Opportunity beckons in life sciences arena

Author: Kabelo Khumalo

South Africa should consider creating a special economic zone for health-care companies to improve its current $3.2-billion (R43.7bn) market share of the continent’s life sciences products industry. This is according to professional services firm Deloitte.

South Africa has the largest life sciences market in Africa, approximated at being more than $3bn out of the continent’s health-care market valued at about $28.bn.

Valter Adao, the health-care industry leader at Deloitte, said the formation of a special economic zone for life science companies would enable skills and resources to be more efficiently shared.

“Creation of a special economic zone for life-sciences companies, with favourable tax incentives for manufacturing and research and development, may prove critical in increasing domestic and international investment into the industry.”

Research by the African Society for Laboratory Medicine has found that while Africa had less than 500 internationally accredited laboratories, 90% were based in South Africa. The Department of Trade and Industry has grants and incentives to support growth of value-adding economic activities, including those of life-sciences manufacturers. These include the Research and Development Incentive, Critical Infrastructure Programme, and Manufacturing Competitiveness Incentive.

Adao said more work could be done. He added two key growth drivers also gave South Africa an advantage in working towards a world-class life sciences industry: the high genetic diversity of the population and the growing demand on Africa.

“Growing economies, higher disposable incomes and a high disease burden across Africa means that there will likely be continually increasing demand for life sciences based products on the continent.”

The need for African countries to aggressively diversify their economies came out strongly at the World Economic Forum on Africa in Durban last week. According to a McKinsey Global Institute report, the deceleration in Africa’s growth since 2010 had been concentrated in two groups of economies – oil exporters and northern countries still rebuilding after the political convulsions of the Arab Spring.

Growth in Africa’s manufacturing sector had been low at 4.3% a year between 2010 and 2014, but utilities and construction expanded to ensure that industry overall had 23% of Africa’s growth, up from 17% in the preceding decade. Resources made a negative 4% contribution to growth between 2010 and 2014, compared with a positive direct contribution of 12% in the previous decade.

Source: Cape Argus