W1 Pharmaceuticals Summary Report by Building Bridges

THE AfCFTA AND TRANSFORMATIVE INDUSTRIALISATION WEBINAR SERIES

PHARMACEUTICALS, HEALTH CARE VALUE CHAINS AND HEALTH RESILIENCE SUMMARY REPORT 2021, Cape Town

Linkoping House 27 Burg Road Rondebosch 7700 Cape Town T +27 (0) 21 650 1420 F +27 (0) 21 650 5709 E mandelaschool@uct.ac.za www.mandelaschool.uct.ac.za Design: Mandy Darling, Magenta Media

Contents Introductory Note........................................................................................................................................... 2 Speaker Bios .................................................................................................................................................... 3 A. Context......................................................................................................................................................... 7 B. Summary of Presentations ...................................................................................................................... 9

1. Introductory Remarks....................................................................................................................... 9

2. Welcome Address............................................................................................................................. 9

3. Keynote Address............................................................................................................................... 9

Covid-19 Pandemic .................................................................................................................. 10 The African Continental Free Trade Area............................................................................ 10 Industrial Transformation........................................................................................................ 10 Constraints to the AfCFTA Agreement.................................................................................12 Conclusions.................................................................................................................................12

4. Discussion – Group 1.......................................................................................................................13

5. Discussion – Group 2...................................................................................................................... 16

6. Trade Policy Discussion..................................................................................................................21

7. Concluding Statements ................................................................................................................ 22

8. Closing Remarks.............................................................................................................................24

Introductory Note AfCFTA and Transformative Industrialisation Dear Reader, 2020 proved to be a challenging year for people across the world. Of note the impact of the Covid-19 pandemic on families, communities and nations reminded us of the need to strengthen democratic governance and pursue development sustainably. The African Continental Free Trade Agreement presented a unique opportunity to explore the challenges and opportunities for better integration of regional value chains in the pharmaceutical, agricultural and textile industries. Successful delivery of our four-part webinar series was made possible through partnership with the Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg, the Centre for Comparative Law in Africa (CCLA) and the Policy Research in International Services and Marketing (PRISM) at the University of Cape Town, Trade and Industrial Policy Strategies at the University of Pretoria, the Toyota Wessels Institute of Manufacturing Studies (TWIMS) in Durban, the Nigerian Institute of Advanced Legal Studies and the Africa International Trade & Commerce Research in Nigeria. We are especially grateful to our distinguished speakers who shared their experience and recommendations, thereby contributing to vibrant discussions during our webinar series. We had the opportunity to relay these recommendations to the Secretary General of the AfCFTA Secretariat, H.E. Wamkele Mene, in December 2020.

This Summary Report on Pharmaceuticals, Healthcare Value Chains and Health Resilience, outlines key themes which emerged during the first webinar. Dr Arkebe Oqubay, Hon. Minister and Special Advisor to the Prime Minister of Ethiopia, provided a detailed overview of the opportunities for transformative industrialisation in his keynote address. He framed his key arguments on the backdrop of the Covid-19 pandemic, highlighting the AfCFTA as a longterm, complex process of implementation, which requires nuanced learning and re-learning to achieve results. The Mandela School is committed to contribute to this learning process by connecting researchers, practitioners, and policy makers to craft solutions. We would like to thank Mr George Awuah, a member of our research team on the AfCFTA and Transformative Industrialisation Project, who compiled this report and captured these important contributions. This work forms the foundation in our efforts to build a network of experts working on issues related to transformative and sustainable industrialisation through the Industrialisation and Development Forum. In 2021, we will continue this series to explore digitalisation and opportunities for green industrialisation. We hope you enjoy reading this report and look forward to your comments. If you would like to receive more information about this ongoing project, please contact Ms Mabel Nederlof-Sithole, who is leading our Building Bridges Programme (mabel.sithole@uct.ac.za). Click here to view webinar videos. Warm regards, Faizel Ismail

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

Speaker Bios (In order of appearance) Dr Arkebe Oqubay Arkebe Oqubay, PhD, is a Senior Minister and Special Adviser to the Prime Minister of Ethiopia, and has been at the centre of policymaking for over 30 years. He has served as a chair and vice-chair on the boards of several leading public organisations and international advisory boards. He is the former mayor of Addis Ababa, has won the ABN’s Best African Mayor of 2006 award for transforming the city, and was a finalist in the World Mayor Award 2006. Dr Arkebe was recognised by the New African as one of the 100 Most Influential Africans of 2016 and a “leading thinker on Africa’s strategic development” for his work on industrialisation and industrial policies, both theoretical and practical. The Order of the Rising Sun, Gold and Silver Star, was presented to him by the Emperor of Japan in recognition of his distinguished achievements. He is a Professor of Practice at the University of Johannesburg (South Africa), a visiting professor at Sciences Po (Paris) and Nanyang Technological University (Singapore), and a distinguished visiting professor at Fudan University (Shanghai). Dr Arkebe is a UNU-WIDER Honorary Research Fellow, a Distinguished Fellow at the London-based think-tank the Overseas Development Institute (ODI), and a research associate at the Centre of African Studies in the University of London. He holds a PhD in development studies from SOAS, University of London. His research focuses on core development economics issues, including structural transformation, industrial policy, economic catch-up and global transformation, with a particular interest in developing countries. His published works include the path-breaking Made in Africa (Oxford University Press, 2015); The Oxford Handbook of the Ethiopian Economy (Oxford University Press, 2019); How Nations Learn: Technological Learning, Industrial Policy, and Catch-Up (Oxford University Press, 2019);

China-Africa and an Economic Transformation (Oxford University Press, 2019); African Economic Development: Evidence, Theory, and Policy (Oxford University Press, 2020); The Oxford Handbook of Industrial Hubs and Economic Development (Oxford University, 2020); and The Oxford Handbook of Industrial Policy (Oxford University Press, 2020). Pharm (Mazi) Sam Ohuabunwa Pharm Mazi Sam Ohuabunwa, OFR, is the national president, Pharmaceutical Society of Nigeria. He is a fellow of several professional organisations, the most prominent being the Pharmaceutical Society of Nigeria (FPSN), the Nigerian Academy of Pharmacy (FNA. Pharm), the West African Postgraduate College of Pharmacists (FPC. Pharm), the Nigerian Institute of Management (FNIM), the National Institute of Marketing of Nigeria (FNIMN), the Nigerian Institute of Public Relations (FNIPR) and the Institute of Management Consultants (FIMC). Pharm Ohuabunwa is the Past Chairman, Nigerian Economic Summit Group (NESG); Past President, Nigeria Employers Consultative Association (NECA); Past Chairman, Manufacturers Association of Nigeria (MAN); and Ikeja and once National President of the Nigerian American Chamber of Commerce (NACC). Pharm Ohuabunwa studied pharmacy at the University of IFE (now OAU) graduating in 1976. He did postgraduate training in business and organizational management at Columbia University, NY, USA and the Lagos Business School. He joined Pfizer Products Plc. in 1978 as a pharmaceutical sales representative and rose to become the Chairman/CEO in 1993. In 1997, Pharm Ohuabunwa led the management buy-over of Pfizer Inc. shares in Pfizer Products Plc., transforming the resultant company, Neimeth International Pharmaceuticals Plc., into a medium-sized Nigerian R&D pharmaceutical company. He voluntarily retired from the company after 33 years’ service in the industry, 18 years of which were at CEO level.

Dr Daniella Munene

Pharm Ignatius Anukwu

Dr Daaniella Munene is a pharmaceutical professional with experience in strategic planning, business development, team leadership and management of key stakeholder relationships in health. Over the course of her career, Daniella has focused on quality management systems for the health supply chain, organisational regulatory compliance and is now engaged in advocacy for better health systems. Armed with a strong passion for equitable health for all, Daniella is involved in policy recommendations and idea mobilisation in the pharmaceutical sector towards attainment of universal healthcare coverage. She has contributed to development of various health sector policies, notably the WHO Guidelines on self-care interventions for sexual and reproductive health and rights.

