Billions Allocated to Boost South Africa’s Pharmaceutical Sector

Pharmaceutical sector
South Africa is the world's largest buyer of ARVs

South Africa’s Trade and Industry Minister Rob Davies has announced a designation process geared towards stimulating manufacturing in the country’s pharmaceutical industry to the tune of R2.5 billion.

The designation comes in terms of the amendment of the Public Procurement Policy Framework Act last year. It came into effect on 7 December 2011 and enables the DTI to designate industries for local procurement, including procurement by state-owned enterprises.

“In particular, this designation will apply to oral solid dosage medicines which are procured by the public sector and these are a range of tablets,” Davies said on Friday of the products used to treat patients for various illnesses.

After the procurement of anti-retrovirals – South Africa consumes 25% of the global market for ARVs – this is the second biggest public procurement in the health sector.

“There is a tender that is out now which is going to be covered by the designation,” said Davies of the R2.5 billion tender for procurement over the next two years.

The designation will require that at least 70% of procurement comes from local manufacturers, with the other 30% open to tender but can also go to local manufactures.

Davies said this was not an opportunity to rip-off the state with excessive pricing and as such, a reference pricing model will be developed.

The department has over recent years been trying to recover lost ground in manufacturing pharmaceuticals. South Africa has been importing a large number of products which previously was manufactured locally.

“We’ve not been exporting as much as we used to,” said Davies, adding that the department has noted that in some tenders, small margins have led to tenders not being awarded to local manufacturers.

Currently, in terms of the trade deficit, pharmaceuticals are the fourth biggest imported products. In 2002 the trade deficit in pharmaceutical products stood at R5.3 billion, rising to over R14 billion by 2010.

“This … will create opportunities for local manufacturers. Our message to manufacturers [is that they should] increase their competitiveness and here is an opportunity that has been created. It’s an opportunity for manufacturers to get a toe in the door,” said Davies.

Health Department Director General Precious Matsoso said the World Health Organisation had emphasised the need for local production, adding that this would improve security of supply.

Davies said the companies needed to be exclusively South African, and that it would be better for international companies trading in South Africa to manufacture their products in the country as opposed to shipping them from abroad.

The DTI wants to give certainty for investment, while also encouraging local companies to take advantage of the designation.

Matsoso said the process of inviting suppliers would take about nine months in total.

The designation is a joint effort between the DTI as well as Departments of Health and National Treasury as well as the provinces.

DTI Director General Lionel October said: “We want our pharmaceutical sector not only to replace imports but to become an exporter of products. If you’re going to become an exporter, you need to ensure that you’re globally competitive and your quality and pricing should be competitive.”

Claudy Stein, the chief director of pharmaceuticals at the DTI, said the process will allow local companies to tender as well as contribute to job creation.