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Meeting highlights:
- Boost local MedTech manufacturing & self-sufficiency: Shift away from 90% import reliance by creating a sustainable local industry that can serve both South Africa and the broader markets, especially the African market, bringing about needed economic growth and job creation whilst reducing vulnerability exposed during crises like COVID-19.
- Four-pillar master plan to drive industry growth: Focus on (1) regulatory reform (creating MedTech-specific legislation and an enabling environment ), (2) market growth (local procurement, African trade harmonisation, increasing exports and attracting investment), (3) skills development (especially regulatory knowledge), and (4) innovation through R&D incentives and better data platforms.
- Implementation and coordination are critical: Success hinges on a multi-stakeholder steering committee (government, industry bodies, unions) moving from discussion to action with clear targets, timelines, and parallel workstreams instead of traditional “talk-shops.”
- Key constraints to address: Fragmented regulatory processes, low trust between public-private actors, opaque procurement, weak inter-governmental coordination, and government debt/payment issues that undermine manufacturer confidence.
- Vision for 2030: An enabling regulatory environment, increased local production, stronger African market presence, and an engaged, incentivised MedTech ecosystem delivering long-term socio-economic returns.
EF: Describe your own goals for your new position as project manager and what you hope to accomplish with the MedTech master plan.
VV: There are two facets of the MedTech industry that we need to consider. First of all, in South Africa, it is a niche industry. Because of its highly technical nature, it is not a very large employer, but from the standpoint of healthcare, it is a very crucial industry. The sustainability of the MedTech sector in South Africa is therefore something we should consider, as in times of crisis, countries tend to look to themselves to safeguard their interests rather than necessarily global interests, as was the case with COVID. Therefore, we must ensure that we become more self-sufficient in the production of MedTech implements and devices.
Currently, we have a manufacturing base of 10% and an imported base of 90%, which is not satisfactory. Economically speaking, bringing in high-tech devices is typically costly due to exchange rates between currencies like the dollar and the euro, and it is also quite difficult from a cost perspective. To develop our niche industry, we must first address the health aspect of things so that we can serve the South African people. Secondly, from a business perspective, we must expand the economy and create more jobs. To do this, we must move from that 90/10 base to a more acceptable one. Healthcare will not be a major employer like the mining or automotive industries, although employment creation will be beneficial.
After assessing our current situation, we need to determine the components that will bring about the change. The goal is to create a very effective and efficient MedTech industry that can serve not only the South African market but the global market, particularly the entire continent of Africa. This is because, while South Africa faces the challenge of 90% imported manufactured products versus 10% locally produced goods, the majority of African countries face even more severe challenges; they do not even have a 10% manufacturing base. So, the African market becomes important, we need to look at South Africa and the broader African markets. The challenge we need to address is how to expand the market size by considering Africa as a whole, not just South Africa, as the South African markets do not provide the volumes required to attract investment into local manufacturing. Although South Africa serves as a starting point, the vision goes beyond South African borders.
EF: Please elaborate on the elements of the MedTech master plan, its foundation with the four strategic pillars, and South Africa's objectives to achieve them.
VV: The regulatory framework is the first of the four strategic pillars. The legislative and regulatory framework in South Africa does not encourage the growth of the MedTech industry or manufacturing sector. This is because the pharmaceutical industry essentially shapes the laws and regulations pertaining to healthcare. Although companies in Pharmacare have certain challenges, they are well ahead of the competition in areas like procurement and regulations in comparison to MEDTECH. Act 101, which regulates the MedTech sector, was drafted with pharmaceutical companies in mind, and as an afterthought, it includes provisions built in for the MedTech sector. When conducting global benchmarking, you will discover that countries at the forefront of the MedTech sector have independent legislation that regulates the MedTech sector. In South Africa, what we need is a separate piece of legislation. Therefore, from a medtech standpoint, the regulatory environment needs to be redesigned because it hinders the expansion of the local market.
This can begin with quite basic things, such as the process for registering an innovative product in South Africa. One example is a scanning device for pregnant women that was developed at the CSIR, a local organization. Pregnant women in our rural areas, in Africa, a largely rural continent, find it quite challenging to be transported to hospitals in urban areas for examination. This new scanning instrument was a highly innovative device that clinics and nurses could use. However, due to their lack of the requisite skill set, the regulatory office in South Africa, specifically the registrar, was unable to certify the instrument for registration. The instrument will either be certified in the United States or Europe. This poses significant cost implications.
Because it is frequently necessary to take products to the US market or Europe for certification, which is highly counterproductive, we lack a regulatory framework with checks and balances that support local innovation and manufacture. In the regulatory space, we must examine all these various value chain components where we might make improvements. Since many of the regulations are duplicated or simply not aligned, we need to do an overhaul. As another example, when products are brought in through the port, two entities are examining whether they meet all the requirements before allowing them into the area. Instead of having one checking office, there are two, which takes a lot of time and delays the delivery of some of the imported products that hospitals really require.
