Black-owned pharmaceutical companies are calling for changes to government procurement policies, saying they continue to struggle to gain a meaningful share of South Africa’s R56.4 billion pharmaceutical market.
The call comes after concerns were raised during parliamentary hearings about the way the Health Department procures medicines and the impact this is having on local pharmaceutical manufacturers.
Pharmaceuticals Made in South Africa (Pharmisa) told Parliament’s Portfolio Committee on Trade, Industry and Competition that the department’s focus on price was excluding local pharmaceutical manufacturers from government contracts.
Pharmisa also warned that this could undermine efforts to reduce South Africa’s reliance on imported medicines.
The concerns have also drawn the attention of the Black Pharmaceutical Industry Association (BPIA), which represents more than two dozen black-owned firms, including manufacturers, wholesalers and pharmacies.
Black firms remain on the margins
BPIA chairperson Kingsley Tloubatla said black-owned pharmaceutical companies faced the broader challenges experienced by local manufacturers, while also having to overcome the legacy of apartheid.
“White-owned firms had benefited from direct support from the apartheid government, yet 30 years after the advent of democracy, black-owned firms remained locked out of South Africa’s R56.4bn pharmaceutical market,” Tloubatla said.
He said less than 1% of the domestic pharmaceutical market is held by black-owned firms.
For the BPIA, the issue is not only about competing for pharmaceutical contracts but about ensuring that government procurement creates opportunities for black-owned businesses to grow in the sector.
Procurement remains a challenge
Tloubatla said government procurement rules were making it difficult for smaller and black-owned pharmaceutical businesses to compete with established companies.
“We are discouraged from producing locally, not incentivised. The minister (of health) says we cannot produce cheaper than India. It is true because those companies operate from special economic zones with export incentives,” Tloubatla said.
He said the sector also faced wider challenges, including rising costs, factory closures and job losses.
According to the BPIA, more than 40 pharmaceutical manufacturers have closed since 1994, while more than 2,000 jobs have been lost in pharmaceutical manufacturing over the past 18 months.
Tloubatla said South Africa needed to do more to support local pharmaceutical production and reduce its dependence on imported medicines.
“All finished products are zero-rated, yet when I want to bring in a tabletting machine, I’m charged import duty,” he argued.
BPIA wants longer contracts
The association is calling on the Health Department to introduce explicit transformation quotas in pharmaceutical tenders, with a portion of contracts reserved for black-owned manufacturers.
It wants government to provide longer supply contracts to give local pharmaceutical companies greater certainty.
Tloubatla has called for contracts lasting between 10 and 20 years, instead of the three-year tenders currently awarded.
Longer contracts, the association argues, would give “black-owned pharmaceutical companies greater certainty to invest, build capacity and compete for a larger share of government business.”
The BPIA is also calling for faster registration of locally manufactured pharmaceutical products as part of efforts to create greater opportunities for local players.
However, the Department of Health has defended its procurement process, saying it has a constitutional responsibility to procure affordable medicines from reliable suppliers.
