Opportunities for Kenya’s pharmaceutical sector under AfCFTA

By Mariam Maina: mmaina@brand ke

The African Continental Free Trade Area (AfCFTA) presents a significant milestone for economic integration in Africa The AfCFTA entered into force on May 30, 2019, after 24 Member States deposited their Instruments of Ratification following a series of continuous continental engagements spanning since 2012� It was launched at the 12th Extraordinary Session of the AU Assembly of Heads of State and Government in Niamey – Niger, in July 2019 The commencement of trading under the AfCFTA was on January 1, 2021

AfCFTA is the largest free trade area having united the 54 member states (to date) and creating a single 1 4 billion market comprising of 8 regional economic blocs Kenya seeks to exploit opportunities tenable in this large market owing to familiarity with the product offerings, close proximity and accessibility to some of the markets

It is estimated that the AfCFTA has the potential both to boost intraAfrica trade by 52 3 percent by eliminating import duties and to double this trade if non-tariff barriers are also reduced Kenya as a member of the AfCFTA has as well greatly benefited in trading of goods under the Guided Trade Initiative (GTI)� For the period 2019 to 2023, Kenya trade with the AfCFTA countries has recorded an average growth rate of 9 9% in exports and a direct positive change in absolute terms of USD 842 8 million same period The total volume of trade recorded in 2023 was valued at USD 4 7 billion

For Kenya’s pharmaceutical sector, the AfCFTA presents both opportunities and challenges Compared to the period 2019, Kenya’s exports in 2023 saw notable changes across various product categories including medicaments which grew to USD 157 3 million holding a 2 2% share of the total exports in 2023�

Expanded market access

The AfCFTA offers Kenyan pharmaceutical companies access to a market of over 1 3 billion people across 54 countries� This expanded market access reduces tariffs on intra-African trade, making it easier and more cost-effective for Kenyan companies to export their products to other African countries With tariffs on 90% of goods expected to be gradually eliminated, pharmaceutical companies can benefit from reduced costs and increased competitiveness in markets where high tariffs previously restricted trade

Diversification of export markets

Traditionally, Kenyan pharmaceutical exports have been concentrated in a few regional markets, such as Uganda, Tanzania, and Rwanda The AfCFTA opens opportunities for Kenyan companies to diversify their export markets beyond East Africa, tapping into West, Central, and Southern African markets

This diversification can reduce dependency on a limited number of markets and provide resilience against regional economic fluctuations or market-specific challenges�

Promotion of local manufacturing

The AfCFTA aims to boost local manufacturing across the continent by reducing barriers to intra-African trade For Kenya, this means an opportunity to enhance its local pharmaceutical manufacturing capabilities and become a key supplier of medicines and health products to other African countries

By leveraging economies of scale and improving production efficiencies, Kenyan manufacturers can lower production costs and offer competitively priced pharmaceuticals across the continent

Strengthening supply chains

Improved trade facilitation under the AfCFTA, including harmonization of regulations and standards, can help strengthen supply chains across Africa For Kenya, this means better access to raw materials and intermediates needed for pharmaceutical production Streamlined customs procedures and reduced bureaucratic hurdles can enhance the speed and efficiency of trade, reducing lead times and costs for Kenyan exporters

Potential challenges

Regulatory harmonization and standards

While the AfCFTA aims to harmonize trade regulations across member states, the pharmaceutical industry is highly regulated, with each country maintaining its own standards and requirements for drug registration, quality, and safety Kenyan pharmaceutical companies may face challenges in navigating different regulatory environments and ensuring compliance with the diverse standards of each market

Infrastructure and logistics

The success of the AfCFTA in boosting trade relies heavily on the state of infrastructure and logistics across Africa Inadequate transport networks, inefficient ports, and underdeveloped logistics can pose significant barriers to trade Kenyan exporters may encounter challenges in reaching markets efficiently, particularly in landlocked countries or regions with poor infrastructure, increasing the cost and complexity of exporting pharmaceuticals

Competition from other African manufacturers

The AfCFTA also opens the Kenyan market to pharmaceutical imports from other African countries, potentially increasing competition for local manufacturers Countries like South Africa, Egypt, and Nigeria have established pharmaceutical industries that could pose a competitive threat to Kenyan companies, particularly in the production of generic drugs and over-the-counter (OTC) medicines

Non-tariff barriers

Despite the reduction in tariffs, non-tariff barriers such as quotas, import licenses, and restrictive administrative procedures can still hinder trade� Kenyan pharmaceutical companies must navigate these barriers, which can vary significantly between countries, adding complexity and cost to the export process

Strategies for maximizing benefits

Investing in quality and compliance

To succeed in diverse African markets, Kenyan pharmaceutical companies must prioritize quality assurance and regulatory compliance� Investing in robust quality control systems and obtaining internationally recognized certifications can help build trust and ensure product acceptance across different markets� Collaborating with regulatory bodies to stay updated on changes and harmonization efforts within the AfCFTA framework can also facilitate smoother market entry

Enhancing production capabilities

To compete effectively in the expanded market, Kenyan manufacturers should focus on enhancing their production capabilities This includes investing in modern manufacturing technologies, expanding production capacity, and adopting good manufacturing practices (GMP) Public-private partnerships can play a crucial role in upgrading manufacturing facilities and increasing the output of essential medicines

Leveraging trade facilitation measures

Kenyan pharmaceutical exporters should take advantage of trade facilitation measures under the AfCFTA, such as simplified customs procedures and improved trade logistics Engaging with trade facilitation agencies and participating in capacity-building initiatives can help companies optimize their export processes Building strategic partnerships with logistics providers and utilizing digital platforms for supply chain management can also improve efficiency and reduce costs

Market research and diversification

Conducting comprehensive market research to understand the demand dynamics, regulatory landscape, and competitive environment in different African markets is essential for developing effective export strategies Kenyan companies should focus on diversifying their product offerings and targeting underserved markets or niche segments where they can have a competitive advantage

Advocating for policy support

Engaging with the Kenyan government and regional trade bodies to advocate for policies that support pharmaceutical exports is crucial This includes pushing for further harmonization of regulations, removal of non-tariff barriers, and investments in infrastructure development Active participation in regional trade negotiations and forums can help ensure that the interests of the Kenyan pharmaceutical sector are represented and addressed

The AfCFTA presents a unique opportunity for Kenya’s pharmaceutical sector to expand its reach across the African continent By addressing the challenges and strategically positioning themselves, Kenyan pharmaceutical companies can significantly enhance their export potential and contribute to the broader goal of African economic integration and self-sufficiency in healthcare