The COVID-19 pandemic and its aftermath, including supply chain shortages, magnified the incumbent risk that all African nations depend on imported medicine. “Pharmaceutical products are currently manufactured in countries such as South Africa, Morocco and Egypt,” Janet Byaruhanga, a senior program officer for public health at the African Union Development Agency (AUDA), wrote in September 2020 in an op-ed on the UN website. Yet “as a whole, Africa currently imports more than 90% of its pharmaceutical and medical consumables. It is unsustainable.”
That dependence is one reason African nations have never realized their full GDP growth potential. “Widespread ill health can trap people in poverty, as those who are healthier are more productive,” Chibuzo Opara, co-founder and CEO at DrugStoc, a cloud-based platform that distributes pharmaceuticals in sub-Saharan Africa, wrote in a March op-ed on the global development-focused media platform Devex. “A thriving pharma sector that boosts access to quality medicines will improve health care and, consequently, propel economic growth.”
In June, Egypt’s President Abdel Fattah el-Sisi announced an initiative to export 30 million COVID-19 vaccines to Africa in coordination with the African Union. That could be the first initiative in a national strategy to ship more volume and variety of pharmaceutical products to Africa. “Africa is a promising market with 1.35 billion inhabitants,” said Sisi at the June announcement. “In 20 or 30 years, it will reach 2.5 billion … That makes it a very promising market in the long term. The opportunity is that 60% to 65% are youth.”
Egypt has the basic building blocks to meet Africa’s pharmaceutical needs. It “can be a hub for Africa and the Middle East region … in the pharmaceutical sector,” Gareth Bayley, the British ambassador to Egypt, said at a February press event.
To attract investors to build sufficient capacity and robust transportation channels for export to Africa, Bayley noted that the country must first overcome incumbent legislative obstacles and build partnerships with the private sector.
Healthcare in Africa
“Healthcare in Sub-Saharan Africa remains the worst in the world,” said an International Finance Corp. (IFC) note. “Few countries [are] able to spend [what] the World Health Organization considers the minimum for basic health care.” According to the United Nations, “African countries spend $8 to $129 per capita on health, compared to high-income countries that spend above $4,000.”
That means most Africans pay a significant portion of their income for treatment. The IFC estimates an “astonishing” half of the region’s healthcare expenditures are out-of-pocket payments by individuals.
Few medicines are manufactured locally. The IFC says the continent has about 375 drugmakers, while Opara of DrugStoc estimates 400. And their reach is limited, as they are “clustered in nine … countries,” said a 2019 McKinsey report. That compares to China and India, whose populations are similar to Africa’s but have 5,000 and 10,500 drugmakers, respectively.
With few domestic pharmaceutical manufacturers, imports represented 70% to 90% of consumption in 2019, according to the IFC. Opara said that “drives up costs and limits availability” in the second poorest continent by GDP per capita, according to the IMF.
Dependence on imports is particularly evident in vaccines. According to research by the Mo Ibrahim Foundation, which promotes governance and leadership in the continent, Africa accounts for a quarter of vaccine demand worldwide yet produces only a tenth of a percent of global output.
The risks associated with such dependency came into the limelight with the onset of the COVID-19 pandemic. According to the U.S.-based public policy institution Brookings, Africa received only about 6% of the 9 billion COVID-19 vaccines produced as of January 2022, despite having 17% of the world’s population.
Just 10% of the continent’s population is fully vaccinated, with 1.2 billion not having received even one dose, wrote Micheal Sidibe, special envoy for the African Medicines Agency, in a January op-ed published by Brookings.
Egypt has been part of Africa’s healthcare and pharmaceutical scene since the 1960s, said Alaa Ghannam, director of the Right to Health program at the Egyptian Initiative for Personal Rights. “Egypt has been implementing development projects in African countries … but its role declined some years ago,” he told Al-Monitor, a Middle East news and analysis website, in June. “[However,] it is currently seeking to restore its leading role in the health sector and support African countries.”
In 2007, the government signed on to the African Union’s New Partnership for Africa’s Development, subsequently renamed AUDA. Among the agency’s first activities was the creation of the Pharmaceutical Manufacturing Plan for Africa (PMPA) to “address the overreliance on imports,” explained Byaruhanga of AUDA.
The PMPA’s “business plan,” said Byaruhanga, aims to improve access, quality, availability, and affordability of medicines. It also aims to promote sustainable medicine production and distribution throughout the continent. “The PMPA … underscores the urgency in addressing the challenges facing the industry.”
In 2014, the Ministry of Foreign Affairs created the Egyptian Agency for Partnership and Development (EAPD) by merging several local African and regional cooperation funds. According to the EAPD’s website, the agency is the “first South-South Cooperation institution in Egypt aiming at putting the country’s comparative advantages and technical expertise into play for the benefit of [countries] south [of Egypt]. Creation of the EAPD and the strong political backing it enjoys reflect Egypt’s resolve to partner with Africa at a time when the continent is undergoing major positive developments.”
