Leveraging investment policies to boost medicine production in Africa

Coinciding with World Health Day on 7 April, the 3rd World Local Production Forum – an initiative led by the UN World Health Organization – kicks off with a renewed push to strengthen local pharmaceutical industries worldwide. The need is particularly acute in Africa, as over 70% of its medicines are still imported and half of the countries in the region have little or no local production capacity.

The continent only captures about 5% of global greenfield foreign direct investment (FDI) in pharmaceutical manufacturing.

To change course, the latest analysis from UN Trade and Development (UNCTAD) unpacks how investment policies – including the use of special economic zones (SEZs) – can catalyze local production for health equity, economic security, and sustainable development.

“This is about putting investment at the service of development. Local pharmaceutical production can save lives and strengthen economies – but only if the right conditions are in place. That’s where UNCTAD can help,” says Nan Li Collins, director of investment and enterprise at UN Trade and Development.

Local production is viable – if it can scale

Pharmaceutical demand is rising rapidly across Africa, driven by population growth and evolving health needs. The potential is clear. A study found that tablets, capsules, and creams produced in Ethiopia and Nigeria could be 15% cheaper than the same products imported from India.

But scale remains a major challenge, with most pharma facilities operating at just 30% to 60% capacity, compared to over 70% in more advanced economies.

Meanwhile, just eight nations – half in North Africa – account for 85% of the continent’s 690 pharmaceutical manufacturing facilities.

Investment push for Africa’s pharmaceutical industry

Building the case for investment in local pharmaceutical production in Africa, UN Trade and Development underscores that shoring up local production requires aligning health objectives with economic and business priorities.

It sets out a comprehensive framework to help policymakers assess strategic impact, address investment barriers, and design effective incentives. The analysis draws on the organization’s long-standing experience, including lessons from a four-year joint project with the East African Community on antibiotic production in the region.

How special economic zones can make a difference?

In a separate report, entitled “Attracting Pharmaceutical Manufacturing to Africa’s Special Economic Zones” UN Trade and Development explores how SEZs can be an effective tool for industries like pharmaceuticals that need scale and specialization to compete.

By clustering investment, infrastructure, and services in one location, SEZs can help pharmaceutical manufacturers scale up, cut costs, and improve quality.

Policy recommendations

The comprehensive framework outlined by UN Trade and Development seeks to balance the top analytical and policy dimensions of local production, namely impact, feasibility, and incentives, to bolster sustainable investment in Africa’s pharmaceutical industry.

Given the varied levels of local production readiness across African economies, UN Trade and Development recommends tailoring policy responses to country-specific conditions.

For instance, regional pharmaceutical hubs with more developed capabilities can focus on scaling up production and attracting FDI, while countries that are starting to build their manufacturing capacity may need to prioritize addressing regulatory challenges and building foundational infrastructure.

Additionally, UN Trade and Development calls for greater efforts of investment promotion and facilitation, which can boost technology transfer, and capital access and better integrate Africa into global pharmaceutical value chains.

It also underlines the importance of regional integration – through means including regulatory harmonization, pooled procurement mechanisms, and coordinated investment strategies – to overcome market fragmentation and achieve economies of scale.

“Local production isn’t just about health – it’s also about economic development and strategic resilience,” says Senior Economist Bruno Casella at UN Trade and Development, who leads the production of both reports as part of the organization’s broader “Investment and public health” program.

“These reports help governments design policies that align investment with these broader goals,” Mr Casella concludes.