Strengthening health value chains by partnering with the private sector in the SADC region
How and why German development cooperation invests, technically and financially, in local manufacturing of medical and pharmaceutical products.
Hannes Malan, Managing Director of a medium-sized pharmaceutical company in Pretoria, South Africa, remembers the sense of frustration he and his team felt when the COVID-19 pandemic revealed their continent’s dependence on pharmaceutical products imported from other parts of the world.
It was painful, but our frustration has turned into the conviction that the SADC region should not rely on other countries for our health security. We have the potential for autonomy! And with the support from the Joint Action SIPS, we have now taken the leap.Hannes Malan, Managing Director, CPT
Chemical Process Technologies (CPT) Pharma, the company Hannes Malan manages, is one of 25 local pharmaceutical manufacturers that are supported via grants and targeted capacity development measures by the programme component Joint Action ‘Support Towards Industrialisation and the Productive Sectors’ (SIPS). Co-funded by the European Union and Federal Ministry for Economic Cooperation and Development (BMZ), the Joint Action SIPS aims to strengthen the medical and pharmaceutical value chains in the Southern African Development Community (SADC) region. Whilst ‘traditional’ development cooperation tends to focus on public sector partners, this initiative is pursuing a new course by fostering partnerships and innovative ways of cooperation with the private sector to jointly tackle regional challenges.
A case for development investments – technical and financial – in SADC’s medical and pharmaceutical value chains
The 16 Member States that collectively form the Southern African Development Community (SADC) envision becoming a ‘peaceful, inclusive, competitive, middle to high income industrialised region, where all citizens enjoy sustainable economic well-being, justice and freedom’ by 2050. However, the COVID-19 pandemic laid bare the SADC region’ considerable dependence on imported medical and pharmaceutical products. At a time of high global demand, basic COVID-19 related medical and pharmaceutical items were difficult to import, and local production was unable to answer to the needs. The economic case for strengthening the region’s medical and pharmaceutical value chains for the region, however, goes far beyond the COVID-19 pandemic. The SADC countries have a high disease burden and the region is home to the world’s largest HIV epidemic. At the same time, Development Reimagined, a consultancy, states that
Africa’s pharmaceutical sector is valued at an estimated 65 billion USD and is primed for rapid growth, the continent produces only 3% of global medicines, and imports over 75% of its pharmaceutical needs.Development Reimagined
Amongst SADC Member States, there is broad agreement that functioning value chains are critical for the region to become competitive and industrialised and at the same time be prepared to respond to ongoing and future pandemics. This ambition is reflected in the SADC Regional Indicative Strategic Development Plan (RISDP) 2020-2030 which prioritises regional economic integration and the development of pharmaceutical value chains to enhance the region’s resilience and health security.
Mission economy: Create the conditions for private investments in the common good
Across the world, the COVID-19 pandemic was a wake-up call for the governments to strengthen their domestic and regional manufacturing systems for key medical and pharmaceutical products. The economist Mariana Mazzucato, who heads the WHO Council on the Economics of Health for All, coined the term ‘mission economy‘ which describes the complementary roles the public and the private sector need to play to answer the enormous challenges the world is facing today. On the public side, governments need to set the goals for such missions, such as for example pandemic preparedness and health security. In addition, they need to create the legal and financial framework conditions that stimulate and steer private sector investments and innovations. On the private side, local businesses use these investment-friendly conditions to produce and deliver the required goods and services. In a development cooperation context, development partners can support both the public and the private contributions to this effect.
Catalysing public and private contributions to SADC region’s industrialisation agenda
The German Development Cooperation is supporting such mission-oriented cooperation between the public and the private sectors in the SADC region. In 2018, BMZ commissioned GIZ to implement the ‘Cooperation for Enhancement of SADC Regional Economic Integration (CESARE)’ programme to support the SADC Secretariat in achieving its regional economic integration agenda. The CESARE programme aims to facilitate intraregional trade and to strengthen private sector stakeholders’ contributions towards the region’s industrialisation goals.
