SA: Next hunting ground for biotech
even as the country faces acute skilled labour shortage, endemic poverty and prevalent diseases, government’s efforts to grow the bio-economy through strengthened partnerships with industry is bearing fruit
South Africa is emerging as one of the prominent players in the biotech sector. Currently, the biotech sector of the country is hovering around US $3.9 billion market (as per the Deloitte report) and it is expected to grow with the rate of six per cent year on year, so it is likely to touch US $5.1 billion by 2018. South Africa has a two-tier pharmaceutical market. The public sector tier is characterised by high demand and low prices caused by low levels of funding. The private sector tier has drug prices similar to those in the developed world. The government sets a single exit price (at ex-factory level) for all prescription medicines, regardless of the channel through which they are purchased.
Recently, the annual increase on the single exit price has not been in line with the recommended/published equation to calculate this increase. This has had a negative impact on the sector, which is still heavily reliant on imports and as such has been negatively affected by the devaluation of the ZAR against the US dollar and Euro.
In parallel, however, South Africa faces a considerable set of social problems: one of the most unequal distributions of income in the world, mass unemployment, a shortage of skilled labour and endemic poverty. In the health field, South Africa’s burden of disease is substantial and, for some indications, worse than other countries in sub Saharan Africa. It has the most people living with HIV of any country in the world (5.54 million people according to estimates from 2005) and the seventh-highest incidence of tuberculosis, with an alarming recent increase in cases of extensively drug-resistant tuberculosis. Other leading causes of death are cerebrovascular disease, ischemic heart diseases and lower respiratory infections.
All these prevailing hurdles have created a perfect platform for the growth of South African biotech industry. The country has a great potential to cater massive healthcare needs through its R&D base, expertise in first-generation biotech (the use of wild-type or natural organisms to produce a product) and great biodiversity. These and other factors lie behind the relatively recent drive to build a local biotech industry to address not only human health, but also food security and environmental sustainability and to act as an engine of job and wealth creation. The huge development in country’s biotech sector came in 2001 when Department of Science and Technology’s National Biotechnology Strategy allocated 450 million Rands in public spending for the year 2004-2007. Further enhancing the sector, Government of South Africa also created Biotechnology Regional Innovation Centres, or BRICs which was particularly carved to identify and develop opportunities in biotech.
The BRICs, along with two life sciences incubators— EGOLI Bio (Johannesburg) and Acorn Technologies (Cape Town), which were established through an earlier government initiative called the Godisa Trust (now SEDA, the Small Enterprise Development Agency) represent the main dedicated public sector instruments to stimulate
and grow private sector biotech activity, particularly through realising the commercial potential of South Africa’s considerable R&D assets.
However, availability of skilled labour has always remained a big problem for the biotech sector in South Africa. As per the recent survey by Manpower Group, the company that conducts annual survey by gathering samples from around 750 businesses in South Africa, skilled trades and engineers remain the most difficult positions for companies to fill.
The survey report further stated, “With unemployment in the country remaining high, it is surprising that employers continue to have difficulty filling positions. South Africa’s continued skills deficit is being compounded by lack of technical skills, which is having a negative impact on employment across many sectors of the country’s economy.”
“Furthermore, there is a high instance of poverty among South African youth, leaving millions unable to pursue secondary and tertiary education or training, which presents a challenge in terms of their skills development and employment prospects,” the survey states.
Report also added that this year the country managed to gain 30th position with 33 per cent of employers reporting difficulty in filling jobs. The survey was conducted around 41 countries. Further, 30 per cent of South African employers cited the lack of industry-specific qualifications or certifications in terms of skilled trades as a challenge,
while 26 per cent cited lack of candidate experience.
The government’s national health plans are expected to boost demand for lower cost drugs especially generics in the coming years, as its commitment to provide greater access to anti-retroviral (ARV) medication within the public health system to combat the HIV/AIDS pandemic. Generics currently account for around 60 per cent of the overall market in terms of volume, but because of their low cost, around one-third in terms of value. The government procures mass volumes of generic products via tender. However, the private market for generic drugs is growing; the higher prices paid by the private sector help to subsidise the low-cost generics made available to the public sector.
The South African medical environment is the most regulated on the African continent. There is pending discussion on further regulating the sector, which some argue will stifle competition and increase prices, while others justify additional regulation as necessary to limit price inflation. Among the recent initiatives, the government has drafted new IP regulations in recognition that South Africa lacks a unified, well-coordinated IP policy. The government is also implementing legislation to speed up the drug registration process, make South Africa more attractive as a destination for clinical trials, and increase the overall competitiveness of the country’s life sciences market as a whole.
Currently, the Medicines Control Council (MCC) is South
Africa’s primary regulatory agency for the manufacture, distribution, and marketing of medicines in the country. One of the key challenges it faces is long delays in the regulatory approval process. (MCC employees are qualified professionals who work on a part-time basis, sometimes resulting in significant delays when it comes to approval of medicines.) To address this and other regulatory issues, MCC is set to be replaced by the South African Health Products Regulatory Agency (SAHPRA), which will be tasked with regulatory responsibility across the life sciences sector—pharmaceuticals, biologics, medical devices and in-vitro diagnostics, complementary medicinal products, foods, and cosmetics. It is, however, unclear when the transition to SAHPRA will be completed.
Identifying the potential of South Africa’s biotech market, Cipla, Indian multinational pharmaceutical and biotechnology company, has decided to explore the SA land by investing 1.3 billion South African Rand (about Rs 600 crore) in a biotechnology plant. As per the information provided by the firm, this plant will target to produce affordable cancer drugs and will be also responsible in spreading it across the global market. The announcement was made after the recent visit of Prime Minister Narendra Modi to South Africa. Cipla Biotech, a subsidiary of the company, will construct the plant at a special economic zone in Durban which will commence production in 2018. In its first initial move to grip the South African biotech market, Cipla had acquired South African drug firm MEDPRO in 2013, this is marked as the first large foreign acquisition of Cipla.
To further back the sector, the Government of South Africa in 2014 launched an updated bio-economy strategy to harness partnerships with industry and academia. The government played this card so that it can ramp up the development of biobased services, products and innovations in South Africa. While unveiling the updated strategies, Derek Hanekom, Science and Technology Minister, Government of South Africa while interacting to Business Day (national daily of South Africa) stated, “The strategy calls for industry, science councils, government departments and academia to cooperate closely to ensure that biotechnology and bio-innovations are marketrelevant and find easier application in South Africa.”
“The government’s aim is to grow the bio-economy through strengthened partnerships with industry, and to extract the full potential of the country’s living systems through the application of our collective competencies and capabilities,” he said. According to the South Africa’s Department of Science and Technology, the bio-economy strategy is closely aligned with the country’s National Development Plan (NDP), which holds that advances in science, technology and innovation will underpin advances in South African economy and society.
Though the South African land is looking like a highyielding ground for biotechnology sector, but there are a few hurdles that might pull the horses down. The Government of South Africa has been proactively involved in churning out wheels for the biotech sector and its hard work is reflecting through rapid transformation taking place within few years. Availability of skilled labour will always be going to be a big question mark on South Africa’s biotechnology sector but that can be overlooked as government is planning to roll out few initiatives in the coming years to overcome this hurdle. Overall, the situation is looking very lucrative for the biotechnology sector in South Africa and if all goes according to the plan, this nation might compete with other countries dominating this sector.