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One giant leap
– by Sanda Oumarou, Roger Peltzer
© Cinpharm S.A.
Pharmaceutical production at Cinpharm
Malaria claims one in 100,000 lives in Brazil today – but in Cameroon it claims one in 116. Among the reasons are structural shortages of Cameroon’s healthcare. Nearly 50 % of the children under five who suffer from malaria do not get the medication they need.
The shortages are also reflected in low per-capita spending on healthcare. It amounts to a mere $ 104 per year, only a quarter of which comes out of the public purse. The comparative figure in Brazil is $ 837, of which 45 % is publicly financed.
Part of the problem is that Cameroon does not have an adequate supply of drugs. Government and church-run hospitals procure some supplies at reasonable prices through international tenders. But the tenders do not allow them to meet all of their needs. Many drugs of low and dubious quality are imported illegally, often doing more harm than good. At the same time, many pharmaceuticals or medical aids such as infusion packs are exported to Cameroon at inflated prices. For these reasons it was important to establish a pharmaceutical industry in Cameroon that can serve the country as well as its neighbours.
Célestin Tawamba is a successful Cameroonian entrepreneur. As the owner of the second-largest wheat mill in the country and the La Pasta food company, he generated sales equivalent of € 45 million and employed 800 people in 2009. Some years ago, he decided to enter the pharma business. He wanted to make money from improving the drugs supply in his country and its region.
The project was ambitious. Tawamba had to overcome lots of hurdles. His first step was to acquire an old Rhône-Poulenc production plant called Cinpharm. The facility had been standing idle for years and it soon became clear that its only useful assets were its buildings. Lack of skilled labour was another challenge. The business had to be launched from scratch.
Tawamba recruited Indian experts and secured the advice of Ekkehard Michahelles, a senior expert who had spent many years prior to retirement establishing production lines around the world for the German pharmaceutical group Merck. The contact with Michahelles was brokered by DEG (Deutsche Investitions- und Entwicklungsgesellschaft), a member of KfW Bankengruppe. DEG’s mission is to promote the private sector in developing countries.
With Michahelles’ assistance and that of an Indian planning office, a new state-of-the-art facility was designed. The German pharma expert also helped Tawamba negotiate a licence and assistance agreement with CIPLA, the India-based global player in the production of generic drugs.
Funding was another challenge. Tawamba needed € 16 million investment capital, and he could only stump up a third of the sum himself. He wanted to raise the rest through long-term bank loans. But bank managers often hesitate to finance ventures like this. Experience tells them that the difficulties are often greater than entrepreneurs anticipate. Founders of businesses regularly underestimate investment costs, the duration of construction and bureaucratic hurdles like drug licensing, for instance. Typically, market launches get delayed.
Tawamba was willing to use the financial clout of his existing businesses to get the loan. In intense negotiations with a pool of local banks and the DEG, he finally put together a loan package that served the interests of everyone involved:
– The loan is paid in the local currency, the CFA franc, so there is no exchange-rate risk for Cinpharm.
– The borrower is not Cinpharm but the entire group of Tawamba companies, which lowers the risk for the participating banks.
– The DEG, in line with its mission to boost private enterprise in Africa, agreed to guarantee 50 % of the local banks’ credit risk.
All summed up, the deal resulted in a credit worth around € 12 million. A small part of the loan will be used to modernise the wheat mill and pasta manufacturing facilities.
The new Cinpharm plant is now in operation. The first 10 pharmaceutical lines were launched on the market in October. By the end of 2011, Cinpharm plans to make a wide range of antibiotics, painkillers, anti-malaria, anti-TB and anti-retroviral drugs based on a total of 60 different active ingredients.
Cinpharm’s annual production capacity is of 1.5 billion tablets, 150 million capsules and 25 million bottles – and every product is made in strict compliance with WHO standards. The company gained support in this regard from the United Nations Industrial Development Organisation (UNIDO). The plant has state-of-the-art facilities for waste disposal and water treatment.
Thanks to Cinpharm, Cameroon will make marked progress towards achieving the Millennium Development Goals (MDGs). Drugs play a role in MDG 4 (reducing child mortality), MDG 5 (improving maternal health) and MDG 6 (combating HIV/AIDS, malaria and other diseases).
Today, Cinpharm employs 300 people, including 20 pharmacists. Training was provided by CIPLA – in some cases in India. During the start-up phase, a number of key management positions are still occupied by South Asian experts, but they will gradually be replaced by Cameroonians. In the medium term, Cinpharm aims to meet 15 to 20 % of pharmaceutical demand in Cameroon and also export to neighbouring countries.
Cameroon already has a strong industrial base and a dynamic entrepreneurial class. Its members provide employment, for example, at a refinery, cement works and metal engineering plants. Cinpharm has added high-tech pharmaceutical production to this promising industrial landscape. That will have a signal effect – and so will the innovative financing that made the venture possible. Célestin Tawamba has set a healthy example of competent entrepreneurship rising to daunting challenges.