Abstract
As growth opportunities continue to move away from the traditional pharmaceutical markets, most multinationals have Africa in the sights of their expanding global footprint. It is a continent ripe with potential, but the challenges for developing a viable market strategy are formidable. Understanding the dynamics and underlying demographics will be key to ensuring a sustainable business model for the future.
IMS Health has conducted a study combining IMS intelligence with secondary research and primary interviews with the pharmaceutical industry, international and African organizations. The study explores critical questions that companies are asking in entering or optimizing their presence in Africa: Why is investing strategically important? Where are the major opportunities? And what will it take to be successful in this fast-evolving region?
AFRICA WILL BE A SIGNIFICANT ECONOMIC FORCE IN THE FUTURE AND PHARMACEUTICAL COMPANIES HAVE MUCH TO GAIN.
By 2016, pharmaceutical spending in Africa is expected to reach US$30 billion. This value is driven by a 10.6% compound annual growth rate (CAGR) through 2016, second only to Asia Pacific (12.5%) and in line with Latin America (10.5%) during this period. Spurred by a convergence of demographic changes, increased wealth and healthcare investment, and rising demand for drugs to treat chronic diseases, this market potentially represents a US$45 billion opportunity by 2020. The pharmaceutical growth is a reflection of economic strength accompanied by increasing healthcare spending. Sub-Saharan Africa (SSA), excluding South Africa, is notable in this regard: according to the Economist Intelligence Unit, its economies are growing faster than anywhere else in the world and this trend is expected to continue. 1
The appeal of Africa lies not in its size – the continent accounts for just 3% of the global economy – but in the dynamics that drive sustainable growth at a time when the major established pharmaceutical markets face a more uncertain future. 1 Underpinning these prospects are a series of positive economic trends: greater political and fiscal stability and improvements in pro-business legislation have led the United Nations (UN) to forecast that Foreign Direct Investment (FDI) in Africa could more than double by 2014, despite speculative money leaving the continent following the collapse of Lehman Brothers, and the Arab Spring restricting investment in North Africa. 2 This FDI is fuelling macroeconomic growth and vastly improving access to new technology. The recent boom in mobile subscribers reflects this trend: as of mid-2012, there were more than 600 million mobile subscribers on the continent, surpassing American and European figures. At the same time, major demographic shifts show an increasing number of working-age Africans, a rising middle class which accounts for 34% of the continent’s inhabitants, and an urban population expected to exceed that of China’s and India’s by 2050. 3,4