Therefore, the first pillar that needs to be better managed and better sorted out in order to attract long-term investment in the MedTech sector is the regulatory environment. Instead of just holding talk shops, we now need to get down to the specifics, like terms of reference for the drafting of a new piece of legislation. There are ongoing discussions, and I believe that with the plan's implementation, we are beginning to make some headway in identifying the important areas that need to be sorted out.
The second pillar, which is your market growth pillar, is arguably the most crucial of all. What are the key drivers that will contribute to the growth of local manufacturing? We are fortunate to have received funding from the localization support fund in this case. Since all the manufacturers I talk to are operating below capacity, one of our action items is to determine which products are being imported and what manufacturing capacity we have in South Africa. For imported goods to enter the local market, we must now match those that can be manufactured locally. That's easier said than done, though.
The procurement process is one of the many steps that fall under the market growth pillar. Our procurement process currently operates on a 90% cost basis and 10% other, meaning local content, black economic empowerment, and so forth. A new act for procurement has been introduced, but it hasn't been implemented yet. They're busy sorting out some of the regulations, which allow for a far better percentage, such as 60% for costs and 40% for local content and black economic empowerment, which is unique to South Africa. Since the legislation has already been issued, we anticipate its effective implementation very soon. This enables the local manufacturer to make a much stronger case to enter both local and international markets.
It is necessary to examine the entire procurement process. We need to determine if hospital groups are willing to invest in local manufacturers. We haven't spent enough time with hospital groups like Mediclinic and Netcare, which is part of the missing connection. We need to talk to them to find out what they would be willing to buy locally. The African side enters the picture when the cost and volume become significant. The process we are beginning this month, under market growth, entails examining local conditions, locating local manufacturers and products, and then conducting a matching process. We have the terms of reference, and I believe that will be the key driver in the upcoming months to change the current landscape.
The African markets and the harmonization of African practices must therefore be examined from a procurement perspective. It is now highly challenging since, unlike in Europe, where you only need to register in one country, you can sell throughout the European Union. Selling into Botswana, Zambia, or even farther up into Africa requires you to register and certify your products in each of those countries, which is very costly. We must cooperate with the regulators and use trade agreements to harmonize regulations. We will also examine trade agreements to identify countries without existing trade agreements; for example, we have an African trade agreement, but it does not include MedTech. Therefore, the goal is either to build new trade agreements or to add MedTech to existing ones. Therefore, the entire trade agreement field is one that we will be pushing into Africa and across other markets. However, Africa will undoubtedly be a priority.
Therefore, the entire market growth arena touches on the aspects of the market that we must address to increase local manufacturing. What components of their products can be produced in South Africa for the large multinational corporations? Can we do something that is less expensive than what they are doing elsewhere? We did, however, meet with some of them throughout the Act's drafting process, but we haven't yet reached that point as we begin implementation.
The third area is the skills area; if we want to expand this market, we must ensure that we have the skill set required to satisfy demand. According to a survey we just conducted, we currently possess the technical know-how to fulfill the need. To my pleasant surprise, none of them were hindered by a lack of skills at the factory level. The knowledge of the regulatory environment and the training of officials to understand the numerous laws that regulate the MedTech sector are areas of deficiency. We must therefore close that gap.
Research and development, data collection, and innovation make up the fourth pillar. Although we have niche areas that handle research and development, South African businesses are not making significant investments in R&D or innovation when compared to those in Europe and the US due to the challenges of bringing products to market. The regulatory component needs to be reviewed there. There must be a far simpler method to get from point A to point B that is less expensive than traveling to the US or Europe to have your product certified. Therefore, the fourth pillar is handling that space.
We must examine incentives. There are numerous incentives for people to invest in the MedTech sector in countries such as Saudi Arabia. However, it is challenging when a government's budget cannot provide the same incentives available in Saudi Arabia or Europe. Therefore, the workshops we will be doing will be centered around finding innovative ways to encourage local manufacturers or investors to enter the market. A few incentives are already in place to help make better use of that, but we need to figure out how to expand the incentive area. For example, can't you move enterprises into export processing zones where they can receive a much better deal? We need to develop the innovative space and build on the innovation portal that is now in place at the South African Medical Research Council, or SAMRC for short. Some companies are producing incredible innovations, but we need to improve to utilize them effectively, increasing exports and supplying local markets.
Our lack of a shared data platform to determine what is in the market, including who your manufacturers are, what they are producing, and what skills universities are offering, is a major obstacle in the innovation space. We held a workshop to examine all universities and training facilities under the skills pillar, determining what they offer. At present, we're building a data platform to track who is capturing data and innovating.
At SAMRC, we're looking at developing a platform that is more than just an innovation portal; it will be a Med tech platform that we can fill with all the information we need to assess the state of the market, including employment figures, the kind of workforce you have there, and whether you have men, women, black people, or white people due to our transformation process. That data platform isn't available right now. Although I can obtain some information from SAHPRA and the revenue services, the information is now rather inconsistent. So, that will be one of the fourth pillar's main areas of attention.
