Zimbabwe Pharmaceuticals and Healthcare Report Q2 2012

BMI View: On account of its unpredictable and unfavourable operating environment and limited funding
for and investment in healthcare and medicines, Zimbabwe’s pharmaceutical market will remain
unattractive to foreign companies for the foreseeable future. Poor healthcare provision and coverage will
continue to provide further operating challenges, as most of the population struggles to afford basic
medicines, which also largely have to be sourced with out-of-pocket spending.

Headline Expenditure Projections
?? Pharmaceuticals: US$160mn in 2011 to US$181mn in 2012; +13.5% in US dollar terms.
Forecast unchanged from Q112.

?? Healthcare US$833mn in 2011 to US$919mn in 2012; +10.3% in US dollar terms. Forecast
broadly unchanged from Q112.

?? Medical devices: US$44mn in 2011 to US$50mn in 2012; +12.6% in US dollar terms. Forecast
unchanged from Q112.

Risk/Reward Rating: Zimbabwe is 28th out of 30 regional markets in BMI’s Middle East and Africa
(MEA) Pharmaceutical Risk/Reward Ratings (RRRs) for Q212, having been overtaken by Sudan.
Zimbabwe’s composite score is a slightly improved 30.1, a 2.2% quarter-on-quarter (q-o-q) increase as a
result of a better country risk rating. Globally speaking, Zimbabwe remains in the bottom three countries
of the 95 markets surveyed by BMI.

Key Trends And Developments
?? AIDS levy collections in 2010 rose to US$20.3mn, from US$5.7mn in 2009, with more
companies contributing towards the National AIDS Trust Fund, the National AIDS Council
(NAC) reported. The NAC concluded in its audited report that the rise reflected an improvement
in the socioeconomic environment since dollarisation. Murombedzi Kuchera, the NAC board
chairman in 2010, called the collection a remarkable achievement and said it was possible due to
on-time payments of individual and corporate taxes.

?? CAPS Holdings, a Zimbabwean company with subsidiaries in all verticals of healthcare delivery
in the country, has seen things turn from bad to worse in recent months. In November 2011, the
company’s largest shareholder, Frederick Mtandah, and general manager Justice Majaka were
arrested by the Anti-Corruption Commission (ACC) for fraud. They have both since been
cleared of wrongdoing, though the prosecution may still push for a retrial in early 2012.
BMI Economic View: Tight domestic and regional food supplies and the introduction of a surcharge on a
range of manufactured goods will drive headline inflation higher in Zimbabwe in 2012, which will
negatively affect the availability of out-of-pocket finances for healthcare and pharmaceuticals. We have
forecast a relatively gradual increase to 7.5% by the end of 2012, with an average of 6.1% for the year.

However, risks are weighted significantly to the upside, with a faster than anticipated increase in food
prices posing the greatest threat. In the meantime, we forecast that Zimbabwe’s economy will grow by
7.4% in 2012. Industries further along the value chain from agriculture and mining will continue to
struggle due to a lack of competiveness and inadequate access to capital.
BMI Political View: President Robert Mugabe was endorsed as ZANU-PF’s candidate at the next
presidential election at a party conference in December 2011. The approach of elections, expected in
2012, will see the indigenisation issue become an increasingly divisive topic for Zimbabwe’s main
political parties. We believe there will be a great deal of uncertainty for foreign firms and investors as
ZANU-PF focuses on implementing the law as a major part of its election campaign.