Zambia Pharmaceuticals and Healthcare Report Q1 2013

BMI View: The majority of investment in Zambia's healthcare market stems from international aidagencies - so the news that the government has increased its allocation for healthcare spending in the2013 budget will be well received by both NGOs and international investors as a sign that Zambia istaking its commitment to healthcare seriously. The country suffers from a burden of both communicableand non-communicable diseases, with a high incidence of HIV and AIDs, malaria, and problems such ascholera emerging in Q412, but it is making progress. The government claims it has already met itsmillennium development goals for turbercolosis, and is on target to meet other healthcare goals. Risksremain, such as the presence of counterfeit and substandard drugs, and the reliance on copper exportmeans Zambia's economy has a narrow base.

Headline Expenditure Projections

Pharmaceuticals: ZMK951bn (US$196mn) in 2011 to ZMK1,095bn (US$207mn) in 2012;

+15.1% in local currency terms and +5.7% in US dollar terms. Forecast lowered slightly from Q412.

Healthcare: ZMK5,347bn (US$1.10bn) in 2011 to ZMK6,290bn (US$1.19bn) in 2012; +17.6%in local currency terms and +8.0% in US dollar terms. Forecast lowered slightly from Q412.Risk/Reward Rating: In Q113, Zambia remained steady at 21st best market in the MEA region in BMI'sproprietary Risk/Reward Ratings (RRR) matrix with a score of 39.6.

Key Trends & Developments

Zambia's government claimed in October 2012 that it is on target to meet its MillenniumDevelopment Goals and has raised healthcare funding by 46% in its current budget. The year2013 will see the government spend ZMK3.46trn on healthcare, or 11% of total spending.

A refurbished eye clinic and centre of excellence, part funded by NGO Operation EyesightInternational, was opened in Lusaka in October 2012. Phase I of the project cost ZMK2.8bn, andwas constructed by India's Nava Bhata Ventures; Phase II will cost ZMK15.5bn.

The Global Fund signed an agreement with the Churches Health Association of Zambia inOctober 2012 to provide US$102mn to support the reduction of HIV and AIDs.

BMI Economic View: Zambia's minister of finance presented the 2013 budget seeking to stimulategrowth in sectors with relatively strong potential for generating employment.,This included a big increasein healthcare spending, from ZMK2.58trn to ZMK3.64trn. BMI believes that the economy has a strongoutlook, and that the business environment will remain stable.

BMI Political View: In the announcement of 2013's budget, the minister of finance revealed that thegovernment will try to promote transparency by ruling that any revenue collected by government bodiesmust be deposited in the treasury. Such moves will go some way to reassuring potential investors that thegovernment is serious about dealing with corruption.