The Joint Action SIPS – which is a ‘joint action’ of SADC, EU and German development cooperation – is strengthening SADC local manufacturers of medical and pharmaceutical value chains, including anti-retroviral (ARV) and COVID-19 related medical and pharmaceutical products. What does this look like in practice?
Selecting manufacturers through a competitive call for proposals
Special care must be taken when development cooperation funds are provided to private enterprises to ensure a level playing field for competing companies. For example, where a public benefit such as access to medicines can only be achieved with contributions by local companies, one modality to be applied is a competitive call for proposals that follows a transparent, criteria-led selection process.
In May 2020, after assessing the capacity of SADC Member States to produce COVID-19 relevant items, the Joint Action SIPS launched its first call for proposals in the SADC region. The call was published and advertised region-wide, starting on the SADC website, social media channels, and in newspapers in the respective Member States, via partner networks and private sector associations.
Call for proposals
Proposal assessment and selection
Due diligence appraisal
Implementation with technical assistance
In response, a total of 108 applications were received from companies operating in 15 different SADC Member States. The Joint Action SIPS team conducted a rigorous screening process which included eligibility checks wherein all applicants had to submit their financial statements, annual turnover and tax clearance certificates. Thereafter, a technical assessment based on a Pugh Matrix was conducted, which measured the strength of the proposed project, the public benefit it would have and the company’s general stability and technical capability. Candidates that cleared the technical assessment were subject to a due diligence appraisal. Next, the details of the grant allocation were discussed directly with the companies and agreements were reached on measures for corporate social responsibility and monitoring mechanisms. 14 companies from 7 Member States were consequently provided starter grants for manufacturing innovative products needed for the regional ARV- and COVID-19-related value chains.
Comprehensive support: Combining starter grants and training
To enhance the impact of the cooperation, Joint Action SIPS combines starter grants with tailor-made capacity development measures for its cooperating private sector partners. These measures are designed to meet specific needs and include training on business management skills to enhance the planning, coordination, and organisation of cooperating private sector partners’ business processes and activities to ensure maximum productivity and profitability. Similarly, the project supports cooperating private sector partners to build environmentally friendly production systems that comply with applicable international, regional and national environmental standards. Additionally, private sector companies are supported to participate in Business-to-Business events that help them establish new intra-regional business relationships. As the following examples illustrate, SIPS has adjusted its support to the specific needs and supply chain challenges faced by different SADC countries.
Boosting Mozambique’s mask production capacities
When the COVID-19 pandemic hit, Mozambique could only produce a limited supply of surgical masks for the local market, and to do so it needed to import raw materials from China. The country lacked the technical capacity and equipment to produce the more sophisticated FFP2 masks. By the middle of 2020, as the pandemic surged across the country, masks were scarce and health workers inadequately protected. When Sociedade Moçambicana de Medicamentos (SMM), a local pharmaceutical manufacturer and surgical mask producer based in Mozambique, heard of the Joint Action SIPS’s call for proposals, they realised that this was the opportunity they had been waiting for. And they seized it.
The grant allowed us to build a production line for FFP2 masks from scratch and even the government was pleased when they heard that we’d gotten the grant since it was close to impossible to import FFP2 masks at the time – we could now help reducing the critical shortage being faced by the country.Evaristo Madime, Company Chairman, SMM
With production up and running by June 2022, SMM is geared to supply its government with FFP2 masks and also looking towards the regional market to begin exporting its products.
Enabling the environmentally friendly production of disinfectants in Mauritius
As with many other countries during the early days of the pandemic, Mauritius found itself in dire need of supplies to curb the spread of the virus, such as hand sanitisers. Archemics Ltd., a Mauritius-based disinfectant and detergent manufacturer, recognised its opportunity and applied for a Joint Action SIPS grant. The grant allowed the company to acquire the machinery and technology needed to scale and improve the production of hand sanitisers and diversify its product range to include a wider variety of gel-based hand sanitisers in different-sized packaging along with surface disinfectants.
