Manufacturing opportunities exist for pharma in Africa

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Good business opportunities exist in Africa for pharmaceutical companies looking to manufacture locally, according to a new report by McKinsey.

The study’s findings could signal a new wave of big pharma companies investing in Africa, with McKinsey telling CGTN that former preconceptions about local manufacturing on the continent are no longer the case.

Tania Holt, a partner at McKinsey, told CGTN that opportunities are available to pharma companies, as long as they approach the African market on a country-by-country basis, considering each individual market's product needs. Getting these factors right, along with setting up production at a “large enough scale can be a good investment,” according to Holt.

Irene Sun, an associate partner at McKinsey, said that while many African countries still “have a long way to go,” manufacturing in Africa can be positive, at least for some products.

Sun described the misconceptions that exist within the pharma sector concerning manufacturing in Africa, with many companies regarding the continent as uneconomical because products could just be imported from Asia. Concerns over electricity and water supplies have also put many companies off from local manufacturing in Africa in the past.

However, as McKinsey’s report shows, those preconceptions are no longer the case across the continent. Holt told CGTN that the biggest opportunities can be found in Africa’s most populous countries which have a large domestic consumer base, such as Ethiopia, Nigeria, Kenya, Tanzania and Cote d’Ivoire.

One of the main challenges facing local pharmaceutical manufacturing in Africa is the lack of harmonization across the continent between individual countries’ regulatory bodies. In its report, McKinsey recommends that the African Union looks at establishing a continent-wide set of pharma regulations, similar to the European Union’s EMEA.

With each individual country having its own regulatory process and registration system, pharma companies will overlook smaller African nations in favor of more populous countries when it comes to setting up local production units.

McKinsey’s report found that the pharma market in Sub-Saharan Africa was worth 14 billion US dollars last year, and is expected to grow by six to seven percent in the next few years.

By 2025, the sector should be worth 22 billion US dollars, spurred on by rapid population growth, greater consumption, more innovation and greater healthcare spending.

While McKinsey’s report suggests there is a strong business case in certain countries for pharma companies setting up local manufacturing bases, African countries will continue to import products from overseas – 90 percent of Uganda’s pharma products last year were imports, according to data from McKinsey.

Looking specifically at China, in terms of value McKinsey found that Chinese products represented just six percent of imports in the African pharma market in 2017, putting the country behind India, France, the US and Germany.

While some Chinese companies, such as Shanghai Pharma, have now been present in Africa for over 20 years, Holt mentioned that in recent years there has been “a new wave of Chinese companies” setting up local manufacturing plants in Africa. While still in the early stages, Holt said “there is still much larger potential.”