When all of that is combined, we have a broad steering group that is made up of representatives from three government agencies: DSTI (Science, Technology, and Innovation), Trade and Industry, and Health. Then there are the four employer groups that are driven by the private sector: SAMED, the Western Cape Cluster, MDMSA, which represents South African manufacturers, and SALDA, which is the diagnostic side. Together with the three government departments, the four industry bodies, and trade unions make up the steering committee. Although our industry is not heavily unionized, trade unions are important contributors to our discussions and serve on the steering committee. Each of these four pillars is replicated in a tripartite manner; each has a working team of experts in the areas of skills, innovation, market growth, and regulatory framework. In order to avoid playing politics and to focus on the important things, we have a simple structure. It was agreed that I would chair each of the subcommittees.
Action items for each of these committees include a regulatory space overview, the development of new law, and harmonisation in Africa. Five or six action items with a delivery date are included in each of the subcommittees. Since we can discuss the subject until we're exhausted and nothing changes, I want to emphasize that the process is equally important as the content. In South Africa, our blueprints have evolved significantly since democratization, enabling us to match any global standard; however, implementing them poses a major challenge. Therefore, we must now give the implementation aspect as much attention as the content. Thus, to grow the market, we must establish a trade committee, review trade agreements, hold an incentive workshop, and take into account some seemingly unimportant but necessary action items with due dates.
While we are reviewing the legislation, we aim to make significant progress in the next 18 months toward developing a more favourable framework for investors and local manufacturers to expand the market. Since it will take two to three years for a standalone act to be considered and finalized, we cannot wait. As a result, we have parallel actions to one another. Since the MedTech sector is a poor cousin to the other healthcare sectors, I believe the most important thing we need to do is reposition and brand it throughout Africa, not only in South Africa. We will always be at the wrong end of the stick when it comes to providing the healthcare sector with the skills it needs if we don't do that, and hopefully, other African countries will do likewise. At the NEPAD level in Africa, there are ongoing debates. One of the committees that examines the many aspects is focused on the MedTech sector. I must admit that while the assertions I read there are sound, they are incredibly challenging to implement throughout Africa; therefore, I'm not very excited about them.
The final argument I want to make is that the government debt is a huge elephant in the room that could be a stumbling block. Government hospitals' incapacity to reimburse suppliers is hurting small businesses and our credibility with multinational companies. There are numerous talks to resolve that, but if it isn't resolved, it will significantly impede the master plan's advancement. Solving that is a top priority. There are indications that it can and will be resolved, but until it is, it will be an Achilles heel that prevents us from moving forward with what I believe to be a really exciting master plan.
EF: You brought up the steering committee, which consists of both the public and private sectors. How well do these different institutions trust one another, and how are you striking a balance so that cooperation keeps everyone in sync and moves forward as a team?
VV: There is a low degree of trust. Individual trust is higher than collective trust. Therefore, we must strengthen the mutual trust between the government and trade associations. The problem has been the tendency of government agencies to function in silo's, instead of government departments standing together to represent the government. Even now, I do not believe there is a seamless approach from the government; the two main players are the Department of Trade and Industry on one side and the Department of Health on the other.
With the new NHI players joining the team, some interesting things have been happening. We have the proposed new NHI, although it hasn't been implemented yet. Some of the NHI's representatives are on the steering committee and are looking ahead, saying, "Hold on, here's how we can do it." They will play a key role in taking forward a request for a standalone piece of legislation and have stated their intention to do so. As a result, they now provide feedback to the steering committee on the drafting of a new piece of legislation.
Trust needs to grow to higher levels as we move toward a stronger process of collective involvement as opposed to individual engagement. There have been numerous issues, not from the pharma side but rather from the medical devices side, and the master plan allows us to work together and involve everyone, including SAHPRA, the regulator. Numerous problems have arisen, and many remain unsolved. It is important to state that SAHPRA is a member of the regulatory committee. Therefore, SAHPRA will present on the African space and its approach to it at the upcoming meeting. As a result, others will be able to see the work that is being done, offer feedback, and express their opinions. Therefore, with the levels of trust rising, the entire dialogue process is now producing a far better participatory process. That is hopefully going to be a platform from which we can launch much bigger initiatives.
EF: What would you like to share with us about the MedTech master plan if we met in five years?
VV: I will want to tell you that we have an enabling regulatory space. I will want to inform you that we have increased our local manufacturing and have secured deals with private and government hospitals to boost the uptake of local products and improve some employment figures; however, these numbers are not expected to be significant. The last one is that there is some increase in activity in the African and other export markets.
EF: Have you got one last thing to say to our readers?
VV: The process is equally important as content, and we all need to drive these processes and participate. The participation of those working in the MedTech industry, whether in the public or private sectors, is what we need. From a government standpoint, I think we have to make a sincere investment in the sector through incentives, as the more you put in, the more you will get out. Now, the benefits will be tenfold greater than the investment in local needs if governments can step up, especially in these challenging times, and create incentives that will encourage the players. Other than that, watch this space.
