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Similar to Tap the potential: The Role of the Private Sector in Stepping up the Pace of Supply of HIV/AIDS Commodities
Similar to Tap the potential: The Role of the Private Sector in Stepping up the Pace of Supply of HIV/AIDS Commodities (20)
Tap the potential: The Role of the Private Sector in Stepping up the Pace of Supply of HIV/AIDS Commodities
- 1. TAP THE POTENTIAL THE ROLE OF THE PRIVATE SECTOR IN STEPPING UP THE PACE OF SUPPLY OF HIV/AIDS COMMODITIES Sponsored by: With co-sponsors:
- 2. The African economy is growing rapidly, creating new opportunities for the private sector.
- 3. Globally, the proportion of the world’s population living in middle income countries is on the rise, creating new consumers of goods and services, including private health services. Low income countries Population living in middle income countries High income countries 8,000,000,000 7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 0 1960 1970 1980 1990 2000 2010 Population World Bank Data, accessed 2014.
- 4. By 2020, models indicate that more than half of African households will have discretionary income to spend. 2000 2008 2020F McKinsey Global Institute. “Lions on the Move.” June 2010. Globals (>20,000) Consumingmiddle class (10,000-20,000) Emerging consumers (5,000-10,000) Basic consumer needs (2,000-5,000) Destitute (<2,000) Households with discretionary income Households only meeting basic needs Household income in 2005 PPP $ % of householdes by income bracket
- 5. HIV/AIDS had a dramatic impact on life expectancy in sub- Saharan Africa, but also made a dramatic recovery following global investments in prevention and treatment. Ambassador Deborah L. Birx, MD. “Delivering an AIDS-free Generation.” Kaiser Family Foundation Town Hall Forum. 23 June 2014.
- 6. Africa is demonstrating remarkable growth across sectors, including key categories for private sector growth. 7.8% 6.8% 4.6% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Public administration Manufacturing Agriculture Real estate, business services Wholesale and retail Other services Resources Utilities Construction Transport, telecommunications Financial intermediation Tourism Compound annual growth rate McKinsey Global Institute. “Lions on the Move.” June 2010.
- 7. The financial cost of starting a new business in Africa is rapidly decreasing, but still remains high compared to wealthier countries around the world. 350 300 250 200 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Cost of business start up as % GNI per capita World Bank Data, accessed 2014. Sub-Saharan Africa (developing countries) BRICS High income
- 8. Direct foreign investment in Africa has spiked massively in the past decade. World Bank Data, accessed 2014.
- 9. Mobile money is booming in Africa, changing the way both individuals and businesses buy and sell goods and services. Claire Penicaud & Arunjay Katakam. “Mobile Money for the Unbanked. “State of the Industry 2013: Mobile Financial Services for the Unbanked.” GSMA
- 10. Investments are being made to improve trade as shipping corridors throughout Africa and freight volume continue to grow.
- 11. The cost to import and export goods across borders varies widely, and remains higher within Africa than in other parts of the world, but sub-Saharan Africa continues to lead in the number of trade reforms. 52 reforms from 2007-2012 0 10 20 30 40 50 60 Sub-Saharan Africa Latin America & Caribbean Middle East & North Africa E. Europe & Central Asia East Asia & Pacific OECD High Income South Asia Total number of trade reforms, 2007-2012 Doing Business 2012. “Trading Across Borders”
- 12. Importing and exporting goods across country borders requires a number of steps, each of which have a cost associated with them. Doing Business 2012. “Trading Across Borders”
- 13. Since 1990, more than $13 billion has been invested by the private sector in infrastructure projects across sub-Saharan Africa. Railroads Seaports Roadways Airports World Bank Group Private Participation in Infrastruture Database, Regional Snapshots, accessed 2014.
- 14. Air freight volume also continues to grow. In the past decade alone, air freight volume through Africa has grown by 33%. World Bank Data, accessed 2014.