Pharm IG Anukwu is the National Chairman of the Association of Industrial Pharmacists of Nigeria (NAIP) where he leads National Advocacy for the establishment of Pharmaceutical Manufacturing Parks in Nigeria as a panacea for unleashing the Nigerian pharmaceutical industry.

Dr Skhumbuzo Ngozwana Dr Skhumbuzo Ngozwana is CEO of Kiara Health, a South African-based, Africa-focused healthcare company. He is an international expert on the African pharmaceutical industry and has worked with both the private and global public health organisations. He consulted to the World Health Organization (WHO), United Nations Industrial Development Organization (UNIDO) and the United States Pharmacopeia Convention (USP). He co-authored the Pharmaceutical Manufacturing Plan for Africa. The plan was the output of the extensive research and analytical work he conducted on the African pharmaceutical industry. He co-authored the Ethiopian Pharmaceutical Sector Strategy and Action Plan and the pharmaceutical sector strategies of several countries. He consulted for USP on their Africa strategy and authored a thought leadership paper titled, The Next Frontiers for the Public Health Medicines Market: Rethinking Priorities for Improved Access to Quality-Assured Medicines for Universal Access.

Pharm Anukwu holds a Bachelor of Pharmacy from the University of Nigeria, Nsukka, and a Master of Pharmacy in Clinical Pharmacy and Bio-Pharmacy from the University of Lagos. With over 25 years of experience in the Nigeria Pharma Industry, Pharm Anukwu has a track record of leading innovation through planning and successful implementation of business strategies. He is currently the Chief Operating Officer of Alpha Pharmacy, a wholly indigenous firm renowned for providing rare ethical pharmaceutical products across the length and breadth of Nigeria. Alpha Pharmacy and Stores Limited also operates a retail chain across the country where Pharm Anukwu is achieving corporate goals through the development and motivation of people. Prior to joining Alpha Pharmacy, Pharm Anukwu has recorded outstanding performance and leadership in diverse roles of increasing responsibility in the industry through formulation and implementation of sales, marketing, brand planning and business development strategies to drive revenue growth. Pharm Anukwu is a Merit Award winner of the Lagos State Pharmaceutical Society of Nigeria. He has served the Pharmaceutical Society of Nigeria in various capacities and is, at present, a member of the National Executive Committee (NEC) and council of the PSN. Pharm Anukwu is a member of the International Pharmaceutical Federation (FIP). Pharm Anukwu is married to Isioma and their marriage is blessed with children.

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

Mr Seth Akweshie Seth Akweshie, who holds qualifications in economics, international business management and accountancy, has a distinguished career as an academic (Fulbright scholar and university lecturer) and industrial civil servant and is an accomplished industrial development consultant specialising in African industry. His more than 40 years’ experience encompasses regional, national, sector and company issues. He has particular experience in inclusive and sustainable industrial development; sustainability and cleaner production; industrial governance; industrial upgrading and modernisation; and industrial cooperation and regional value chains. He has worked across Southern, East and Central Africa for key UN agencies and regional trade groupings. He was appointed by UNIDO as the SADC Regional Coordinator for the African Productive Capacity Initiative (APCI) and is well-connected to senior industrial sector policy makers throughout the region. He was the Industrialisation Advisor to the SADC Secretariat from March 2017 to May 2018. Ms Kirti Narsai Kirti Narsai has 23 years of experience of working in various roles in the healthcare industry and has won several awards during her career for leadership, innovation and performance. She has held many technical and managerial roles which have given her broad exposure across commercial and noncommercial areas across broad geographical areas. She currently runs her own consultancy focusing on health and trade policy issues in Africa while completing her PhD in pharmaceutical policy at the Utrecht University, Netherlands focusing on health products regu-

lation in the Southern African region. Prior to this, she served as Senior Director, Government Affairs & Policy at Johnson & Johnson with responsibility for sub-Saharan Africa where she was responsible for proactively assessing, influencing and shaping the rapidly evolving health policy environment in the region across the company’s core focus areas: medical devices, pharmaceuticals and consumer products. She also completed the Ascend Accelerated Leadership Development Program at Johnson & Johnson during 2018, reserved for women identified for accelerated development. She has facilitated the African Regional Business Network meeting of the World Economic Forum for Africa and appeared in a panel interview on CNBC Africa on the African Continental Free Trade Agreement. She has held several board positions at Johnson & Johnson Medical Devices, South Africa; Johnson & Johnson Consumer, sub-Saharan Africa; Nepad Business Foundation, Janssen, Pharmaceutical Companies of Johnson & Johnson, South Africa; American Chamber of Commerce, South Africa; and National Business Initiative. She has also been a member of several special interest groups: World Economic Forum, African Regional Business Network, Johnson & Johnson, Africa Innovation Challenge Leadership team, Transformation Advisory Committee – National Business Initiative, and Gauteng government task team for investment in pharmaceutical and medical devices sector. Previously she was Head: Scientific and Regulatory Affairs at the Pharmaceutical Industry Association of South Africa (PIASA), a trade association representing pharmaceutical companies in South Africa. Kirti focused on strategic scientific, health and pharmaceutical policy issues affecting pharmaceutical companies operating in South Africa and other African countries across four regional economic communities. Kirti has published several reports, submissions and research papers in international peerreviewed journals on policy issues affecting the pharmaceutical industry. She facilitated and chaired various industry working groups focusing on key policy issues and also convened the first Cold Chain forum in SA. She was responsible for trade industry submissions on various draft policy issues, including National Health Insurance, Pharmaco-economics, draft

regulations, and reimbursement of medicines, product quality, pharmacovigilance and clinical trials. Kirti began her career in the pharmaceutical industry with Janssen, pharmaceutical companies of Johnson & Johnson in 1997 in Medical Affairs and Pharmacovigilance. She held several positions of increasing responsibility in Medical Affairs at AstraZeneca Pharmaceuticals. She was also Programme Manager at a leading health insurance company, PruHealth (a division of Discovery Health). Kirti is a qualified pharmacist, with a M.Sc. (Pharmaceutics) (cum laude) and an MBA (GIBS) (dissertation with distinction). Kirti is passionate about health and related policies and their impact on patients and public health in African countries. Mr Marlon Burgess Having held management and director positions with many local and international brands such as Johnson & Johnson, Dinaledi Medical, Philips and Stryker, Marlon Burgess brings a wealth of knowledge and years of experience to ASH. In 2015, he completed his tenure as Chairman of SAMED and still is an active Board Member. He also chairs AMCHAM Health Forum and SAMED’s Public Sector Committee.

Professor Caroline Ncube Prof Caroline Ncube is an NRF-rated researcher and holds the DST/NRF SARChI Research Chair in Intellectual Property, Innovation and Development. She holds a PhD from the University of Cape Town, an LLB degree from the University of Zimbabwe and an LLM from the University of Cambridge. She is a Fellow of the Cambridge Commonwealth Society and a Shell Centenary Fund Scholar. She is an Associate Member of the Centre for Law, Technology and Society at the University of Ottawa. Ncube joined the Department of Commercial Law as a lecturer, in January 2005. Since then, she has served as Head of the Department of Commercial Law (2014 -2016) and Deputy Dean, Postgraduate Studies (2017). Before joining UCT, she lectured at the University of Limpopo (formerly University of the North) and the University of Zimbabwe. Prior to embarking on an academic career, she briefly practised as an attorney. Ncube plays an active role in various professional associations and networks. She is often invited to give lectures and seminars in intellectual property to various constituencies. She is also actively involved in research projects that focus on open development, access to knowledge and the promotion of a balanced approach to IP. She is the founding co-editor of the South African Intellectual Property Law Journal and serves on the editorial boards of the Journal of Corporate and Commercial Law & Practice, the African Journal of Intellectual Property and the African Journal of Information and Communication.

