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EXECUTIVE SUMMARY

1. Introduction

The current demand for numerous popular plant species used for indigenous medicines exceeds supply. To date, several plant species, such as wild ginger (Siphonochilus aethiopicus) and the pepper-bark tree (Warburgia salutaris) have become extinct outside of protected areas in KwaZulu-Natal. The declining supply of indigenous medicinal plants is likely to generate significant economic and welfare losses considering that there are some 27 million indigenous medicine consumers in South Africa and a large supporting industry. There would be additional losses as potential income generating opportunities associated with a growing local and international demand are not realised. Furthermore, intensive harvesting of wild stocks is a serious threat to biodiversity in the region with over 700 plant species actively traded in South Africa.

Photo 1: Pepper bark (Warburgia salutaris) being traded at Nongoma. This bark has been harvested in Mozambique and is likely to be bought by traders from Durban and Johannesburg (three to four hours away by car).

As a result of the declining supply of medicinal plants and the localized extinctions that have occurred, Cunningham [1988] recommended the cultivation of indigenous medicinal plants. However there has been little response to these recommendations and/or to increases in market prices. It became clear that there was insufficient knowledge of the economics of indigenous plant production and the associated markets. The lack of information has prevented individuals, organizations and government bodies assessing opportunities in cultivating indigenous medicinal plants for the market.

Consequently, a research project was initiated by the Institute of Natural Resources to investigate the economic feasibility of cultivating high value medicinal plants for local medicinal markets, with a focus on the cultivation potential, production costs and marketing.

This report covers the marketing aspect of the larger research project. The market study aims to describe the demand, supply, current marketing practices, potential and limitations within the medicinal plant market and makes recommendations for a wide range of decision-makers.

The case study has had a spatial focus on the KwaZulu-Natal province in South Africa, and specifically on Durban (a city with 4 million people). The province is an area of active plant harvesting, trade and consumption, with Durban forming the hub of the regional plant trade. The other provinces in South Africa also have an active trade in indigenous medicines, and some reference will be made to national trends in the case study.

2. The demand for indigenous medicines

The demand for indigenous medicines and services is considerable relative to the demand for western health care services. The black population in Durban indicated that they relied on both health care systems, with 60% of the health care services demanded coming from western health care systems and 40% of the services demanded coming from indigenous medicine. It is estimated that there are 6 million indigenous medicine consumers in KwaZulu-Natal, and 27 million consumers in South Africa. Households were spending between 4% to 8% of their annual incomes on indigenous medicine services. As indigenous medicine is based almost entirely on the use of indigenous plants, a massive demand is generated in terms of both the numbers and the mass of plants consumed. In KwaZulu-Natal, over 4 000 tonnes of plant material is traded in a year, with a value of US$ 13 million (R 60 million), some one-third of the value of the annual maize harvest in the province. At a national level, 20 000 tonnes may be traded in a year, with a value of approximately US$ 60 million (R 270 million).

The demand for medicinal plants is likely to remain buoyant in the future. Consumers indicated that indigenous medicine was not an inferior good and demand is unlikely to decline should income levels and welfare increase in the future. On the contrary, urban consumers indicated they anticipated that their consumption of indigenous medicine would either remain at current levels or increase, despite indigenous medicine being more expensive than subsidized western health services provided by government. Consumers also indicated that western medicine was not an alternative to indigenous medicine and that irrespective of price, they would have to continue to use indigenous medicine. There are a wide range of ailments and needs which cannot be adequately treated by western medicine. This implies that indigenous medicine is a basic consumer good, essential for the welfare of black households.

The AIDS pandemic in the region, and the growing international demand for South African medicinal products, are also likely to increase the demand for indigenous medicine products in the future.

3. The supply of indigenous medicines

The indigenous medicine market is based on indigenous plants that are generally harvested from wild plant stocks in KwaZulu-Natal, neighbouring provinces and other countries. The plant stocks and their harvesting are not managed and little cultivation takes place. The combination of high demand and the lack of any significant resource management and plant production have resulted in a decline in the supply of numerous indigenous medicinal plants.

A wide range of plant species is showing indications of unsustainable use, with the size of the products decreasing, distances to stocks increasing (for example, in the last eight years there has been a 45% increase in travel time between popular plant sources and the market), supply becoming increasingly irregular, and/or some plants becoming unavailable in certain markets. Some popular plants have become extinct outside of protected areas in KwaZulu-Natal. The supply of indigenous medicinal plants is clearly not sustainable using the current harvesting strategies.