- 15. South Africa, 20% Kenya, 15% Egypt, 14% Other, 23% Sudan, 13% Uganda, 3% Ethiopia, 3% Morocco, 4% Congo, 5% Distribution of air freight (2009) across African countries World Bank, Transport Sector Board, and International Trade Department. “Air Freight: A Market Study with Implications for Landlocked Countries.” August 2009
- 16. The volume of goods shipped through other African ports is also rapidly increasing annually. Republic of Congo Nigeria Kenya Ghana Algeria Egypt Tanzania Sudan World 0% 10% 20% 30% 40% 50% 60% 70% 80% Change in total container volume (2008-2013) World Bank Data, accessed 2014.
- 17. Investments are being made to upgrade the infrastructure and processing systems in major ports around the continent.
- 18. Map from PriceWaterhouseCoopers. Annual container volume by port from various sources.
- 19. DurbanSouth Africa 2.6 million TEUs (2012) Largest shipping terminal in Africa Handles 31.4 million tons of cargo each year
- 20. Mombasa Kenya 903,443 TEUs (2012) Undergoing a $366 million upgrade Will increase handling capacity by 200,000 TEUs a year
- 21. Tema Ghana 822,131 TEUs (2013) Ghana Ports & Harbours Authority investing $2.5 billion in improvements by 2018 Traffic has already risen five-fold since 2000 and will double to 2 million TEUs by 2018.
- 22. At the same time that investments are being made in infrastructure and shipment volumes increase, the cost to import a container of goods in countries with key ports continues to increase. $2,500 $2,000 $1,500 $1,000 $500 $- South Africa Nigeria Tanzania 2005 2007 2009 2011 2013 World Bank Data, accessed 2014.
- 23. Though the quality of the roads in Africa has continued to improve, the African Development Bank anticipates that road freight will continue to be somewhat costly and inefficient until competition in the trucking industry is increased and barriers to trade are lifted.
- 24. High road freight tariffs and administrative and border delays create additional barriers to road shipment. 0.03 0.05 0.07 0.08 0.13 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 Global average Southern Eastern Western Central million $ tariffs in million $ per ton-km African Development Bank, sourced from Teravaninthorn and Raballand, 2008.
- 25. Investment and growth in technology is also changing the business environment across the continent.
- 26. Mobile coverage continues to increase across Africa, which is now the second largest mobile market in the world after Asia. Mobile penetration (%), 2012
- 27. For each fixed line in sub-Saharan Africa, there are 28 mobile phone connections, demonstrating the dominance of mobile as a means of communication. Mobile Fixed line GSMA and Deloitte “Sub-Saharan Africa Mobile Data Observatory, 2012”
- 28. The average annual cost of mobile phone ownership has decreased dramatically across the continent. In East Africa, the average monthly cost to own a mobile phone has declined by up to 72% from 2008 to 2011. $11.11 $15.04 $6.65 $10.11 $5.49 $6.15 $2.7 $2.83 16 14 12 10 8 6 4 2 0 Uganda Tanzania Ethiopia Kenya Monthly cost of mobile ownership (US dollars) 2008 2011 GSMA, 2013.
- 29. Increased demand for mobile communications services has sparked investment in network infrastructure, including cell towers, 3G connectivity, and more. Airtel $1.5 billion in 2013 Africa France Telecom $9.3 billion from 2010-2015 Africa MTN Group $9.3 billion from 2008-2013 Africa & Middle East $- $2 $4 $6 $8 $10 $12 $14 $16 CapEx Investments (billion $) GSMA and Deloitte “Sub-Saharan Africa Mobile Data Observatory, 2012” Etisalat $15 billion from 2010-2015 Africa & Middle East
- 30. Broadband access continues to grow, including new fiber optic cable around the continent. Steve Song, ManyPossibilities.net
- 31. Even across landlocked countries, entrepreneurs like Liquid Telecom are working to provide fast, reliable broadband access. $350 million invested to install 17,500 km of fiber cable across 12 countries The Economist. “Cabling Africa’s Interior: Many Rivers to Cross.” 5 July 2014.