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

A. Context The African Continental Free Trade Area (AfCFTA) presents an opportunity not only for boosting regional trade but also meeting the continent’s transformative industrialisation imperative. Currently, with an intra-regional trade of about 17%, the continent lags behind Europe (69%), Asia (59%), and North America (31%). While the reasons for the low intra-regional trade are many and complex, a primary factor underpinning the abysmal performance – despite a long history of efforts to foster regional integration – is the lack of productive capacity on the continent.

In light of this shortcoming, the AfCFTA affords an opportunity to rethink Africa’s approach to regional integration by moving away from a linear-based approach that focuses solely on the removal of trade barriers to a development-based approach that pays attention to the building of productive capacity through the promotion of economic diversification, structural transformation and technological development. Specific policy tools often identified to foster ‘developmental regionalism’ in Africa include, among others, development of regional value chains (RVCs) that exploit existing comparative advantages and complementary features within the region including differentiated labour cost, productive capabilities, natural resource endowment and geopolitical advantages1. Indeed, in the context of the AfCFTA, the development of RVCs holds special appeal as a model for Africa’s industrial development for several reasons. For a start, the development of RVCs constitutes a viable strategy for mitigating negative distributional impacts that Africa’s smaller and more vulnerable economies are likely to suffer under AfCFTA trade liberalisation. Lessons from the European Union, where negative distributional effects have led to scepticism and suspicion among some members are very instructive in this regard. Also, given that individual African countries lack competitiveness in global trade, the prospect of national economic transformation efforts can be enhanced if they are supported and complemented by regional strategies.

RVCs in the context of the AfCFTA will enable African countries to combine forces, organise the regional division of labour, boost their productivity and strengthen their position to climb a specific global value chain as a regional block. The integration of ASEAN countries into the electronics global value chain through the development of RVCs, for instance, offers inspiration in this regard. Finally, RVCs are uniquely well-suited for industrial development in sectors where idiosyncratic factors determine consumption behaviours and market opportunities. Specifically, on the African continent, distinctive regional tastes, cultural preferences and climatic conditions demand building local companies around RVCs in sectors that barely attract the interest of extra-regional companies. The pharmaceutical industry is a typical example of where distinctive health problems, including both tropical diseases such as malaria and environmental health challenges such as humidity and sun exposure, get the attention of only a few pharmaceutical companies outside the continent. The food industry also offers a good example given unique regional tastes and dietary habits. It is in light of the above that the Nelson Mandela School of Public Governance at the University of Cape Town identified three priority sectors that were perceived to have the potential for RVCs in the context of the AfCFTA. They include i) pharmaceuticals and healthcare ii) cotton, textiles and clothing iii) agriculture and food processing.

1 Other policy tools often identified are regional industrial development policy, use of development corridors and the establishment of special economic zones.

Subsequently, the school partnered with the Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg, the Centre for Comparative Law in Africa (CCLA) and the Policy Research in International Services and Marketing (PRISM) at the University of Cape Town, Trade and Industrial Policy Strategies at the University of Pretoria, the Toyota Wessels Institute of Manufacturing Studies (TWIMS) in Durban, the Nigerian Institute of Advanced Legal Studies and the Africa International Trade & Commerce Research in Nigeria to launch a webinar series on the theme: “The AfCFTA and Transformative Industrialisation”. The webinar series seeks to provide a platform to address the question of how the AfCFTA can advance transformative industrialisation in Africa, with each webinar focusing on one of the three potential RVCs identified. Insights from the webinars informed policy briefs that will be shared with relevant stakeholders, including the AfCFTA Secretariat. The first webinar of the series held on 15 October discussed “Pharmaceuticals, Health Care Value Chains and Health Resilience”. The objective was to explore the potential for enhancing the competitiveness of the African pharmaceutical industry through the development of regional value chains. This report presents a summary of the main ideas and key insights from the webinar.

The Nelson Mandela School of Public Governance has identified three priority sectors that were perceived to have the potential for Regional Value Chains (RVCs) in the context of the AfCFTA. They include: 1. Pharmaceuticals and Healthcare

2. Cotton, textiles and clothing

3. Agriculture and food processing

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

B. Summary of Presentations The webinar comprised eight sections, featuring an introduction and welcome address, followed by a keynote address, presentations organised into two distinct discussion groups, a trade policy discussion, concluding statements and closing remarks. Participants asked questions in writing via the chat function of the webinar platform. What follows is a thematic summary of the content of the various presentations.

1. Introductory Remarks Ms Mabel Nederlof-Sithole (Programme Manager, Building Bridges, Nelson Mandela School of Public Governance, University of Cape Town) opened the webinar by thanking and welcoming the audience and the speakers. She expressed gratitude to the participants and highlighted the significance of the expression of interest across the public, private and civic spaces to engage in such momentous conversations as the successful implementation of the AfCFTA. Ms Nederlof-Sithole then proceeded to provide context to the “AfCFTA and Transformative Industrialisation Webinar Series”, outlining the dates for the subsequent webinars under the series and encouraging participants to register and participate. She also indicated that the webinar constitutes a start to an ongoing conversation and opportunities for collaboration and urged the audience to use the chat function to post their questions and comments.

2. Welcome Address Prof Faizel Ismail (Director, Nelson Mandela School of Public Governance, University of Cape Town) delivered the official welcome address. He began his address by welcoming the audience and the speakers. He explained the motivation for the webinar series, including the support from partner institutions. Prof Ismail underscored the need for a developmental regionalism approach to the AfCFTA that facilitates and enables transformative industrialisation in Africa and spreads the gains of trade and integration to the smaller and more vulnerable economies of Africa. He noted that while the pandemic has slowed

down work on advancing the implementation of the AfCFTA, it has not reduced the political commitment of leaders on the continent. At the time of this first webinar, ministers of trade of the African Union met at the end of September and agreed to finalise the outstanding issues to kick-off the implementation of the AfCFTA in January 2021. Prof Ismail expressed delight at the overwhelming response to the calls for experts to participate in the webinar series. He indicated the number of registered participants for the webinar to be a little over 200, with representation from across the continent. He then introduced the keynote speaker, Dr Arkebe Oqubay.

3. Keynote Address Dr Arkebe Oqubay (Hon. Minister and Special Advisor to the Prime Minister of Ethiopia) delivered the keynote address. The presentation was on the theme “Framing the landscape of opportunities for transformative industrialisation in Africa”. Dr Oqubay opened his address by thanking the Nelson Mandela School of Public Governance and partner institutions for organising the webinar series. He expressed a strong conviction that the webinar series will contribute to concretising the broad vision of continental free trade among African countries as well as advancing the economic transformation agenda. On the substance of the address, Dr Oqubay organised his presentation around three core interconnected issues, viz, the Covid19 pandemic, the AfCFTA and industrial transformation.

Covid-19 Pandemic Dr Oqubay noted that whilst the Covid-19 pandemic has caused fundamental shifts, it has not, and probably would not, change government policy drastically. Rather, what has been observed is that countries which have experience in industrial policymaking have been more effective in responding to the pandemic as well as the economic fall-out. On the contrary, countries that are lagging in industrial development and have weaknesses in government coordination and policymaking have been observed to face many difficulties in managing the pandemic. Thus, industrial capacity has been critical not only in dealing with the health emergency but also in rebounding from the ensuing recession; so too has government effectiveness and policy responses been fundamental.

