LAGOS (Sundiata Post) – The story of Africa rising, positive demographics and robust household incomes underpins foreign direct investment. It is told usually in the context of consumer goods but is the rationale for a McKinsey study entitled Africa: A Continent of Opportunity for Pharma and Patients.
Its projections show increases in consumer spending on the continent from US$1.8trn in 2013 to US$2.4trn in 2020, and in the number of households with annual incomes above US$5,000 from 134 million to 166 million. Urbanisation is another driver. McKinsey has 1.5 million households in Lagos with incomes between $20,000 and $70,000 by 2030.
The private sector has to adapt to different regulations. The report gave the example from Nigeria of Merck, which imports only the active pharmaceutical ingredient for its diabetic drug. The company’s local partner presses the tablets and is responsible for packaging.
Encouragingly for local manufacturing, the report stated that in Nigeria (and six other African economies) generics had gained market share since 2004 over branded products and over-the-counter medicines.
Opportunities may arise in consolidation in Nigeria. The report noted that most of the 400 new pharmacies opened in South Africa since 2006 were operated by two retailers, and that chains were also expanding in Kenya.
The McKinsey report may be dated April 2015 but was released well into the slide in the oil price. The average price of Bonny Light was $57.5 per barrel in the month in question.
Health indicators from official sources show the size of the challenge for the authorities. According to estimates from the Nigeria Demographic and Health Survey, infant and under-five mortality stand at 69 and 128 deaths per 1,000 live births.
The Federal Government does not have the necessary resources to transform healthcare in Nigeria. The appropriation bill 2016 makes allocations to the ministry of health of N222bn ($1.13bn), the fourth largest, and N36bn for recurrent and capital spending respectively.
Other public agencies have a role, too. The Nigeria Sovereign Investment Authority included healthcare among its 15 investable sectors for 2015. It has signed memoranda of cooperation with seven federal healthcare institutions, and a binding agreement with a group of private-sector operators to build and operate five modern diagnostic centres. The authority’s firepower, we have often observed, is limited by the impasse between the federal and state governments over reserves accumulation.
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