Zimbabwe Pharmaceuticals and Healthcare Report Q4 2010
In the Q410 update of BMI’s regional Business Environment Ratings (BERs), which assess 19 key markets in the Middle East and Africa (MEA) region, Zimbabwe has not improved its standing, remaining last. Though some of its economic indicators are somewhat improved, the country is unlikely to push up the regional rankings, in the medium term at least. Our pessimistic view is based on a combination of unfavourable political, regulatory and other factors, including the negligible per-capita expenditure on pharmaceuticals, the crumbling public healthcare system and the prevalence of counterfeiting. Globally, Zimbabwe ranks second from bottom, ahead only of Nicaragua, out of the 83 markets surveyed in total.In 2010, unemployment and wider economic hardships will hamper the development of pharmaceutical market values. In fact, pregnant women in Zimbabwe are facing increasing maternity care fees and the public health delivery system is in an increasingly dire state, according to The Standard. Expectant mothers are required to pay the equivalent of US$50 for monthly antenatal check-ups and delivery, which is out of reach for the vast majority of the population. In the meantime, a newly-published Zimbabwe Maternal and Perinatal Mortality Study shows a maternal mortality rate of 725 deaths per 100,000 live births.
Still, despite the massive potential demand for healthcare services as well as pharmaceuticals, we forecast that the value of the pharmaceutical market in Zimbabwe will increase from just US$41mn in 2009 to US$61mn by 2014, representing a compound annual growth rate (CAGR) of 8.1% in both local currency and US dollar terms, as Zimbabwe is now dollarised. Over our longer, ten-year forecast – through to 2019 – even though this rate of growth will increase to strong double-digit figures, the overall market value will reach just US$116mn, providing few incentives for key pharmaceutical players.
On a wider economic front, the International Monetary Fund (IMF) has recently stated that Zimbabwe’s heavy debt burden can only be resolved through a write-off by the international community. The statement follows detailed discussions between the IMF and Zimbabwean authorities in March 2010. The body added that neither economic policies nor mineral wealth are sufficient to immediately resolve the country’s severe debt problem. However, in order for a write-off to occur, Zimbabwe would be required to improve relations with the international community in order to qualify for the heavily indebted poor countries scheme, which would result in debt relief after the two-year economic programme.
Nevertheless, despite the Zimbabwean government’s attempts to soothe foreign investors’ fears by making amendments to the country’s indigenisation legislation, we believe foreign investment will remain constrained by the existence of the law. Furthermore, a proposed ‘indigenisation tax’ – which would be used to fund the purchase of stakes in non-indigenous companies – will create a disincentive to invest in many companies (including drug producers), which are already struggling to remain profitable and thus also compounding existing medicine shortages.
