Duty reduction excite pharmaceuticals sector

Published: 21 January 2014

The local pharmaceuticals industry is optimistic that the proposed reduction of duty on raw materials as outlined in the 2014 national budget will be implemented, thereby aiding the recovery of the sector.

A duty reduction is expected in the pharmaceuticals industry, giving hope to manufacturers who have been facing operational challenges over the past few years, owing mainly to outdated equipment and lack of capital.

Capacity utilisation fell to 40 percent by end of 2013 from 45 percent and companies have been forced to negotiate for shorter working hours for their employees to minimise costs and remain viable.

What has worsened the situation for manufacturers is that 60 percent of the market for their products is the public sector which depends heavily on government funding, donations and development partners.

The Chairman of the Pharmaceuticals Manufacturers Association (PMA), Mr Emmanuel Mujuru said there is a glimmer of hope for the resuscitation of production as duty on raw materials has been reduced as outlined in the 2014 national budget.

"In terms of pricing, the local industry has shown that it can compete. What is worrying is that raw materials are imported and we pay duty and value added tax (VAT) yet finished imports are brought in duty free. So this creates an uneven playing field. We expect a removal of tax on raw materials to improve production," he said.

The State Procurement Board has also helped improve the situation for local companies by giving preference to locals.

Recently, CAPS Holdings was awarded a $3 million tender to manufacture anti-retroviral drugs.

There are nine pharmaceutical manufacturers operating in the country and they require at least $80 million to recapitalise.

To tap into the African pharmaceuticals industry which is the second fastest growing in the world after Asia, locals have to acquire modern equipment urgently.
- zbc