. Any mention of industries or countries should not be taken as an endorsement.