The African Continental Free Trade Area On the AfCFTA, Dr Oqubay emphasised that the trade agreement ought not to be considered as an end in itself, but the first step towards a much more complex challenge of economic transformation. According to him, to make the AfCFTA impactful in facilitating economic transformation, there is a need to understand the impact of the trade agreement on the supply and demand side linked to the nature of a given industry and the shifting external environment. It is only in such context, Dr Oqubay asserts, that we can understand the dynamics of AfCFTA.

Industrial Transformation According to Dr Oqubay, industrialisation and economic transformation are essentially about sectoral transformation, which makes looking at specific industry and sector crucial to understand the dynamics. Dr Oqubay then proceeded to highlight key perspectives that are crucial to effective industrial policymaking: Perspectives on industrial policy • First, industrial policy ought not to be seen solely as government intervention. Rather, it must be seen as a vehicle for structural transformation, technological learning and catch-up. Further, industrial policy should

always be linked with the strategic importance of exports. • Second, an industrial policy will not be impactful unless aligned with other policies that affect industrialisation – including policies on infrastructure, human capital and macroeconomy. Policy coherence is, therefore, critical to industrial policy success. • Third, an industrial policy must be adaptive; it must be adapted to the external environment, the local condition and the specific sectoral situation. • Fourth, industrial policy requires a great deal of practicality. The selection of sectors must be based on productive criteria – not political criteria – and the policy design must be sector-specific. Additionally, policymaking and industrial transformation are essentially about performance, discipline and reciprocity as there are always different industrial and interest groups with changing behaviour. The state and private sector roles must be seen as a moving arrangement where the state may play an important role in a sector but gradually the private sector

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

medical products are imported. To transform the industry, Dr Oqubay noted that a study was commissioned in 2016 to understand the constraints and the strategic implications of the sector. According to him, a new understanding emerged from the study that stressed the need to consider the pharmaceutical industry as a national security issue. Moreover, the need to shift from import-substitution towards an export-oriented approach was reinforced. Dr Oqubay noted that further study was undertaken to explore the experience of successful pharma industries in other countries such as India, South Korea, Singapore and China. Subsequently, the policy approach changed fundamentally at the strategic level. Dr Oqubay outlined the key policy thrust – as well as adopted strategies – that have underpinned Ethiopia’s new policy approach to the pharmaceutical industrial development since 2017. They include: • First, the need to focus on large manufacturers with export orientation as a source of productive investment.

may evolve to play a much more dominant role. Sector-specific industrial policymaking: The Ethiopian example To underscore the point that industrial policy approaches ought to be sector-specific, Dr Oqubay highlighted the differentiated approach that the Ethiopian government has adapted to different sectors. He outlined the key policy thrust and strategies that the government adapted to the pharmaceutical, apparel and clothing, and horticulture industries. The pharmaceutical industry in Ethiopia: Key policy issues and strategies Dr Oqubay underscored the importance of having a differentiated approach to the pharmaceutical industry by outlining segments within the industry: from medical devices, pharmaceutical products, and veterinary products to healthcare services. He noted that the pharmaceutical industry has been a source of dilemma for the Ethiopian government. He indicated that the Ethiopian pharmaceutical industry was very weak as almost 80–85% of

• Second, the need to build the pharma industrial ecosystem. In this regard, the construction of the World Bank-financed Kilinto industrial park, at the cost of US$260 million, was a major step towards this objective. The park, which is now completed, was designed with GMP compliance and sustainability as essential elements. Key consideration has also been given to promoting the production of APIs, which is critical to the growth of the pharma industry. • Third, the need to promote human resource development from changing and enhancing courses at universities to developing bioequivalence excellence centres. • Fourth, the need for government procurement policy to support the pharma industry. Here, the government’s purchase policy had to be modified by shifting the cycle of procurement contracts from one year to 3-5 years to enable companies to plan. Export-oriented companies – those with a minimum of 30% of exports – were given additional incentives. • Fifth, the development of the pharma industry must be linked with export logistics to enhance tradability. Ethiopian Airlines, which was part of the development of the pharma industrial policy, has been instrumental.

• Sixth, and with export potential in mind, measures were taken to improve harmonisation regulations, which can be a major constraint both at the regional and extra-regional level. Light manufacturing: Apparel and textile Given the differences in industrial constraints, the light manufacturing industries required a different approach from those adopted for the pharma industry. Specifically, in terms of the apparel and textile industry, the focus has been on attracting high quality and productive FDI, building specialised industrial parks and enhancing the industrial ecosystem. Agriculture-related industries: Brewery and Horticulture Ethiopia’s brewery industry has been expanding rapidly, growing at 25% annually. The Ethiopian government has succeeded in attracting three leading brewery companies from Europe to invest in Ethiopia. While the backward linkages are important, the key driver has been the expansion of the local market The horticulture sector is export-oriented, contrary to the brewery which is domestic market-oriented. As such, the sector also has its unique requirements, with the key element being the critical importance of dependable air logistics. Here, Ethiopian Airlines has been a major player. The supply of land has been a major constraint, with the adoption of a cluster approach constituting a useful strategy.

Constraints to the AfCFTA Agreement Dr Oqubay returned to the AfCFTA theme and highlighted key constraints to the trade agreement. First, industrial capacity will be critical. Particularly, economies of scale will be essential to drive the expansion of sectors that can produce at a competitive price and with acceptable standards and speed to market. Industrial policy efforts must be linked to economies of scale to make industries sustainable and competitive. Second, vertical domestic linkages are essential to developing export competitiveness even at the regional level. The pandemic has shown the vulnerabilities of the global value chains, offering an advantage to regional value chains. The success of regional and sub-regional value

chains hinges greatly on individual countries exploiting all domestic linkages. Third, infrastructural connectivity is a key constraint. While industries like pharma depend on air transport, many other industries rely on land transport, but the continent has serious land transport infrastructure constraints. Fourth, the lack of harmonised regulatory requirements can be a critical challenge especially for the trading of pharmaceutical products.

Conclusions Dr Oqubay ended his presentation with a number of conclusions: • First, the AfCFTA must be seen as a complex project and as a journey that demands learning. The pace of learning can improve the policy impact and also shorten difficulties African countries may be facing. • Second, the AfCFTA can only be effective and successful if African countries and policymakers focus on industrialisation and target job creation, exports and, in broader terms, economic transformation. • Finally, there is a need to be aware of the new requirements that have been evident because of the Covid-19 shock. Specifically, ensuring, improving and deepening resilience will be critical. To highlight this, specific examples from Ethiopia include the re-purposing of garment factories to produce PPE products, the establishment of PCR Covid-19 diagnostics facilities and Ethiopian Airlines’ successful shift from passenger to cargo operations without any losses, salary cuts or employee lay-offs – providing an opportunity to improve its productivity, efficiency and profit resilience.

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

4. Discussion – Group 1 This section outlines speaker inputs by Pharm (Mazi) Sam Ohuabunwa, Dr Daniella Munene and Dr Skhumbuzo Ngozwana. Pharm (Mazi) Sam Ohuabunwa (President, Pharmaceutical Society of Nigeria) Pharm Ohuabunwa was asked to share his experience with localising pharmaceutical production in Nigeria. He described efforts in West Africa to regionalise pharma production. The Nigerian experience of building local manufacturing capacity Pharm Ohuabunwa started his presentation by thanking the organisers of the webinar and the keynote speaker, Arkebe Orqubay. He proceeded to outline the challenges the Nigerian pharma industry had to contend with in trying to build local manufacturing capacity. Firstly, he pointed to the fragmentation of the industry, where companies are not coordinating their efforts. The foremost attempt was, therefore, towards organising the industry into what is now the Pharmaceutical Manufacturers Group of Manufacturers Association of Nigeria (PMG-MAN). Starting with a membership of just about 10 local pharmaceutical manufacturing companies, the group now has over 150 members. Initial tension and mistrust between foreign and domestically owned companies also had to be resolved. The second issue pertained to the lack of data to support planning and advocacy. Efforts were, consequently, made to build internal capacity to generate data. Today, PMG-MAN has reasonably reliable data-generating capability.