- 32. Access to the internet through broadband and mobile devices is rapidly increasing across sub-Saharan Africa. 180 160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 Total broadband connections (millions) Total mobile Total fixed GSMA and Deloitte “Sub-Saharan Africa Mobile Data Observatory, 2012”
- 33. As ICT becomes more accessible and affordable, it is increasingly being leveraged in logistics and supply chain management. A recent landscape analysis by the mHealth Alliance identified more than 40 different electronic logistic management systems currently in use in countries around the continent and the world.
- 34. The African pharmaceutical market is rapidly expanding.
- 35. Total health expenditure in Africa has increased more than three-fold in the past decade. Total health expenditure (USD billions) 30.7 61.7 100.6 2001 2006 2011 African Development Bank Group. “The Africa Pharmaceutical Summit: Pharmaceutical Capacity and Finance for Results in Africa Summary Report.” September 2013.
- 36. Growing consumerism African demographic trends & rising medical needs African Pharmaceutical Growth Stable macroeconomic growth Maturing regulatory environment African Development Bank Group. “The Africa Pharmaceutical Summit: Pharmaceutical Capacity and Finance for Results in Africa Summary Report.” September 2013.
- 37. The total annual pharmaceutical spending in Africa is expected to more than double within this decade. 2010 $21 billion Today $29 billion 2020 $45 billion IMS. “Africa: A Ripe Opportunity.” White Paper
- 38. An estimated $25-30 billion in new investments will be needed to meet demand for improved distribution and retail systems for pharmaceutical and medical supply product facilities between now and 2016. $11-20 billion of those funds are likely to come from the private sector.
- 39. As new producers come into the market, many multinational pharmaceutical companies expect to see declines in revenue of up to 40% between 2008 and 2015. AstraZeneca Pfizer Eli Lilly Bristo-Myers Squibb Merck & Co sanofi-aventis GlaxoSmithKline Wyeth Schering-Plough Novartis -50% -40% -30% -20% -10% 0% 10% 20% Percent change in annual revenue from 2008-2015 PriceWaterhouseCoopers Pharma2020 Report
- 40. Local manufacturers are game changers in pharmaceutical procurement. Tanzania Ethiopia 13 essential medicines procured through local suppliers Reduced landed cost by 5.3% Reduced lead time by more than 50% of 45 total essential medicines Data from the Partnership for Supply Chain Management on local procurement in 2012
- 41. Right-sizing responsibility with capacity. HIGH VOLUME / RELIABILITY SUPPLIERS 7 Top X 27 Major suppliers hospitals = 70% of volumes LOW VOLUME HIGH VOLUME SITES SITES LOW VOLUME / RELIABILITY SUPPLIERS HIGH VOLUME / RELIABILITY SUPPLIERS
Editor's Notes
- In the 1990s, life expectancy plummeted across the continent with the emergence of the HIV/AIDS epidemic. The unprecedented investments by the global community during the last decade in prevention and treatment, have had a dramatic impact, turning the corner and returning the trend toward increased life expectancy in sub-Saharan Africa. Working with governments, donors and NGOs, the private sector has contributed significantly to this rebound -- from ensuring there was enough quality ARVs available as programs scaled -- to efficiently moving product through a global supply chain by ocean, air and road -- to in-country warehousing and distribution following good distribution practices. The personal and economic impact of over 12 million people on ART globally -- many in the workforce -- is a key contributing factor to the rapidly growing African economy -- creating new job opportunities in the private sector.
- The commodity boom explains only part of Africa’s growth story, with the rest coming from sectors like wholesale and retail trade, transport, telecomms, and manufacturing. Key reasons behind Africa’s growth surge were microeconomic reforms and improved political and macroeconomic stability. African governments increasingly have adopted policies to energize markets, including privatizing state owned enterprises, reducing trade barriers, cutting corporate taxes, and strengthening regulatory and legal systems. Improvements in industry-specific value chains and policy and regulation have a direct impact on the viability and profitability of businesses, and act as a draw on private capital. These are important steps to enabling a private business sector to emerge. This trend has enabled SCMS to procure more than $260 million in products and services from 650 local businesses in Africa -- enabling us to be more responsive to our clients, strengthening the private sector and growing the local economy.