The scarcity of popular plants has led to their under-supply, with considerable increases in product prices [for example, Siphonochilus aethiopicus is regularly traded for US$ 100/kg (R 450/kg)], imports into the province, and the use substitute plants. In addition, there has been an increase in the use of destructive harvesting techniques, which aim maximize the harvest from declining plant stocks in order to maintain income levels in the short term.

There is however options for sustaining the supply of plants to markets. There are extensive areas of grasslands, woodlands and thickets on private property that have not been intensively harvested in the past. With effective management, these areas could supply many products to markets in the long term. However, the volumes of plant resources available in these areas and the harvesting strategies which should be applied, need to be investigated. In terms of forest species, there are limited forest areas available and consequently management of existing stocks is unlikely to meet market demand. In addition, the most popular plants, irrespective of their habitat, now exist in such small quantities that management of existing stocks is unlikely to supply consumer needs.

The cultivation, management and enrichment planting of high value plants are therefore an important strategy to meet consumer demand and to reduce the impacts of the market on biodiversity. The success of cultivation trials undertaken to date has shown good potential for this strategy. Fast growing species could be supplied in sufficient quantities within a few years. However, the slow growing popular trees, particularly forest trees, are unlikely to supply the bark quantities demanded in the short term, and alternative products need to be investigated.

4. The marketing of indigenous medicinal plant products

Over 400 species of plants are marketed in large quantities within KwaZulu-Natal. While the mixing and prescription of plant products is sophisticated, the processing and development of products is extremely limited. There is little processing and value-added to products, with most products sold in the raw form. The most sophisticated product form is a mixture of ground plant parts. There is little standardization in product quality and recycled waste is used for packaging. The entire industry is dominated by simple technology. Most of the value is added when an indigenous healer prescribes medicines.

The plant products are marketed to consumers as self-medication or as healers' prescriptions. The products are marketed within residential areas dominated by black consumers or at transport nodes throughout urban and rural areas. The conditions in the markets are generally poor, with most consumers indicating that they would prefer more modernized and hygienic trading sites. The lack of storage facilities and trading infrastructure frequently results in the spoiling of raw materials, resulting in wastage and/or a decrease in product quality. Both the healers and consumers have indicated that they are concerned about the quality of the products purchased in the markets.

There is currently no certification of indigenous medicines traded, however, there is legislation which requires the registration of products traded as medicines. The legislation is currently not applied to the indigenous medicine industry due to the informal nature of the trade. This legislation may limit investment in the formal cultivation of plants for the indigenous medicine industry. Unless the current legislation is changed, the production of plants for local markets may be limited.

The supply of plant products is not only critical for the welfare of approximately 27 million consumers, but it is also critical for the welfare of people employed in the industry. In KwaZulu-Natal there are between 20 000 and 30 000 people who derive an income trading indigenous plants in some form. Importantly, most of the people involved are black rural women, who are the most marginalized group in South African society. The medicinal plant industry therefore plays a critical role in empowering a large number of rural women.

Overall, the marketing of medicinal plants is poorly developed. Consumers and traders in plant products could benefit considerably through the development of both the products and markets.

5. Institutional support for the marketing of indigenous medicinal plants

In terms of policy support, very little policy has been developed to support the marketing of indigenous plants, with most policy designed to limit the marketing of indigenous medicinal plants. There are several regulatory mechanisms (associated with first world standards for medicines and biodiversity priorities) in place but are not being implemented at present. The medicines' regulatory mechanisms could threaten any commercial plant production and product development, particularly in sectors with limited financial resources and which are unlikely to be able to meet the standards required by existing legislation.

As a result of a largely negative policy environment, there has been insignificant education, training, research and extension regarding medicinal plant markets. Most research and development support from government and business has been directed at bio-prospecting and pharmacological investigations. There are few efforts directed at developing the current markets, their associated products, infrastructure and market players. Some efforts have been directed at training market players in the cultivation of medicinal plants but it is insignificant relative to the size of the market. There is an imbalance in support for indigenous medicine, with most investment directed at seeking commercially useful chemicals within medicinal plants, while little or no investment is being directed to maintain or increase the benefits which the current market is already delivering to millions of consumers.

Market information systems are poorly developed, resulting in considerable inefficiency within the markets. Market resources are wasted through inefficient coordination of trade activities. This is particularly problematic given the already short supply of plants and the inability of the current market players to absorb costs.