2005. Today, the proportion of locally manufactured local drugs hovers around 40%. Of the 40% produced domestically, 70–80% of the raw materials are imported. Failure to meet the proposed target is underpinned by systematic challenges, including poor infrastructure and lack of long-term finance. Pharm Ohuabunwa indicated that thanks to the Covid-19 pandemic, the government of Nigeria has started paying attention to the industry. The Central Bank of Nigeria provided 100 billion naira to enable the industry to scale up capacity. For the first time, the Central Bank of Nigeria is providing financial support to pharmaceutical researchers, research companies and institutions. Efforts to build sub-regional pharma capacity in West Africa As a founding president of the West African Pharmaceutical Manufacturers Association, Ohuabunwa noted that the goal was to bring together all pharma manufacturers in the sub-region, build capacity and enhance competitiveness. He outlined the specific strategic goals, to include regulatory harmonisation and integration and advocacy for regional pharma support initiatives. Drawing from the experience, Ohuabunwa underscored the lessons for the implementation of the AfCFTA, including the need for regulatory harmonisation, joint regional advocacy to unions like the EU and learning from each other. He noted that as the pandemic has shown, global supply chains are unreliable, which makes reliance on an external supply of pharmaceutical production, including essential drugs, very risky.

The third challenge related to raising product quality standards to enhance competitiveness. The approach involved setting up internal quality control mechanisms that involved a committee of quality control managers reviewing and qualifying factories, sometimes over and above the requirements stipulated by state regulatory agencies.

Dr Daniella Munene (CEO, Pharmaceutical Society of Kenya)

The fourth problem related to the government assessment of local pharma industry products. Advocacy efforts led to the promulgation of a government policy that targeted achieving 70% local production of essential drugs by

Regional distribution hubs: A proposed strategy Dr Munene emphasised, while alluding to Dr Oqubay’s point on critical essence of export logistics in the pharmaceutical industry that

Dr Munene shared her experience in pharmaceutical supply chains, building human resources and institutional capacity. She shared Kenya’s regulatory challenges and the opportunity the AfCFTA provides to address them.

beyond increasing domestic production capacity there is the need to recognise that the quality and value of medicine has to be factored in from factories to patients.

ties. She noted that regulatory harmonisation would help address these challenges, but the implementation of policy documents has failed to materialise.

Dr Munene emphasised good distribution practices, strengthening the distribution value chain, maintaining the integrity of medicine and having end-to-end quality assurance of the product. She outlined two ways the nature of distribution might affect the quality and price of pharmaceutical products. First, while a product might come out of a very good factory, depending on how it is handled, it could reach the patient in a state that it will not be helpful to the patient. Second, a product may be very affordable from the factory, but it may not be affordable by the time it gets to the patient if the distribution process is convoluted and has stages where products keep changing hands.

Dr Munene suggested that while minor progress has been made at regulatory harmonisation at sub-regional levels, the AfCFTA offers an opportunity for this to be fast-tracked. She pointed out that the African Union models of regulatory harmonisation are a good starting point.

Dr Munene proceeded to suggest that the AfCFTA provides a unique opportunity to establish regional hubs to deal with distribution challenges. Specifically, she noted that while efforts are made to increase local pharma industrial capacity, dependence on imports including both raw materials and finished products will continue to be a reality. A good strategy, then, is to make importation ‘smart’ by having regional hubs of medicines perhaps in customs bonded warehouses that are then distributed to nearby countries. Such a strategy has the advantage of reducing cost due to bulk importation and also helping to manage product quality. Even better, with the removal of tariffs under the AfCFTA, the movement of products from the regional hubs becomes cheaper.

Dr Skhumbuzo Ngozwana (CEO, Kiara Health)

Regulatory harmonisation and the AfCFTA Dr Munene noted that like most other African countries, Kenya is import-dependent in pharmaceutical supplies; the proportion of imported medicines is about 70%. She noted that Covid-19 has shown that global supply chains are not resilient to pandemics. On regulatory harmonisation, Dr Munene highlighted the challenge in the East African region where requirements across countries are not only different but also lengthy and difficult to follow. In effect, local pharmaceutical firms have no incentive to sell in other markets, especially where imports are in small quanti-

To conclude, Dr Munene intimated that as efforts are made at boosting African industrial capacity, it is important not to lose sight of the services that support that capacity – ie logistics, distribution, simplification of the supply chain and digitisation for visibility and traceability.

Dr Ngozwana’s guiding question, asked what is it that Africa needs to do to build its capacity in the pharmaceutical and healthcare sector, and the AfCFTA’s potential to achieve this objective. The seven pillars to build Africa’s pharma industrial capacity Before delving into the specifics of what needs to be done to build pharma industrial capacity, Dr Ngozwana emphasised the need to dispel the long-standing cynical notion that the continent cannot be competitive in producing medicines due to strong binding constraints. He then proceeded to outline seven fundamental pillars that are essential to building formidable pharma industrial capacity to ensure health security on the continent. • First, there is a need for regulatory strengthening and harmonisation. A strong regulatory system helps to safeguard public health even as advocacy for local production gains traction. In terms of regulatory harmonisation, specific strategies such as having preferences or expedited reviews and approvals for products that are domestic-market oriented can help reduce the cost and help catalyse the development of local industry. • Second, governments must utilise procurement as a financial asset for local companies. Varied measures can be employed to support local pharma companies – from allocating

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

a portion of public procurement to local companies, offering them price preferences to longer-term tenders that give certainty about price and volume. Additionally, there is need to lobby the international global public healthcare community to source pharma products from local companies in order to support health interventions on the continent. To put it in perspective, between 2009 and 2018, at least US$ 7 billion USD worth of medicines were procured across the continent, with at least 98% of that amount going to companies outside Africa. • Third, making available incentive packages to support the industry is very critical. Given the capital-intensive nature of the sector – thus requiring high setup costs and about two to three years before plants can be commissioned to get a return on investment – it is very unlikely that the private sector would have the incentive to invest in the absence of governmental support. Ethiopia’s substantial incentive, which has succeeded in attracting several multinational firms, underscores the role of government incentive packages. There are also reverse incentives, such as restricting the procurement of certain products to the local market, which has worked well in Ghana and Nigeria. Other possible incentive policy instruments include establishing special economic zones and pharmaceutical industrial parks. • Fourth, tariff policies need to be reviewed to support the low-cost importation of pharmaceutical raw materials (APIs) to enable local firms to produce at competitive prices. • The fifth pillar encourages the development of human capital to support the industry. • Sixth, local companies need to be assisted in the acquisition of technology. Institutions can be tasked to reverse-engineer products and diffuse these technologies to local companies. • The final element pertains to opening up markets and this is where the AfCFTA comes in. As it relates to the AfCFTA, critical elements include the need for regulatory harmonisation, the importance of regionally pooled procurement and the essence of policy coherence at the regional level. Lastly for ultimate health security, local production of APIs is essential; this can be accomplished through a collective regional effort.

