The Sunday News
Dumisani Nsingo Senior Business Reporter
GOVERNMENT’S dependence on donated drugs and an influx of imports is threatening the viability of the country’s pharmaceutical industry with capacity utilisation estimated to have dropped to about 35 percent.
Chairperson of the Pharmaceutical Manufacturers’ Association of Zimbabwe Mr Emmanuel Mujuru said although the industry was suffering from the same challenges being faced by all manufacturing players in the country there were other irregularities that were hampering its viability.
“However, there are other variables peculiar to the local manufacturing industry that include an uneven playing field that favours importation of drugs at the expense of local production and unfair trade practices such as non-tariff barriers for drug exports through South Africa.
“There is also an influx of relatively lower priced drugs and at individual plant level lack of investment in plant upgrades and product development resulting in inefficient facilities and uncompetitive product portfolios,” Mr Mujuru said.
He said local manufacturers were finding it difficult to compete against lower priced drug imports, especially from Asia.
“The situation for the industry is very critical with the real danger of local pharmaceutical production disappearing altogether in the near future if bold steps are not taken to address the situation. Capacity utilisation is at an all-time low averaging 35 percent.
“The industry used to supply more than 75 percent of the country’s essential drug requirements before 2000. This has now fallen to below 46 percent and could be even lower given the current state of low capacity utilisation,” Mr Mujuru said.
About 70 percent of the effective demand of drugs in the local market used to come from Government through public procurement by Government agencies such as Natpharm.
However, due to lack of funding from Government, Natpharm has virtually stopped procuring from local manufacturers.
“The public sector is now heavily dependent on donated drugs funded by humanitarian agencies, such as Unicef (United Nations Children’s Fund), Global Fund, PEPFAR (President’s Emergency Plan for Aids Relief) and DFID (Department for International Development) among others who prefer to procure from external industries.
More than 90 percent of drugs in public hospitals are supplied by donors and this has virtually excluded the local industry from supplying this important market,” Mr Mujuru said.
He said donors should be encouraged to procure from local manufacturing companies because if the drugs were sourced from outside it would result in the local industry losing its vital markets further stating that:
“Failure of which the industry will eventually collapse and the country will be left without any capacity to produce essential drugs for its requirements including exports when the donors eventually leave.
“There is now increased advocacy internationally for humanitarian agencies to secure as much as possible of their requirements from the local environment they operate in order to promote their development”.
He also said there was a need to put in place policy measures to address factors affecting capacity utilisation in order for the industry to be competitive against imports.
“First of all there is a need to level the playing field. We have a situation where drug imports are zero rated, which means they are neither charged customs duty, import tax nor Value Added Tax (VAT) while imported raw materials and packaging and other local import tariffs and VAT.
“This increases the costs of inputs by as much as 20 percent. Efforts have been made through a rebate system (SI 179 of 2014) to remove duties on imported raw materials but this comes short of the zero rating status accorded to imported drugs,” Mr Mujuru said.
He said Government’s bid to protect the agricultural sector had a negative impact on the pharmaceutical industry as it was subject to import permits for moving in its essential raw materials.
“Import permits are now required for raw materials such as starch and lactose which are deemed to be by-products of agriculture products.
“However, this does not take into account the fact that the quality of starch or lactose used in the pharmaceutical industry is of such high quality that it cannot be manufactured locally,” Mr Mujuru said.