Keen to contribute to the CEO Water Mandate of the United Nations Global Compact, Nidi Ramlogun, Head of Quality and Sustainability, proposed to SIPS to purchase a reverse osmosis plant. An industrial borehole for water extraction and such a plant would allow them to generate and recycle all the needed water and protect the islands’ scarce potable water resources. Her request was granted. ‘Through the grant, we are now able to source our own water and treat it using reverse osmosis. The effluent we generate can be recycled and we are using significantly less chemicals for the treatment of water.’
The Joint Action SIPS team encouraged Archemics Ltd. to expand its customer base beyond Mauritius and supported Nidi’s team to attend the SABA Trade Fair in Dar es Salaam, Tanzania in July 2022. Given the team’s positive feedback from the trade fair, Archemics plans to set up a company branch and eventually delocalise one of its production lines to Tanzania.
Establishing an Active Pharmaceutical Ingredient industry in the SADC region
The SADC region remains the area most affected by the HIV epidemic with 34% of the total number of people living with HIV worldwide residing in 10 SADC countries. Prevalence rates vary considerably between SADC countries, between just less than 1% to nearly 40%. The continuous availability of antiretrovirals (ARV), the treatment required to ensure that HIV positive people do not develop AIDS, is therefore critical for a significant proportion of the region’s population. To produce ARVs, active pharmaceutical ingredients (API) are indispensable as they account for 50 – 70% of the final dosage form. However, when SIPS started, not a single company in the SADC region was producing ARV APIs.
In South Africa, CPT Pharma had been manufacturing APIs for animal medicine for over a decade. It was keen to expand its product range to API required for ARV production but lacked the funds to attract and employ experts with the complex skill needed for this industry. According to Hannes Malan, SADC produces a considerable number of chemists who, when graduating, possess the necessary expertise. However, given the lack of a viable API manufacturing industry, most of them leave the region. The SIPS grant allowed CPT Pharma to start reversing this trend: It hired several highly skilled experts to initiate its ARV API production and established research internships for Masters students. Once graduated they can join their team, paving the way for eventual large scale API production in the region.
What has been achieved?
Across the region, the interventions realised by Joint Action SIPS have begun to bear fruit:
104 new posts for full-time employees have been added to the ARV and COVID-19 related medical and pharmaceutical value chains, with this number set to rise substantially in the coming years.
The skills development component has ensured that the companies utilise grant funds in accordance with their set out terms, and has provided continuous technical assistance via trainings, regional fellowship programmes, and by providing access to international industry networks.
Many grantee companies have consolidated their positions on the local and regional markets: In Tanzania, for example, Tridea Ltd. has increased the availability of affordable and high-quality hand sanitisers across the country.
Similarly, Tindwa Ltd. is the only mask manufacturer in the country that has successfully attained the internationally valid ISO 9001 and ISO 45001 certifications.
And what’s next?
From December 2022 onwards, a second round of grants will be implemented, this time for products relevant for COVID-19 vaccine production, administration and management along with patients’ clinical management. 10 private sector entities from across 5 SADC Member States have been selected to receive financial grants and capacity development support.
To help build the human resources the SADC region will need in the years to come, the Joint Action SIPS will coordinate the development of the pilot regional SADC Industrial Pharmacy Fellowship Programme to build linkages between the private sector and academic institutions. The Programme will collaborate with three academic institutions, i.e. the University of Witwatersrand, St Luke Foundation-Kilimanjaro School of Pharmacy and the University of Zambia. Private sector actors, like for example Hannes Malan of CPT Pharma in South Africa, will be involved in the development of an academic curriculum that prepares graduates for employment in the region’s growing industrial pharmacy sector. For him, the objective is clear: ‘We should be able to provide people with the medicines they need to have a good quality of life’.
Shahmir Hamid and Daniel Peña-Ortiz,