Local medicines are more costly than imports.
Zimbabwe's pharmaceutical manufacturers are seeking government intervention over what they say are unfair trade policies imposed by South Africa. Industry players also say a duty regime by the Zimbabwean government is giving South African products an edge on the local market, further exacerbating their woes.
A Confederation of Zimbabwe Industries (CZI) official said the situation for drug manufacturers is dire. "The Zimbabwean pharmaceutical sector is being forced to airfreight their exports to South Africa, while their South African counterparts are exporting to Zimbabwe using road. Air-freighting costs $5 a kilogram and road transport is $0.80 a kilogram. The cost difference is too big and is making the local manufacturers uncompetitive," he said.
Through its trade development standing committee, he said, the CZI, the largest grouping of manufacturing companies in the country, had agreed that the ministries of finance and health be brought on board to discuss the issue because it affects government revenue.
Local pharmaceuticals also pay duties on imported raw materials, while foreign pharmaceutical manufacturers are bringing their finished products into the country duty free and without paying value-added tax (VAT), the official said. Emmanuel Mujuru, chairperson of the Pharmaceutical Manufacturers Association, told the Mail & Guardian that this was by far the greatest problem facing the industry.
Imported drugs are exempted from duties and VAT through a statutory instrument. However, raw materials and packaging materials imported by local manufacturing companies attract duties of up to 40% and VAT of 15%. The high import tariffs on pharmaceutical raw materials and packaging materials increases the cost of locally produced drugs, making imports cheaper.
Hurt both domestically and abroad
Mujuru said drug firms were being hurt both domestically and abroad and he called for a review of the current tariff structure, which he said was now promoting "deindustrialisation and dumping" of foreign products on the local market.
On the issue of exports to South Africa, Mujuru said: "This is a government-to-government issue and our government has pledged to raise this with their South African counterparts during routine meetings."
He said the problem emanated from the fact that South Africa had not designated the Beitbridge border post as an entry point for drugs. Currently, Johannesburg, Durban and Cape Town airports are designated ports of entry for drugs being imported to South Africa.
This means that local companies exporting to South Africa cannot send their drugs by road freight and are forced to send their goods by air. However, drugs imported into Zimbabwe from South Africa can enter the country through Beitbridge because it has been designated a health port by Zimbabwe. This automatically gives South African products an advantage over Zimbabwean products, whose exports are also subjected to duties and VAT.
"This makes it uncompetitive for local drugs manufacturers," said Mujuru. "Even when supplying to Lesotho or Swaziland, we have to go through South Africa and therefore use air freight. Most of our products are licensed in South Africa, which is the biggest market in the region."
He said these problems had forced many pharmaceutical manufacturers to import drugs rather than to produce them, but this had resulted in job losses and deindustrialisation.
Delisting from the Stock Exchange
CAPS Holdings, one of Zimbabwe's biggest drug manufacturers, recently delisted from the Zimbabwe Stock Exchange and later faced several law suits that resulted in the attachment of some of its properties to pay off debts. Industry sources said the company had experienced viability problems partly caused by the tariff barriers.
Mujuru said 99% of raw materials used by local companies to manufacture drugs are imported, making the duties and VAT on raw materials a major concern as this adds to the cost of production.
He said local manufacturers are also facing stiff competition from Indian generics. Indian drug manufacturers enjoy tax and export incentives from their government, which does not buy drugs from companies operating outside India, and this makes it difficult for Zimbabwean drug makers to export to India, said Mujuru.
"The ministry of health has promised to take up our issue. We have also raised our concerns with Regional Integration and International Co-operation Minister Priscilla Misihairabwi-Mushonga."
The Zimbabwe pharmaceutical industry is capable of supplying more than 122 products – 46.9% of the country's essential drugs requirements, says the Pharmaceutical Manufacturers Association.
South Africa's department of trade and industry had not responded to questions at the time of going to press.