In March 2019, Sisi announced that since Egypt has almost eradicated hepatitis C in the country, the focus will switch to helping Africa overcome the disease. “The initiative to provide hepatitis C treatment for 1 million Africans is currently focused on three African countries, namely South Sudan, Eritrea and Chad,” a Ministry of Health official told Al-Monitor, in June 2021.
In September 2019, the market research company Fitch Solutions reported Egypt was starting to work on a “national plan to support the pharmaceutical industry and exports, with African markets being the primary target.”
By May 2021, Egypt’s president said the government would help Djibouti build a state-of-the-art hospital. No more details have surfaced to date. In June 2021, the Ministry of Foreign Affairs announced it would cooperate with South Sudan to prevent malaria in the country; the EAPD is financing the project.
Egypt’s ambassador to Rwanda in June 2021 signed an MoU to build an Egyptian center for heart surgeries in Rwanda’s capital. “The center is the first of its kind in East Africa, focusing mainly on heart and blood vessel treatment, particularly in children,” noted the Ministry of Foreign Affairs in a June 2021 press release. It would also train Rwandan medical staff and help them conduct biomedical research.
Rakha Hassan, a former assistant foreign minister and member of the Egyptian Council for Foreign Affairs, told Al-Monitor that ongoing cooperation between Egypt and Africa includes providing medical supplies and equipment. Egypt is also organizing medical convoys in the most impoverished African countries. Additionally, the government is helping train doctors from various countries. “Some African countries are in dire need of these medical projects,” he said, noting that South Sudan and Djibouti benefit the most from those ongoing efforts.
The next step for Egypt to increase its support for Africa’s healthcare and pharmaceutical landscape is to export COVID-19 vaccines to the continent, according to Sisi. Egypt is already producing Sinovac, one of China’s vaccines, with a maximum capacity of 100 million doses yearly.
Egypt is also developing two homegrown COVID-19 vaccines (COVI-VAX and EgyVax). In February, the World Health Organization said Egypt and five other African countries would receive the technology needed to develop mRNA vaccines like those produced by Pfizer-BioNTech and Moderna.
For Egypt to meet the pharmaceutical needs of 1.4 billion Africans, it must significantly increase local capacity. “The government can’t do it alone, given the current growth rates and increasing demand for medicine,” Acting Health Minister Khaled Abdel Ghaffar told AmCham in April.
He said Egypt’s “near-perfect” handling of the COVID-19 pandemic — balancing lives and livelihoods — showed the robustness of the country’s health sector during the worst of the pandemic. That would invariably attract local and international pharmaceutical and healthcare investors to Egypt to meet local demand and eventually export to Africa. In September, the Egyptian Drug Authority met with South Korean officials to discuss such investments.
Abdel Ghaffar said reforms in the medical sector focus on making high-value medicines rather than just chasing volume. He added that the nation’s Universal Healthcare Coverage is opening doors for “very important” pharmaceutical and health-related public-private partnership projects.
Including more citizens in an effective national healthcare system would “increase consumption, [growing] the market for quality health care and pharmaceuticals,” Opara of DrugStoc wrote in his blog on Devex.
Boosting private sector involvement will allow the healthcare and pharmaceutical sectors to boom. “Given Egypt’s plan to become a medical hub in the region, predominantly in the manufacturing of vaccines and other pharmaceutical products, there will be growing opportunities for multinationals to expand their presence in Egypt,” said Fitch.
The market research firm stressed Egypt’s pharmaceutical companies need to scale up quickly to capitalize on healthcare developments throughout the continent. Egypt has the opportunity to “act as a regional hub for pharmaceutical trade for neighboring healthcare systems undergoing significant government investment,” noted Fitch.
However, Fitch has concerns about the government’s ability to attract sufficient pharmaceutical investments to double exports between 2020 and 2023, “a steep goal, particularly when considering recent pharmaceutical trade growth trends and challenges posed by the COVID-19 pandemic.”
The market research firm highlighted several challenges hindering new FDI in the Egyptian pharmaceutical sector. The first is “ineffective intellectual property (IP) protections,” essential for pharma companies to ensure their patented medicines aren’t replicated and sold at significantly lower prices.
The second is “aggressive” government policies to localize pharmaceutical production coupled with “flawed” pricing policies, which cripple new entrants and stifle profit margins. Such challenges “continue to undermine the investment climate in Egypt, creating a difficult operating environment for foreign investors and trade partners.”
However, the market research agency believes Egypt should see a massive regulatory overhaul after signing the Treaty for the Establishment of the African Medicines Agency (AMA) in February 2019. “The AMA aims to provide regulatory harmonization across the African continent as well as promote clinical trials and simplify the registration and commercialization of safe and affordable medicines,” Fitch said.
Tangible results from signing that agreement will not likely materialize in the short term. Still, Fitch noted that the signing of the deal should “increasingly attract innovative drugmakers, acting as a catalyst for greater sector investment and a long-term growth driver for Egypt’s pharmaceutical market.”
