BMI View: The somewhat rebounded copper price s seen since the beginning of this year may prevent the deepening of the economic crisis in Zambia after the prices depreciated in 2014. This may prompt the government to stick with its commitment to strengthening policies of providing affordable and quality health care. In line with this, Zambia's health ministry has begun deploying specialised doctors to all provincial health facilities in a latest bid to bring primary healthcare services closer to communities. The move is part of the government's goal illustrated in the National Training Operative Plan and the PF manifesto to promote health. The government aims to set up specialised care units that are fully equipped and staffed in order to cut the number of patients referred overseas.
Headline Expenditure Projections
Pharmaceuticals: ZMW1.29bn (USD210mn) in 2014 to ZMW1.46bn (USD182mn) in 2015; +12.7% in local currency terms and -13.2% in US dollar terms. Forecast remains flat from last quarter.
Healthcare: ZMW8.32bn (USD1.35bn) in 2014 to ZMW9.49bn (USD1.19bn) in 2015; +14.1% in local currency terms and -12.1% in US dollar terms. Forecast revised downwards from last quarter.
Zambia has a Risk/Reward Index score of 34.7 out of 100, making it the 22th most attractive pharmaceutical market in the MEA region. This represents an improvement by two positions since the last quarter. Rewards were driven primarily by the country's good growth prospects in 2015 in light of firms such as GlaxoSmithKline investing in private sector medicine supply chains, as well as small-scale health insurance and other projects, illustrating that there are opportunities for private sector investment. Risks are weighed down by the lack of fixed time periods for approvals and not recognising international quality assurance qualifications.
Key Trends & Developments
Kingpharm Zambia is to open a USD30mn pharmaceutical plant at the Lusaka East Multi Facility Economic Zone in Zambia to manufacture various vital drugs. Construction of the plant, which will produce drugs for Zambia and other countries in Southern Africa, have already begun. Kingpharm Zambia will invest USD15mn in the project while the Zambia-China Economic and Trade Corporation Zone will invest USD15mn to build the plant. Operations at the plant will be commissioned in August and will create 135 jobs for locals, with figures expected to increase to 150 by June 2016.
The increase in the number of unlicensed drug stores, chemists, and pharmacists in Zambia have led to significant growth in the trade and distribution of fake, stolen and illicit drugs and medical devices in the country. The prevalence of unlicensed pharmacies allows the public to purchase drugs easily, economically and in some cases without a prescription. These facilities are only allowed to be selling general drugs but end up selling prescription drugs as well, making it difficult for the regulatory authority to supervise, noted the Zambia Medicine Regulatory Authority public relations officer Ludovic Mwape. 'Obviously, this means the fight to stop illegal drug stores cannot be left to the regulators alone. It needs consented efforts from the public to change mindsets and attitudes towards buying drugs from illegal stores', said Mwape.
The US Ambassador to Zambia, Eric Schultz, has stated that the US government is committed to supporting the Zambian government on health promotion issues. So far, the US government has provided more than USD2bn to Zambia to improve health promotion.
BMI Economic View
Zambia's current account balance will remain in deficit in 2015 at 5.1% of GDP, having turned negative in 2014 at 1.1% of GDP. A fall in the value of copper revenue will be the principal driver of the current account deficit. BMI forecasts that the current account balance will remain in deficit at 4.7% in 2016. Lower copper prices will also contribute to reduced profits for mining companies and therefore to smaller income account shortfalls, but this is unlikely to offset a narrower trade surplus and a services deficit.
BMI Political View
Zambia will have to increase public spending cuts and borrowing after lowering its mining royalty tax rates. This will fuel public discontent and further reduce the likelihood of President Lungu being re-elected in 2016.