- The cost of registering a business -- that is the various paperwork and processes required -- is a key indicator of the climate for private sector growth. While the relative cost to register a business in sub-Saharan Africa has declined markedly over the past decade, it still has a ways to go in comparison to wealthy countries. Have the BRICS set a target that is achievable for Africa?
- While data sources vary on the exact amount, this illustrative chart from the World Bank demonstrates that there is no question that the volume of foreign direct investment has increased dramatically, and is likely to continue in coming years. This is happening as international aid flows begin to plateau, and in some countries and regions are declining. In 2011, the combined private capital flows were four times larger than official development assistance from the 23 traditional donor countries to Africa. The developing world is benefiting from the proliferation of thousands of social enterprises that seek to lower the price and increase the accessibility of a range of goods and services for the very poor while still turning a modest profit. But while the private sector’s emergence as a major contributor to international development is gaining recognition, the pursuit of profit is still its primary purpose and responsibility -- not achieving development impact in low-income countries. The question is how these divergent interests can be better aligned, so that the private sector can play an even more effective key role in international development.
- Mobile money is booming in Africa and represents a tremendous opportunity for the private sector enabling customers to access goods and services. It provides an important commercial opportunity for companies building mobile money into their core strategy for achieving future revenue growth.
- Broadband access continues to grow in Africa, including new fiber optic cables around the continent.
- Even across landlocked countries, entrepreneurs like Liquid Telecom are working to provide fast, reliable broadband access. Taking anything across borders in Africa typically involves reams of red tape and long delays. In general the commercial links between African countries are weak. In such an environment the stamina and know-how to cut through red tape are useful assets. This company has found a way. It is laying around 100 kilomters of cable a week and recently raised $150 million from a group of banks to keep expanding.
- Mobile broadband uptake will be supported in upcoming years by the increased penetration of smartphones. The number of smartphones sold is forecast to grow on average 40% per year up to 2017. In South Africa smartphones are expected to exceed 50% of the subscriber base, followed by Nigeria at 29% and Kenya at 28%.
- As information and communications technology becomes more accessible and affordable, it is increasingly being leveraged in logistics and supply chain management. A recent landscape analysis by the mHealth Alliance identified more than 40 different electronic logistic management systems currently in use in countries around the continent and the world.
- Let’s take a quick look at the African pharmaceutical market.
- Total health expenditures in Africa has increased more than three-fold in the past decade, from $30.7 billion in 2001 to $100.6 billion in 2011 -- or $106 per capita. The BRICS in comparison is approximately $585 per capita -- nearly five times the estimate for Africa. Although India is at $62 per capita and China at $274. === 2011 per capita health expenditure (current USD) was estimated at the following figures for the BRICS countries: Brazil, $1119 Russia, $802.5 South Africa, $669.5 China, $273.8 India, $61.8
- As total health expenditures in Africa continue to grow, there is a corresponding growth in the pharmaceutical industry. This is not only driven by demand -- that is the African demographic trends and rising medical needs -- but also by an improved industry-ecosystem. There is a growing consumerism driven by discretionary income where buyers make choices. The regulatory bodies are maturing and taking responsibility for product quality and availability, including import substitution, molecule stability data, domestic labeling requirements, consumer advertising, and pricing controls. And finally, more stable political environments has led to macroeconomic growth.
- Growth in the African pharmaceutical market is ever-increasing. In 2010, pharmaceutical spending in Africa was $21 billion. Today the projected annual spend will be $29 billion -- and looking forward to 2020 the estimated spend will be $45 billion. While the market is rapidly expanding, the market is also changing, with an influx of generic imports and local manufacturers.
- The IFC estimates that over the next decade, this increase in demand will require $25-30 billion in new investments in health care assets, including hospitals, clinics, and improved distribution and retail systems for pharmaceutical and medical supply products. $11-20 billion – or about half -- of those funds are likely to come from the private sector.
- Multinational pharmaceutical companies continue to see declines in revenue. As new suppliers entered the market, many of them saw declines in revenue by up to 40% between 2008 and 2015.