Posted on Thursday, 08 November 2012 18:22

Foreign investment raises local fears in Zimbabwe

Donors, who supply 98% of drugs in the public sector, do not prioritise local companies/Photo©ReutersLocal companies are already struggling in the face of the government's preference for cheaper imported drugs, so the arrival of new foreign-backed companies could fundamentally alter the structure of the industry.

Under-capitalisation, antiquated technology and an influx of cheap drugs make life tough enough for Zimbabwe's pharmaceutical industry, but now it is bracing itself for new competition from foreign investors.

There are nine licensed pharmaceutical companies in Zimbabwe, including the four biggest: CAPS Holdings, Datlabs, Plus Five Pharmaceuticals and Varichem. All firms face similar viability problems, leading to drug shortages.

The cash-strapped government is doing little to monitor or fix the problems. Officials says they cannot quantify the volume of illegal drugs imported into Zimbabwe, as the ministry of health has no personnel stationed at the coun try's ports of entry.

Miriam Rungwende, business development manager for the government-owned National Pharmaceutical Company of Zimbabwe (NatPharm), told journalists in May that 98% of drugs in the public sector come from international donors.

Some donors' funds are used to buy imported drugs, and some are used to purchase drugs locally. The government constitutes 60% of the market in terms of value and more than 80% in volume, but it is struggling to pay its suppliers.

As of June, the ministry of health owed NatPharm $3.6m. A parliamentary committee said the company needs a $65m capital injection from the treasury.

Healing the region

With Zimbabwean manufacturers unable to meet local demand, a Japanese company called Rohto-Mentholatum is planning to set up a state-of-the-art manufacturing plant that would make it the first foreign drug maker in the country. Its regional representative, Shunsuke Bito, says the firm will have a base in Zimbabwe by the end of the year but that total investment costs are still confidential.

"We intend to manufacture essential drugs and a wide range of medicines such as antibiotics, antifungals, anti-TBs [for tuberculosis], antimalarials, anti-hypertensives [for blood pressure], painkillers, cough syrups and ARVs [antiretrovirals]," says Bito.

The firm plans to export into the region and to produce herbal medicines as well as beauty and cosmetic products.

Bitter pill to swallow

Bito says that the company intended to partner with local companies. However, such partnerships could prove difficult as local firms are bitter about the competition. An official from CAPS Holdings, based in Harare, told The Africa Report on condition of anonymity that the Japanese entry would be a huge blow.

"We are already on our knees and the Japanese want to finish us off," she said. "They have a huge capital base and sophisticated machinery to outstrip us. In short, their investment is not welcomed." CAPS Holdings delisted from the Zimbabwe Stock Exchange in 2011 as part of a restructuring. In April this year, its Harare head office and property were seized to recover $4.4m owed to CBZ Bank.

Confederation of Zimbabwe Industries president Kumbirai Katsande says the pharmaceutical sector is teetering on the brink of collapse. "We know that some of our companies will not be in existence this time next year unless something improves," Katsande warns.

Although it is difficult to find statistics on drug manufacturers in Zimbabwe, a 2011 report by the United Nations Industrial Development Organisation estimated that around 10% of production is exported into the sub-region. Varichem, for example, was one of the first firms in sub-Saharan Africa to produce generic three-in-one antiretroviral drugs.

A report in March by Zimbabwe's National Economic Consultative Forum think tank paints a gloomy outlook. It warns that the government's preference for cheap imported drugs could lead to the closure of some factories.

"If the situation continues, indications are that many pharmaceutical companies may fold or relocate to neighbouring countries to carry out production in order to survive," says the report●

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