At the market level, there has been little development due to competition and the under-developed capacity of most market players. There is acute competition within the markets and this limits the sharing of knowledge between market players, especially the healers. There is no literature available at present which healers can use as a reference for administering indigenous medicine. Furthermore, with high levels of illiteracy and few business skills, the industry has been unable to develop. In terms of the healers, there are numerous healers' organizations which serve the healers' interests. However, as they focus largely on practice issues, and little investment is made at an industry level.

The combination of a negative policy environment and the limited capacity of market players to cooperate and promote their own development, has resulted in an industry which is large but underdeveloped.

6. Potential scenarios for the medicinal plant industry

The characteristics of demand, supply, marketing and institutional support generate a number of opportunities and constraints for the indigenous medicinal plant industry, and include:

· a large and growing local and international demand for medicinal plants,
· a declining supply of forest species in the short term,
· a fluctuating supply of grassland and savannah species in the short term,
· an increase in the price of scarce plants,
· the diverse cultivation potential of indigenous medicinal plants,
· an increase in the numbers and diversity of market players,
· a negative policy environment in the short term, and
· the majority of the current market players having limited business skills in the short term.

The above opportunities and constraints can be considered relatively fixed factors in the short term. In contrast to the fixed factors, there are variable factors which will to a large extent determine how the market may change in the future. The key variable factors are driven by the actions of different market players and associated authorities. The variable actions of these key players include:

· the degree to which the current market players cooperate to develop a common vision and lobby for government support,

· the responses of government departments (Health, Agriculture, Trade and Industry, Water Affairs and Forestry, and Environment and Tourism) to the indigenous medicine industry,

· the responses of national, provincial, and local political leaders to the indigenous medicine industry,

· the response of business to the opportunities in the industry, and

· the quantities demanded by consumers for different levels of processed, certified, standardized, and packaged products.

The study identified three potential scenarios which could develop depending on the actions of key role players in the markets. The possible scenarios are as follows.

Scenario 1 - No intervention - the continuation of the status quo - where there is limited investment in promoting the supply and development of popular plants and products in association with current market players. Consequently, large commercial interests are likely to cultivate high value plants and trade processed products, while most of the current market players continue to compete for a decreasing share to a declining stock of popular plants. A narrow range of species (the high value species) would be cultivated, processed, and distributed for the upper end of the market with a small number of large business interests benefiting. Biodiversity and health care will be negatively impacted.

Scenario 2 - Industry driven intervention - collaboration between progressive current market players and skilled business interests - is likely to offer large benefits to large and intermediate companies and to a limited number of current market players. Cultivation, processing, and distribution would occur for the middle and upper end of the market. Small-scale traders and gatherers are likely to continue to trade in wild plants, but supply is likely to decline as wild stocks are depleted. Biodiversity and health care will be negatively impacted.

Scenario 3 - Collaborative intervention - collaboration between many current market players, government and business interests - this could see the development of a wide range of processed products from simple rural products to sophisticated pharmaceutical products. Plant cultivation would take place from the subsistence level through to large commercial estates. Numerous market players could develop a range of different quality products for a wide range of consumers, with different prices suited to the consumers' budgets. Such a scenario, is likely to promote the growth of the industry, and promote development at a broad scale. Investment in resource management and biodiversity conservation is also more likely in this scenario. Health care would benefit.

The most likely scenario to develop is number 2, where big business enters the market and leads market development to suit its own objectives. Current investments by both government and big business are supporting the development of this scenario. Furthermore, current legislation supports the development of the corporate sector by excluding the less developed market players from producing more commercialized indigenous plant products. The costs of this scenario will be borne largely by the current consumers, who will lose access to basic consumer goods through price increases and scarcity, and numerous current market players will lose income-earning opportunities.

As the current consumers and current market players are largely from the least developed sector of South African society, it is essential to initiate market interventions which promote the welfare of the current consumers and market players, especially at the lower end of the market. At the same time, the opportunities for large-scale corporate involvement at the upper end of the market and in international markets, should be supported. To maximize the benefits to the greatest number of beneficiaries, South Africa needs to focus on achieving the development of both the existing market players and corporate entrants.

The development of the indigenous medicine market in South Africa will promote economic growth, people's development, consumer welfare, and biodiversity conservation. However, this will only be achieved if development takes place across the whole spectrum of the market, from rural resource management and marketing through to corporate bio-prospecting and production.

