Frost: Economic Growth, Foreign Donations to Drive Growth in Sub-Saharan African Health Care Industry

October 22, 2007 // Published as a news service by IHS

Analysts said significant economic growth is being experienced in South Africa, Nigeria, Kenya and Tanzania.

This, combined with the huge in-flow of donor funding, is driving growth in the pharmaceutical and medical device sectors in these countries.

Recent analysis from Frost & Sullivan of the health care industries in key sub-Saharan African countries found that the sub-Saharan African health care pharmaceutical industry earned revenues of $4 billion in 2006, with estimates to reach $6.9 billion in 2012. The medical devices market in the region earned revenues of $2 billion in 2006, and should reach $2.7 billion in 2012.

"The health care industries in sub-Saharan Africa are being driven by the economic growth of the continent and the in-flow of foreign donations targeted at the improvement of health care access and infrastructure," said Frost & Sullivan research analyst Dr. Shaun Cochrane. "Attention has finally been focused on improving the lives of people in Africa and health care is emerging as the critical platform for doing so."

With South Africa, Nigeria, Kenya and Tanzania beginning to emerge as important developing market economies, analysts said the governments of these countries have realized the importance of developing the health care industry. Accordingly, government and donor funding is aimed at the improvement of health care infrastructure and accessibility, thus providing key opportunities for market participants in the pharmaceutical and medical device sectors.

Analysts said key challenges, such as price sensitivity and the low purchasing power of end-users and consumers in Africa, are vital considerations. These are further compounded by exchange rate fluctuations, which frequently weaken the local currencies against the U.S. dollar and the euro.

"The meager availability of government funding for health care and the poor infrastructure present in the majority of African countries have resulted in pharmaceutical end-users and consumers purchasing products based predominantly on low prices," said Cochrane.

"Expensive pharmaceuticals are thus facing competition from low-price, poor quality products, as well as counterfeit drugs, while high-end medical devices and capital equipment simply do not experience the volumes of sales typical of Europe and the U.S."

Cheaper products with high-volume sales will therefore prove highly successful in sub-Saharan Africa. Analysts said products targeted at primary health care, such as antibiotics, analgesics and medical consumables, will continue to perform well and grow over the next seven years.

Analysts said the high infectious disease burden across Africa will drive the need for diagnostic kits and equipment. Targeting these product categories will allow organizations to capitalize on the real needs of the health care industries in the region.

Source: Frost & Sullivan.