5. Discussion – Group 2 Pharm IG Anukwu (National Chairman, Association of Industrial Pharmacists of Nigeria) Pharm Anukwu was asked to share his experience in building the Nigerian pharma industry and insights about what the AfCFTA could do. Challenges of the Nigerian pharma industry Pharm Anukwu noted that the pharma industry in Nigeria has seen minimal governmental support, in terms of funding, as health spending has consistently been below 5%. The dominant players in the industry are from the private sector. Pharm Anukwu indicated that there is no API manufacturing in Nigeria; local manufacturers rely on imports. He proceeded to outline the challenges of the pharma industry to include poor infrastructure (power, water, transportation), multiple taxations, lack of technical manpower and lack of funding. The challenges ultimately lead to high production costs which render local manufacturers uncompetitive. Other industrial constraints include low capacity utilisation. Pharm Anukwu he mentioned the Nigerian government’s 100 billion naira intervention geared towards ramping up local pharma production capacity in the context of Covid19. He welcomed this novel development, but noted that a more sustainable strategy would be to float a government grant to support the industry. Such a grant, he indicated, could be given out at a 5% interest rate with about two years moratorium. Looking ahead: A Nigerian pharma industrial park Pharm Anukwu noted that the first pharma industrial park in Nigeria is under construction, drawing largely on the Ethiopian experience. He observed that the aspiration is to mobilise API and excipient manufacturers, ignite indigenous research and commercialisation. In terms of technical manpower and expertise, Pharm Anukwu said they hope to mobilise diaspora support.

The role of the AfCFTA in developing pharma RVC Pharm Anukwu noted that the AfCFTA is essential to the building of pharma value chains. He emphasised that the AfCFTA will be instrumental in boosting local and regional productive capacity. He stressed the opportunity the webinar affords to tap into the insights and expertise of the other panelists. More importantly, he emphasised the huge market opportunity the AfCFTA affords industries across the region. The AfCFTA also provides the opportunity to leverage technical expertise across the region. It will also facilitate affordable sourcing of APIs and excipients intra-regionally. It also affords the opportunity to establish distribution networks to get medicines closer to those who need them. Pharm Anukwu concluded his presentation by highlighting the need for conversations and discussions among the key players on the continent given that the implementation of the AfCFTA would begin in January 2021. In effect, he indicated that he hopes the conversation in the webinar series will be carried on. Ms Kirti Narsai (Director, HealthValue Consulting) Ms Narsai was asked to share her view on how Africa could build its capacity and competitiveness in the pharmaceutical and healthcare sector and to highlight some of the implementation challenges based on her experience, and what member states can do to address them. From national to regional: The need for policy shifts in building competitiveness Ms Narsai noted that like previous speakers emphasised, the AfCFTA is the beginning of a long and complex journey for the continent to leverage the opportunities that a free trade area provides. On building productive capacity and promoting competitiveness and innovation on the continent, Ms Narsai noted that the AfCFTA necessitates rethinking the nationalistic approach to pharma industrial capacity-building. With an enhanced market size of about 1.3 billion people, in the context of the AfCFTA,

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

governments and policymakers, she notes, ought to adopt a more regional and continental perspective. According to Ms Narsai, whilst focus on local production is critical for national governments to enhance local capacity to deal with public health threats (HIV/AIDs, TB and malaria), reduce external dependencies and create employment, the AfCFTA affords African countries the opportunity to build competitiveness beyond national borders and even beyond the African continent. Ms Narsai also emphasised that pharmaceutical manufacturing on the continent must not be entirely domestic market-oriented. Rather, manufacturers must have an extra-regional export orientation. Vaccine and API manufacturing: An imperative Ms Narsai highlighted the need to promote API manufacturing on the continent and to develop capacity in this area. She noted that API manufacturing has its own distinct value chain with substantial market opportunity for the development of intermediates that require less technical expertise. At present, these markets are dominated predominantly by India and China, creating external dependencies for manufacturers in Africa. Currently, approximately 70% of vaccine manufacturing capacity is supposedly housed in developing markets. She also underscored the need to ramp up vaccine manufacturing capacity on the continent. She noted the limited vaccine production capacity within the current context of Covid-19 and the implication of reduced immunisation levels. Supply chain innovations: The role of technology and partnerships Ms Narsai turned to supply chain innovation and distribution practice. She emphasised the rural-urban divide on the continent and the implication of the huge supply chain infrastructure deficit, especially cold chain infrastructure, on getting quality medicines to patients. This, she noted, will be a challenge in getting Covid-19 vaccines to everyone on the continent. She noted, however, there is an opportunity to adopt innovative technologies and forge strategic partnerships to address this challenge. This is also an opportunity for innovative public-private partnerships. She shared an example of one such example of an unlikely partnership between an FMCG compa-

ny, a bank, a technology company and a transport company providing goods and services to low-income consumers. Implementation challenges of regulatory harmonisation: The need for private sector engagements On implementation challenges, Ms Narsai identified the key to regulatory harmonisation as practical implementation. While regulatory harmonisation is talked about at the policy level, the actual implementation has been a challenge. The AfCFTA, however, affords the opportunity to adopt a granular and practical approach to resolving the regulatory challenges by involving the private sector as early as possible in the policy development processes. Such an approach would unearth the real challenges, for instance, that companies experience on a daily basis with drug registration, transportation of medicines across borders and distribution costs, which unfortunately are passed on to the patient. These are areas that require active engagement with the private sector. However, platforms for engagement for these policy discussions are currently not well developed but remain critically important to move from policy development to implementation. These policy engagement platforms representing the private sector must, in the context of the AfCFTA, move beyond national level to the regional level. Mr Marlon Burgess (Chairman, Medical Device Manufacturers of South Africa) The guiding question for Mr Burgess’ remarks pertained to his experience in sourcing medical devices and PPEs in South Africa during the pandemic and his view of what is required in Africa to build productive capacity in the medical devices space. The South African experience The Covid-19 pandemic dramatically impacted the PPE supply chain as countries adopted a nationalistic approach by imposing restrictions on the export of PPEs. In South Africa, public-private partnerships have been critical in dealing with supply chain issues. The private sector and the government (Department of Health) partnered in an innovative way to ensure that essential medical supplies are accessible to the frontline health workers. The experience has shown that the public and private sector entities, which ordinarily are hardly able to

collaborate, can come together in a meaningful way during emergencies. The challenge, is to nurture public-private sector collaboration beyond periods of health emergency.

leveraged towards a fund which forms the basis of a mechanism that includes offtakes and training to support the sustainability of SMEs in the value chain.

Building pharma industrial capacity: The private-public partnership requirement Mr Burgess suggested that the most critical requirement for building productive capacity in the pharmaceutical and healthcare sectors is private-public partnerships. Such partnerships should be pursued as a strategic initiative towards strengthening the health system – not as a recourse in emergencies. Indeed, if it is the health crisis that has caused the economic recession, it is only prudent that the causal mechanism is reverse-engineered by strengthening the health system to safeguard the economy.

Israel: Israel used its superior military technology in the health sector to support innovation. Today, many multinational firms look to Israel for IP in new product development and this has created a value chain of significant economic value for the country.

