African Free Trade Agreement could give impetus to domestic pharmaceutical production

With an African Continental Free Trade Agreement (AfCFTA), aimed at boosting economic and integration gains, stakeholders for Africa’s pharmaceutical area, have been asked to increase domestic production of pharmaceutical products.

A press release copied to, from the Economic Commission for Africa (ECA), says stakeholders agreed at a two-day Horn of Africa AfCFTA forum organized by the ECA that, the AfCFTA provides an opportunity for economies of scale, a lack of which previously hindered African pharmaceuticals production.

The AfCFTA came into force in May this year. The Agreement, which will create the African Continental Free Trade Area, is said to create a single continental market for goods and services, which eventually allows free movement of business persons and investments.

According to the release, participants believe the real test of the AfCFTA implementation, would be to see these happen: strengthening regulatory frameworks crucial for the development of the pharmaceutical sector, encouraging domestic production with a regional focus, domestic reforms, an efficient and safe logistics chains, that can significantly bring down cost of medicines in Africa.

“African traditional medicine is in an area where there is room for African innovation, but we need to improve on commercialization. This is an area where many micro-small and medium enterprises operate,” Stephen Karingi, Director for Regional Integration and Trade for the ECA was quoted to have said at the forum.

“However, we should also look at the issue from a regional perspective. We can have policy space to promote local production, but not to the extent that it prevents the flow of trade,” Mr. Karingi added.

According to McKinsey and Company, most parts of sub-Saharan Africa import 70 to 90 per cent of their drugs, which eventually puts a strain on government and household budgets and already limited foreign exchange.

It said the continent has only a handful of companies who produced for the local market. The continent has around 375 drug makers, most in North Africa, while those in sub-Saharan Africa are largely clustered in just nine of 46 countries, and they’re mostly small, with operations that do not meet international standards, it said.

“By comparison, China and India, each with roughly 1.4 billion in population, have as many as 5,000 and 10,500 drug manufacturers, respectively. And the sub-Saharan market’s value is still relatively small, at roughly $14 billion compared with roughly $120 billion overall in China and $19 billion in India,” a McKinsey and Company article, titled, ‘Should sub-Saharan Africa make its own drugs?’

The ECA believes domestic policies that can be used to support the industry include investment assurances, grants, fiscal incentives and local content requirements.

In addition, participants at the forum agreed that, regional centers of excellence could be used to overcome issues in human capacity and limited resources for research and development and testing.

“I strongly hope that you have critically examined how the AfCFTA process through the creation of the type of export diversification needed to generate labour-intensive jobs for Africa’s youth in sectors such as manufacturing and agro-industry would answer the question of youth unemployment in a sustainable and equitable fashion,” Mr. Johan Borgstam, Ambassador of the European Union to Ethiopia was quoted to have said at the event.

By Gifty Danso

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