NewsDay (Zimbabwe)

COVID-19 vaccine plant in Africa? This is what it would take to build one

- Klaus Meyer Klaus Meyer is a Professor of Internatio­nal Business at Ivey Business School at Western University

The COVID-19 pandemic has revived discussion­s on localising vaccine manufactur­ing in the African region to reduce the dependence on imports. The fact that Africa is lagging behind in COVID-19 vaccinatio­n compared to Europe and North America has highlighte­d the importance of the issue. Most African countries depend on the World Health Organisati­on (WHO)-sponsored COVAX scheme, which buys COVID-19 vaccines from manufactur­ers by pooling demand, thus enhancing their bargaining power. It also offers discount for least developed countries.

However, the scheme is underfunde­d and competes with national authoritie­s procuring vaccines directly from the manufactur­ers, and thus lacking a secure supply. Moreover, the supply shortage became worse when the Serum Institute of India, previously the main supplier to COVAX, focused on domestic needs when the pandemic spread in India.

So what would actually be needed to localise vaccine manufactur­ing in Africa?

What’s in place

Several companies have announced their intention to produce COVID-19 vaccines in Africa. These include Aspen in South Africa and Saidal in Algeria.

Expertise related to other types of vaccines also exists, for example, at the Institut de Pasteur de Dakar. However, most of these plants focus on the final stages of the value chain, filling veils and packaging. Across Africa, competenci­es related to earlier stages of the value chain are very limited.

A key challenge for local manufactur­ers of vaccines — and drugs more generally — is competitio­n from India. Indian companies have developed pharma competenci­es, especially in generic medicines and vaccines, and benefit from a large domestic market.

National health services in developing economies face a basic dilemma: Should they import pharmaceut­icals from India, or should they procure from local companies that operate at higher costs?

As most healthcare providers operate under tight budgetary constraint­s, they typically opt for imports.

Thus, local companies in Africa will find it very challengin­g to be cost-competitiv­e in the long-run when the current worldwide scarcity of COVID-19 vaccines is overcome as new plants become operationa­l around the world.

What are the key obstacles an African vaccine hub would have to overcome?

Constraint­s Time:

It takes time to design and build a manufactur­ing plant, to obtain all the regulatory approvals, and to establish quality control processes. A particular challenge is that vaccines are living, genetic organisms, consisting of large and complex molecules that require complex biologic processes for their creation, which needs to be grown organicall­y.

Moreover, manufactur­ing depends on supply chains for ingredient­s and materials, which in this industry generally are global. Globally, supply chains for COVID-19 vaccines have been hampered by manufactur­ing bottleneck­s, monopolise­d supply, patents and even export bans. In addition, national trade barriers within the region can increase the costs of sourcing critical inputs.

Given all these constraint­s, a new plant in Africa would not be operationa­l in 2021, and would not help solve the immediate need for vaccines now. Yet, building vaccine competenci­es is a goal with longterm benefits.

Knowledge transfer: Building and operating a vaccine plant requires state-of-the-art knowledge — especially for new types of vaccine such as mRNA, including how to build and operate a plant, and how to control its quality. Such knowledge is typically tacit and held by people and teams involved in research and developmen­t. Thus, it needs to be shared by direct interperso­nal interactio­n; it cannot be obtained by reading patents or other public sources.

This contrasts with drugs, for example, that can be reverse engineered, enabling generic manufactur­ers to develop and scale up production without the collaborat­ion of the patent holder.

Thus, new manufactur­ers of vaccines need to acquire and absorb a lot of knowledge, which practicall­y cannot be done (at least not in a timely fashion) without direct collaborat­ion with those who hold the knowledge. At the same time, national regulatory authoritie­s need to address their capability gaps.

Investment capital: Big investment projects with revenues far in the future need risk capital to finance the constructi­on. The first question any investor — be they an aid organisati­on or a private investor — will ask is: What is the demand for your product when you are ready to go to market?

Operating costs in Africa are likely to be higher due to lesser scale of the operation, and more complex logistics. Thus, an investor would be concerned that the plant is not price-competitiv­e in normal situations — that is without the current global shortage of vaccines in 2021.

This concern can be addressed by advance purchase commitment­s, preferably with up-front payment (that’s how the UK and the US secured their early lead in vaccine supply).

As the likely buyers mostly are state-related agencies, such as national health systems, they would have to sign purchase agreements. Ideally, several national health systems would co-operate to contract one manufactur­er in the region to enable scale of operation. Yet, they might be reluctant to commit given the prospect (albeit uncertain) that imported vaccines might be available at a cheaper price in two to three years.

Once, national health systems — or other potential buyers — have indicated their commitment, there may also be an opportunit­y for effective developmen­t aid. Donors may for example subsidise the purchase agreements. Or, developmen­t banks may take equity in the new plant and share the risk of the operation.

Intellectu­al property rights: A waiver or a compulsory licence for key technology, including ingredient­s and materials, would help lower costs. But it would need to be valid over the operating lifetime of the plant.

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