One significant problem facing Egyptian pharmaceutical companies looking to export their products is Africa’s fragmented market. “They [African governments] have for a long time disincentivized pharmaceutical manufacturing investors,” said Byaruhanga of the AUDA. “African manufacturers … cannot compete with their Asian counterparts that operate in vastly larger markets and therefore enjoy economies of scale.”
The African Continental Free Trade Agreement (AfCFTA) could be one solution. “African manufacturers [that capitalize on the agreement] can be expected to enjoy significant economies of scale and scope,” stressed Byaruhanga. “It will integrate a market of 1.3 billion people and potentially 2.2 billion by 2050.”
The continental pact also could expedite the alignment of those countries’ legislative frameworks, which Byaruhanga said are weak and hard to navigate.
Opara of DrugStoc agreed. “While Africa has more than 50 countries with different pharma markets and trade policies, the introduction of [AfCFTA] offers immense integration opportunities for the manufacturing and trade of pharmaceuticals,” he said. “It seeks to turn the continent into one giant trading bloc, potentially offering locally manufactured pharmaceuticals a larger market and a better investment outlook.”
That continental free trade agreement coupled with ever-increasing digitization of the pharmaceutical sector could make entering African markets even more manageable. “Africa has a unique opportunity to utilize these advancements in technology and leapfrog the current infrastructure gaps affecting its pharmaceutical value chain,” noted Opara. Those opportunities include “connecting patients to responsive, resilient, and adaptive supply chains. It is a unique feature that technology can bring to the pharma space.”
As with most industries that move to digital operations, the costs of pharmaceutical products would likely decrease. For Africa, that could mean more access to top-quality medicines and the latest pharma products that otherwise might not have been possible.
Other challenges remain, including securing “affordable financing and modern technology, which hampers business expansion,” said Byarhanga. She also noted the lack of qualified doctors and medical staff coupled with “poor procurement and supply chain systems and policy incoherences in countries’ trade, industry and finance departments.”
Opara of DrugStoc said the unavailability of cost-effective and accessible transportation between African countries increases shipping costs and makes them reach patients slower. “The lack of organized distribution systems forces healthcare providers to rely on open drug markets and unlicensed drug traders,” he said. “That makes patients susceptible to counterfeits and substandard products.”
Egypt is not the only country that sees Africa’s growth prospects in the healthcare industry. “The continent’s pharma market is projected to reach … over $25 billion by [the end of] 2022,” said Seth Onyango, the founder of How We Made It Africa, a portal. “That’s not pocket change for investors who are keen to cash in on demand by building the continent’s local capacity to manufacture drugs.”
Companies throughout the continent are capitalizing on the pharmaceuticals and medical equipment gap the pandemic exposed. “As the demand for vaccines and drugs outstrips supply … homegrown firms are positioning themselves to plug the deficits,” said Onyango. For example, in October, South African drug maker Aspen Pharmacare announced the start of operations at the largest anesthetics production facility in Africa, south of the Equator.
A more significant challenge for Egyptian companies is competition from Asia, including Chinese pharmaceutical companies. “Speeding up local manufacturing in the African medical industry alongside the unification of African standards” was a central topic of discussion at the Forum on China-Africa Cooperation, held in Senegal in November. A forum blurb stressed: “Local manufacturing is vital to African economies, a challenge made especially clear with the supply restrictions that have arisen during the COVID-19 pandemic.”
Multinational pharmaceutical companies also are eyeing production facilities in Africa. In October, Moderna said it would allocate $500 million to establish a new manufacturing plant in Africa to supply mRNA COVID-19 vaccine doses. It didn’t mention where the factory would be located, but the facility would directly compete with Egypt. “We expect to manufacture our COVID-19 vaccine as well as additional products within our mRNA vaccine portfolio at this facility,” CEO Stephane Bancel said in a statement.
Meanwhile, Pfizer and BioNTech announced in July 2021 that they would collaborate with the South African pharmaceutical company Biovac to distribute several mRNA vaccines throughout the continent. “We believe that our mRNA technology can be used to develop vaccine candidates addressing other diseases,” said Ugur Sahin, CEO and co-founder of BioNTech, in a statement. “This is why we will continue to evaluate sustainable approaches that will support the development and production of mRNA vaccines on the African continent.” No Egypt-based company has a comparable agreement.
BioNTech also has a long-standing agreement with Bill & Melinda Gates Foundation to develop HIV and tuberculosis programs in Africa. Onyango sees that “big pharma” is making a “calculated entry into Africa’s pharmaceutical market. The spike in investment into Africa’s pharma industry is hardly accidental.”
Tania Holt, a senior partner at McKinsey in London, believes other options are few for pharma companies with ambitious growth plans. In a 2015 article, she wrote, “Africa may be the only pharmaceutical market where genuinely high growth is still achievable.”