Mr Burgess bemoaned the continent’s limited productive capacity in the pharmaceutical industry and the production of medical devices in particular. He attributed this to a lack of leadership, effort and strategy. He noted that significant innovations come out of Africa, but lack of government support and collaboration has made it impossible to develop value chains to the point of being export competitive. Mr Burgess indicated that while he was encouraged by the news of the Nigerian government’s support for the pharma industry, such initiatives are reactive; it would be more encouraging to initiate such interventions proactively and strategically. Beyond public-private partnerships, Mr Burgess also underscored the need for regional collaboration in dealing with issues like regulatory harmonisation. Building pharma industrial capacity: Learning from international experience Mr Burgess proceeded to outline three international examples that provide strategies for implementation to build productive capacity in Africa, within the context of the AfCFTA. Ireland: Ireland has gone from being ranked 20th in medical devices exports to 3rd in Europe. This feat was achieved on the back of a previous economic meltdown when the health sector was identified as a strategic economic driver. The strategy was to implement various incentive packages to attract multinationals. Further, a component of the tax on firms was

Malaysia: Malaysia applied project management approaches to project implementation – which Africa struggles with. In this case, the president leads the project management team for the national development plan. All projects to be rolled out within a year are outlined; there are monthly project meetings led by the president. This supported effective and realistic execution of the individual projects. Mr Burgess concluded his presentation by emphasising the AfCFTA’s success requires collaboration in pursuit of the opportunities it presents. Mr Seth Akweshie (Group Managing Director, FINACCO Group International) Mr Akweshie was asked to share his insights on regional pharmaceutical manufacturing strategies and their implementation in the SADC region. SADC regional pharmaceutical manufacturing strategy: An overview Mr Akweshie provided a brief overview of the SADC regional pharmaceutical manufacturing strategy: • Vision and goals: The vision of the SADC regional pharmaceutical manufacturing strategy is to contribute to universal health coverage by supplying affordable good quality essential medicines and health commodities for both communicable and non-communicable diseases. The vision has a dual purpose of developing a sustainable regional pharmaceutical industry that is competitive, reliable, innovative, productive and responsible, and to promote health for all people in the southern African region through the universal health coverage and improved access to medicines. The overall goal of the strategy was to manufacture within and make available essential medi-

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

cines in the region. • Challenges: The challenges identified pertain to quality and standards, the limited range of pharmaceutical production, the weak regulatory framework (which allows counterfeit drugs to enter the region), limited research development and innovation capacity, inadequate skills, poor backward linkages, lack of policy space for manufacturing pharmaceutical products due to intellectual property restrictions, and limited women’s involvement in the sector. • Recommendations: The regional pharmaceutical manufacturing strategy sought to address the identified weaknesses. Recommendations include infrastructure development; strong accreditation and quality control systems; promoting research, development and innovation, including the use of local materials; promoting the production of medical equipment; exploiting the TRIPS flexibilities for producing essential medicines and health commodities; and promoting female scientific education to increase their specialisation in pharmaceutical skills. • Focus areas: Four broad areas of focus were identified. Firstly, policy alignment: aligning the policies on health, trade, industry,

finance, agriculture and education given the interdependencies between these sectors of the economy. The second area pertains to resource mobilisation: from human resources to finance and infrastructure. The third area of focus is regulatory harmonisation. Finally, the fourth focus area pertains to collaboration, partnerships and knowledge exchange. • Action plan: The action plan identified the following areas: pooled procurement, quality control – WHO certifications, human resource development, establishing centres of excellence and promoting academic-industry linkages. Member States are meant to include responsibilities in their national legislation and to encourage national medical regulatory authorities to exchange information. Strong emphasis was placed on the critical role of the private sector as investors. Civil society plays an important role in monitoring the effectiveness of the strategy on the ground. • Importance of pharma value chains: The pharmaceuticals value chain is cross-cutting with potential for catalysing pan-African industrialisation by leveraging Africa’s natural resource endowments to spur sustain-

able growth of this and other economic sectors. Developing this sector will provide the following benefits: foreign exchange savings, employment creation, poverty reduction and improved quality of life. • Implementation challenges: A major implementation challenge has been a slow start. What is required, therefore, is an acceleration of strategy implementation. Key constraints and policy insights Mr Akweshie proceeded to highlight constraints and policy insights on building pharmaceutical value chains on the continent in the context of the AfCFTA. First, there is the need to emphasise that while a lot can be gained from developing the pharmaceutical industry, it has to be linked with other sectors of the economy to spread the gains across national borders. Not every country has the capacity to manufacture pharmaceuticals, but all countries are in the value chain either consuming, providing raw materials, manufacturing or distributing. In the context of AfCFTA, increasing productive capacity on the continent requires dealing with the supply-side constraints not just in the pharma space but for other sectors as well. These constraints include energy and infrastructure deficits, and financing gaps (there is the need to court domestic investment to complement FDI). Infrastructural constraints can be addressed by establishing industrial parks, as an example. Second, the agriculture sector has been a constraint to industrial production and competitiveness due to inadequate and irregular raw material supply. This constraint also limits the ability to grow the manufacturing sector based on agro-products and agro value chain development. Third, there is the issue of weak institutions with limited capacity to provide support, especially to the small, medium and micro-enterprises, including the informal sector. For effective job creation and poverty reduction outcomes, small and medium enterprises must be linked up to supply inputs and to large scale enterprises. Fourth, there are demand-side constraints, because of the low purchasing power of the general population. Government procurement

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

policies are therefore needed to support local pharmaceutical firms. Finally, there is a need for both public-private partnerships and alignment of national policies to regional strategies. There is also the need to ensure technology transfer to support regional value chain development efforts. Conclusion In conclusion, Mr Akweshie stressed the need to define measurable indicators to enable the monitoring of the continent’s performance in terms of share of global trade and the structure of contribution to global trade. The share of manufactured goods in total trade, the share of industrial products in both national and continental GDP, contribution of industry to employment and the share of industry in the global competitiveness index were suggested as possible performance indicators.

6. Trade Policy Discussion The session began with Prof Ismail first providing a brief context to the discussion – specifically the proposal submitted by South Africa and India to the WTO for a waiver from WTO-IP obligations to contain Covid-19 – and then introducing the discussant. He subsequently moderated the session, posing the guiding question to the discussant, Prof Caroline Ncube. Discussant: Prof Caroline Ncube (Expert – IP Policy, Faculty of Law, UCT) Prof Ncube was asked to share her insights on how to address the regulatory challenges raised by other speakers, her views on current debates on providing affordable access of Covid-19 vaccines to African countries, and how the AfCFTA can help in address some of the challenges. The AfCFTA IP Protocol: The promise and potential Prof Ncube started by addressing the question of how the AfCFTA and in particular, the Intellectual Property (IP) protocol can address some of the issues facingpharmaceutical value chains and health resilience. In the context of the AfCFTA, intellectual property is very crucial as it constitutes a non-tariff

barrier to trade. But the IP protocol is one in a package of seven; others include trade in goods, trade in services, investment, intellectual property rights, competition and dispute settlement. With regards to the structure, the IP protocol is going to follow the template of the already negotiated protocols, with the creation of an IP Committee. Also, the IP protocol will be driven by the principles that underpin the entire AfCFTA. In terms of substance, the IP protocol comes into a regulatory environment that is, to some extent, congested. All AU Member States have some IP regime in place, either national, sub-regional, regional or even global. So, the IP protocol comes into an environment where there are substantively several layers of regulation and it requires navigating the space carefully and carving out some space for it. She proposed that the IP protocol can help in dealing with regulatory challenges. It would be useful where there is policy space and a single continental front is required. The IP protocol can play a key role regarding policy coherence, direction and filling of gaps as they exist. Waiver from WTO-IP obligations to contain COVID-19 Prof Ncube proceeded to give her remarks on the waiver discussions by providing a brief overview of the waiver proposal. India and South Africa submitted a proposal to the WTO to seek a waiver from WTO-IP obligations to enable them to undertake revolutionary measures required to contain the pandemic. The waiver pertains to IP rights – not only to patent laws but also copyright laws, trade secrets and industrial designs. The basis of the proposal would be article 73 of the TRIPS Agreement, which is the security exceptions. The outcome of the discussion of the proposal, Prof Ncube noted, is highly anticipated. What the continent can do in the context of the AfCFTA Prof Ncube also identified measures that AU Member States can pursue in the context of the AfCFTA IP protocol. First, the IP protocol ought to provide a platform on the continent for AU Member States

to discuss IP standards and consolidate a common African position on trade and intellectual property matters at the global level. Second, despite manifold regulation in the IP space, there are gaps that the AfCFTA IP protocol can fill. For instance, there is no global standard about how to protect traditional knowledge. In pharmaceutical manufacturing, for instance, knowledge of traditional medicines is very significant. The AfCFTA IP protocol can take leadership in directing how knowledge on traditional medicine could be dealt with. Regional pharmaceutical value chains and the IP protocol In terms of building regional pharma value chains, Prof Ncube highlighted how regional cooperation can aid in leveraging the strength of AU Member States as a group. The IP protocol might be able to guide Member States to adopt a regional exhaustion principle where a patent holder loses their right to control distribution once a member purchases a pharmaceutical product or medical device. This would help in leveraging the purchasing power of some Member States withing the region. Conclusion Prof Ncube closed off her remarks by emphasising that the IP protocol has a lot of potential to allow the continent to align its policies around pharmaceutical value chains and this requires addressing the policy and regulatory gaps that exist.

