REUTERS

A pharmacist counts pills in a pharmacy.

The state is to invest R1 billion in the construction of a pharmaceuticals plant, which is aiming to produce antiretroviral (ARV) ingredients by 2016.

The plant, a joint venture between Swiss pharmaceutical company Lonza, the Industrial Development Corporation and state-owned Pelchem, will be the first in South Africa to produce active pharmaceutical ingredients (APIs) for ARVs.

The company will be called Ketlaphela, meaning “I will live or survive”.

Currently the state purchases ARVs from one of four companies that produce the life-saving drugs in South Africa. However, these companies must import the APIs from overseas, which raises costs.

On Friday, at a briefing of journalists at Parliament, Health Minister Aaron Motsoaledi said his department spent R4.2bn on ARVs a year.

This figure, he said, had been reduced by 53 percent since 2010, when the cost of ARVs was R8.8 bn.

“We opened the tenders to international bidders and forced companies to reveal their cost structures. You must remember it’s not a fixed price,” he told Business Report.

The same four companies will still tender to supply the government with ARVs as Ketlaphela will only supply companies with APIs.

The plant is expected to begin production by 2016.

The government will have a 50 percent stake in the new company, while Lonza will own a 30 percent stake, with the remainder open to other investors, including medium and micro enterprises.

Science and Technology Minister Naledi Pandor said the plant would reduce South Africa’s dependence on outside imports as well as lessen the sensitivity to exchange rates.

“There is an opportunity for South Africa-based solutions to our health issues, for pharmaceutical scientists to establish research programmes for novel ARVs,” Pandor said.

It was also beneficial that Lonza was well known as a company practising green economics, for example with its waste management technologies, Pandor said.

Economic Development Minister Ebrahim Patel said 60 percent of capital investment for the project would involve local sourcing, including the sourcing of supplies.

“The reaction of the industry is in line with the Local Procurement Accord which was signed last year. (Part of that) was an agreement that the private sector will work to produce local goods,” he said.

Lonza representatives at the briefing pledged that the South African workforce – with about 2 200 direct and indirect jobs – would be taken for training to its Swiss headquarters.

“The New Growth Path outlines the expansion of the knowledge economy. There will be 350 primary manufacturing jobs,” Patel said.

An additional 3 800 jobs will be created during the construction phase of the plant.

Trade and Industry Minister Rob Davies said the joint venture provided an opportunity for South Africa to take advantage of its “world-leading” intellectual property laws.

Tommy Makhode, the spokesman for the Department of Science and Technology, said the manufacturer of APIs would primarily be targeting the rest of Africa, along with the local South African market.

He said once there was capacity, Ketlaphela would be able to expand elsewhere.

“The Department of Trade and Industry’s industrial policy action plan (Ipap) looks at diversifying value-added manufacturing, because… Ipap includes drivers of the economy through knowledge and higher-quality jobs. (Ventures such as Ketlaphela) are among the priority sector and are of economic and strategic importance,” Makhode said. - Shanti Aboobaker