Zimbabwe Pharmaceuticals and Healthcare Report Q3 2009

In the BMI Business Environment Ranking for Q309, Zimbabwe remains firmly at the bottom of the matrix, which ranks 17 key markets surveyed in the Middle East and Africa (MEA) region, as well as globally. Zimbabwe's position is expected to show little improvement over the coming months, as the government continues to struggle with economic and political issues, which have sidelined health in the past to an alarming degree. The country's appalling health status has been exacerbated by the recent outbreak of cholera, which threatens to reappear due to catastrophically inadequate sanitation and water treatment facilities. BMI notes that Zimbabwe's misguided governance has contributed to the scale of this disaster, and has exposed the country as almost entirely reliant on international aid.

Given the dire economic situation in the country, which had been worsened by the staggering inflation rate, the government recently took local tender out of circulation and began using US dollars for commercial transactions. The decision has already eased inflationary pressures dramatically, but is unlikely to improve the situation of the majority of small businesses and individuals significantly, given the scarcity of foreign currency in the country, and the lack of viable export commodities. Additionally, although the new finance minister put together a short-term recovery plan, some US$5bn is needed in total, including US$2bn in donor funding. Nevertheless, in our view, the plan is a well-conceived document, with an honest sector by sector assessment of conditions and costs for essential investments in areas such as health and fuel. However, the unpredictable political situation remains a major obstacle to international involvement.

Zimbabwe's recent dollarisation makes pharmaceutical market valuations somewhat less complicated.

However, the overall picture is still far from clear, due to several factors, including the lack of proper distinction between prescription and over-the-counter (OTC) products, the authorities' failure to keep proper records, rampant counterfeiting, and the fact that much of the demand for essential medicines is met through donations by foreign companies and aid organisations. Nevertheless, we are forecasting that the Zimbabwe's pharmaceutical market will increase a compound annual growth rate (CAGR) of 3.0% through to 2013. From a value of US$8.0mn in 2008, we expect that the market will be worth just over US$9.3mn at consumer prices in 2013, with OTCs - especially analgesics - gaining ground at the expense of prescription-only medicines.

In terms of market split between generics and patented products, the epidemiological profile of Zimbabwe and the need to treat huge numbers of HIV/AIDS patients will conspire to marginalise generics in terms of share of the total, which will remain at around 5% throughout the forecast period. If the government decides to prioritise healthcare, drug prices could also take a hit, especially in the face of Zimbabwe's large proportion of no- or low-income population, which will all work against the faster development of the overall pharmaceutical market values, providing - of course - that dollarisation meets its target.