7. Concluding Statements This section was facilitated by Prof Ismail. All the panellists were asked to, as parting remarks, briefly comment on the way forward. Dr Arkebe Oqubay Dr Oqubay expressed delight at listening to the presentations, emphasising that it has been an excellent learning opportunity for him. He proceeded to highlight a number of points. First, it is important to recognise that the government has a greater role in the pharma industry than in other sectors. For instance, while in other industries like clothing and apparel, the government may have to provide incentives to boost production, governments are responsible for ensuring public health and the additional prerogative to buy these products. This affords the government the opportunity to use its role as a buyer to support local industry via procurement measures. Second, the government is also a regulator. Because there are several government policies to be coordinated, the regulatory role is very significant because of its implication for public health safety. Third, he underscored the critical role of platforms such as the webinar for dialogue and discussions among players and delegates from different countries. Fourth, while regional value chains are important, weak domestic linkages would imply building regional value chains on a weak foundation. Developing and improving the domestic linkages is essential for boosting the dynamism of the regional value chains. Finally, while there is a rich research literature on pharma from the AU and UNIDO, among others, with many commonalities in the issues outlined by such studies, addressing specific constraints and designing support schemes would require a more focused study and continuous appraisal. Dr Daniella Munene First, one way to implement the AfCFTA is to have borderless movement of products and regional hubs of pharmaceutical and health

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT

products warehouses with a centralised distribution system. The continent could be divided into logistically manageable chunks. For example, when a country needs a certain product outside the continent, these products can be brought into the hub and then distributed into each of the countries, thereby saving costs and also making it easier to trace batches and the quality through the system.

in Africa (at least four on the continent) as APIs constitutes about 75% of the manufacturing cost of the finished products.

Second, the AfCFTA affords the opportunity to adopt a regional division of labour in the pharma industrial value chain. Depending on existing capabilities and resource endowment (ie comparative advantage) the different AU Member States can specialise in different aspects of the value chain, from manufacturing to distribution.

First, an important requirement is balancing national versus regional/continental priorities under the AfCFTA. That would require rethinking approaches to building market competitiveness and attracting FDI by considering the capabilities of other Member States and collaborating on how to extract value from regional value chains to fully enhance competitiveness.

Dr Skhumbuzo Ngozwana

Second, efforts need to be made to develop and nurture the innovation ecosystem. Africa already has a thriving innovation ecosystem but this is jeopardised by lack of access to markets and funding. This has led to the loss of intellectual capacity in this area at a rapid rate. An example is the loss of researchers from the continent annually, effectively undermining the continent’s innovation capacity. Nurturing the innovation ecosystem requires collaboration and partnership between the private sector, governments and academia.

The pandemic has only served to accentuate the flawed approaches of constrained governments to the pharmaceutical industry in Africa. More importantly, the pandemic has also shown the inventiveness of Africans and local companies – from building ventilators to PCR test kits. It shows that the capability exists and it is time the African leadership steps up and support local expertise and local companies. Pharm IG Anukwu Platforms for conversation and engagement with the private sector such as this webinar, are important to understand and appreciate the opportunity the AfCFTA promises to provide. Mr Seth Akweshie First, public health is a human rights issue and Covid-19 has underscored that fact. Governments, therefore, need to prioritise public health by making available the resources required for the implementation of the various strategies. Second, import duties on pharma raw materials and excipients must be removed to enable local firms to produce and sell at competitive prices. Third, there is a need for mutual recognition across national borders since the pharma industry works on economies of scale. Fourth, there is the need to establish API plants

Fifth, there is the need to develop productive capacity in all areas and recognise the linkages that exist. Ms Kirti Narsai

Third, to deal with the pervasive implementation challenges, there is the need to become granular and practical about implementation. This requires moving beyond policy documents to on-the-ground reality. Involving the private sector, which ultimately needs to implement and adhere to policy, is going to be critical to successful implementation. Mr Marlon Burgess First, there is a need for policy coherence in the first instance. So is the need for partnerships between the public and private sector. Second, it is important to adopt a broader African perspective in terms of value chains development. This implies looking at regional opportunities in the value chain leveraging on the strength of Member States. Third, it is essential to adopt a project management approach to initiatives to aid implementation. This would require proper business planning and appointing project managers perhaps

from each sub-region to execute the project. Getting the public sector to understand its role as the facilitator, coordinating the partnership is also crucial. Prof Caroline Ncube In the projected negotiation IP protocol, key considerations should be given to context, coordination and coherence. First, there is the need to think very carefully about our context, the African continent and also think about IP within the context of a trade agreement. Second, it is essential to coordinate the regional hub to see how IP law and policy can assist in those endeavours. Third, it is important to ensure the IP protocol provides us with guidance to come up with a coherent IP policy. Finally, there is the need for national action. Dr Carlos Lopes Dr Carlos Lopes, honorary professor at the Nelson Mandela School of Public Governance, joined the discussion by listening in. He shared his insights on the way forward. Dr Lopes underscored the need to build pharma industrial capacity by noting that the World Bank has announced an allocation of US$ 12 billion towards the provision of Covid-19 vaccine to the continent. Regrettably most of this fund – which far exceeds other funds from the Bank to support Covid-19 response on the continent – will go to pharma companies outside the continent. He noted this underscores how IP schemes have not been favourable toward developing the pharma industry on the continent; it is effectively robbing the continent of potential support to tackle social-economic dimensions of the pandemic that are much more urgent and significantly more present.

8. Closing Remarks Prof Faizel Ismail Prof Ismail delivered closing remarks thanking all panelists and audience members and proceeded to outline a few proposals: First, what the Mandela School of Public Governance seeks to do is create a platform such as this webinar for dialogue and conversations. Depending on the interest of participants, the School could facilitate the creation of a continent-wide network of experts committed to building the productive capacity of the continent in the pharmaceutical and healthcare space. Second, participants who would, on the basis of the presentation and discussion, want to write a policy brief could share for editorial and broader dissemination geared towards inspiring others on the continent to join the network. Individuals in academia are welcome to submit or work with the School on for further exploration of any of the research and policy issues to build a better understanding. Finally, the School seeks to act as a bridge, facilitating dialogue with policymakers. Specifically, the fourth webinar would bring together policymakers, including the Secretary-General of AfCFTA Secretariat. Prof Ismail then called on Ms Mabel Nederlof-Sithole to deliver the final closing remarks. Ms Mabel Nederlof-Sithole Ms Nederlof-Sithole thanked the speakers and all participants for attending and contributing to the discussion, noting that their contributions have added greatly to the debates and key considerations moving forward, especially in bridging policy and practice. She emphasised the Mandela Schools role as a bridge between the different constituencies that have a role to play in bringing life to the AfCFTA and the number of initiatives around transformation within the industries in Africa.

Pharmaceuticals, Health Care Value Chains and Health Resilience • SUMMARY REPORT