HARARE - United Kingdom-based GlaxoSmithKline plc (GSK), a leading global research-based pharmaceutical and healthcare company, has stopped operations in Zimbabwe due to the country’s high political risk profile.
Zimbabwe is regarded by foreign investors as a high political and credit risk country due to the fragile political environment and the country’s failure to service its $10 billion external debt.
GSK, which has been supplying anti-retroviral drugs, vaccines, antibiotics, asthma and heart disease medication to local distributors such as Pulse Pharmaceuticals, PCD, Sky Pharmaceuticals, Savanna Pharmaceuticals and Greenwood Wholesalers, ceased operations in December last year.
The pharmaceutical group’s South and southern Africa general manager Davies Gichuhi said the decision was made in light of “evolving local situations” in the country.
“As a result we have decided to change the way we operate in Zimbabwe to ensure that our business is governed effectively and in accordance with GSK requirements,” he said.
GSK — the world’s sixth-largest pharmaceutical company — indicated that it would only deal with Zimbabwe through UN agencies.
“We believe that this is the most appropriate business model for Zimbabwe at this time,” the company said.
However, economic experts said GSK’s exit was a clear indication of Zimbabwe’s high political risk profile that is making doing business in the country expensive.
“The company was also increasingly getting agitated with the volatile political situation in Zimbabwe and the “threats” made by the Indigenisation minister Patrick Zhuwao when he was appointed minister cemented GSK’s decision to leave the country,” said a source close to the company.
Soon after his appointment as Indigenisation minister last year, Zhuwao, who is also President Robert Mugabe’s nephew threatened to nationalise all foreign firms that fail to comply with the black economic empowerment regulations.
Zimbabwe introduced a black empowerment law in 2008 that compels foreign businesses to cede 51 percent of their shareholding to locals, but investors are wary of these regulations and have so far given the southern African nation a wide berth.
Meanwhile, health experts say the pulling out of GSK from Zimbabwe signifies disaster to the country’s ailing pharmaceutical industry.
The industry, once the envy of the region and only second to South Africa in the Sadc region is now on the verge of collapse and facing numerous challenges emanating essentially from an unfavourable policy and legislative environment which favours importation of drugs at the expense of locally manufacturing them.
The country is currently getting almost 90 percent of essential drugs through donor-funded programmes yet it has been highlighted that such high dependence on donors for essential drugs poses a major health and security risk.