Africa should open markets, diversify supply and strengthen regional value chains to become a competitive provider of certain health-related products, a new ITC report finds.
Africa can position itself strategically and develop a regional response to avoid healthcare product shortages similar to those triggered by the COVID-19 crisis. That’s the main message of Medical Industries in Africa: A Regional Response to Supply Shortages, a new International Trade Centre (ITC) report.
COVID-19 severely burdened the global health system, driving a surge in demand for medical supplies such as masks, gowns and gloves. The World Health Organization warned in early March that international production of such goods would have to ramp up by 40% to meet demand.
Today, Africa sources only 8% of its health-related products from African suppliers. The continent can become competitive in some of these items while combating the crisis and building its own resilience to future pandemics, the ITC report finds. The African Continental Free Trade Agreement has a key role to play in supporting the regional medical industry, it adds.
‘We examine the potential of the African medical supply industry and show how trade can be an important element of the continent’s health response, both in the short and long term,’ says Dorothy Tembo, ITC Executive Director a.i. ‘We suggest a strategic mix of open markets, diversified procurement and stronger regional value chains’ to position Africa strategically in the future trade landscape of the global medical industry while safeguarding the health of Africans.
Keeping the regional market open for essential health products is critical, the report says. ITC business surveys on non-tariff measures have found that companies in Africa frequently struggle to import medical supplies because of inspections and customs charges. In addition, tariffs are relatively high: African countries apply a 10.3% average tariff on these items, compared with 7.9% in non-African developing economies and 2.9% in developed countries.
African governments should review import regulations and consider temporarily lifting tariffs, taxes and other restrictions that hinder access to these goods – especially as the continent has limited sources of such products.
Regional value chains would help diversify global supply
That’s why it’s also important to diversify suppliers, the report notes. Africa provides just 8% of its own medical products, importing most of the rest from the European Union, China and India.
The report urges policymakers to consider regional suppliers with export growth potential. Diversifying would reduce the impact of export restrictions on essential goods and make the continent less dependent on just a handful of foreign suppliers. Egypt, Ghana and South Africa are viable alternatives for products such as disinfectants and adhesive bandages.
Governments also should help build up Africa’s capacity to produce key medical supplies by developing regional value chains, the report says. Although the continent produces many of the inputs used to manufacture health-related products – such as rubber, fabrics and ethanol – these goods are often exported without any transformation.
Policymakers could support the development of regional value chains by channeling investments into these sectors, the report says. Furthermore, they could leverage negotiations in the context of the African Continental Free Trade Agreement to keep trade functioning smoothly along these value chains – for instance, making sure that these vital goods trade duty-free within Africa and that other regulations are harmonized.