The challenge facing the South African community is to capitalise on the market opportunities and to overcome the market constraints in the medicinal plant industry through achieving a greater balance in the distribution of development resources in public and private sector.

7. Recommendations

The market study has shown that the under-development of the market has significant negative implications for consumer welfare, market players, state expenditure and biodiversity. The development of the market is therefore critical in promoting widespread welfare and in limiting the costs (direct and indirect) which society will bear as a result of continued market under-development.

Development requires actions at two key levels. Firstly, coordinated support for the indigenous medicine industry needs to be developed amongst policy-makers in all levels of government (and within a range of departments), in business and in NGOs. A supportive, consistent and positive policy and regulatory environment needs to be developed for the indigenous medicine industry. Secondly, development actions are required within the market itself. However, little significant market development will occur without a positive policy environment and a coherent strategy for industry transformation.

7.1 Recommendations for optimizing opportunities in market demand

Recommended actions regarding the growing demand for indigenous medicinal plants as a basic consumer good in South Africa, other African countries and abroad are:

· Decision-makers at all levels of government, business and civil society need to acknowledge of the magnitude and permanence of indigenous medicine and the associated indigenous plant demand.

· Promote public awareness and open discussion regarding the demand and utilization of indigenous medicine.

· Investment in supply and market development should be undertaken given an assured market for indigenous medicine products.

· New opportunities should be investigated as demand grows.

· Export opportunities should be investigated and developed.

· Exploit consumer reverence for indigenous plants for the promotion of biodiversity conservation.

Recommended actions regarding consumer preference for better quality products and packaging, and for more modem dispensing locations and retail outlets are:

· Products, packaging and retail outlets and dispensing establishments should be improved to meet consumer demand and promote consumer welfare.

· Decision-makers in government and business should be made aware that consumers are not satisfied with the standards of products and market infrastructure.

· A focused information and technology transfer system should be developed to inform market players.

Recommended actions for optimizing the lack of accepted alternatives and the demand being relatively unresponsive to price changes are:

· There should be investment in product and market development in several sectors and for several species as demand for higher priced products exist.

· A range of different standard products with a range of prices should be marketed and response monitored to identify the levels of demand, and potential opportunities for expansion.

Recommended actions regarding the adaptability of indigenous medicine are:

· Identify development opportunities for South Africa from Indian and Chinese experiences in the development of indigenous medicine markets.

· Test the market for new product acceptability, in collaboration with indigenous healers, traders and consumers.

7.2 Recommendations for optimizing opportunities in market supply

Recommended actions for management and utilization of existing wild plant stocks are:

· Populations of scarce plants should be identified, and genetic material preserved appropriately using resource protection, and the establishment of gene banks conserving the diversity in genetic material from various localities.

· A programme for promoting the farming medicinal plants in commercial and communal rangelands and forests should be developed, and should include:

- information dissemination regarding values and opportunities,

- demonstration of management and harvesting techniques in different habitats,

- provision of ongoing technical expertise to farmers in management, harvesting and marketing of wild plants through an extensive extension programme,

- provision of source materials, including seeds and cuttings, for enrichment planting,

- the development of economic models for estimating returns on wild plant farming.

· The traders' demand for bark products should be coordinated with logging operations in indigenous forests.

· The process of authorizing land use changes such as afforestation, water impoundment and other land clearing activities should incorporate mandatory plant salvage operations.

· Research into the sustainable harvesting of wild plants at both the population and individual plant level should be undertaken.

Recommended actions for the optimal use of existing expertise in plant cultivation, processing and marketing are:

· Establish a directory of individuals with appropriate expertise and services.

· Develop a networking system between potential suppliers of expertise and services, and the market players requiring expertise. A funding system would need to be established to facilitate the transfer of expertise to poorly resourced market players.

· Identify and access appropriate international expertise and case studies with potential for contributing to the southern African situation. Develop and publish guidelines for cultivation, processing and marketing from the lessons learnt in other countries.

· Build on the expertise of current market players, particularly the plant harvesters, who can use their existing expertise to promote more efficient supply and marketing. Training programmes with appropriate curricula would need to be established in various accessible centres.

· Build on the expertise of institutions which have already developed extensive knowledge in production, cultivation, processing and marketing.

Recommended actions for optimizing the demand for new agricultural opportunities are:

· Make market information, agronomic schedules and production costs available to farmers via various media and through training extension workers in agriculture and forestry departments.

· Reform obstructive legislation which prevents the commercial production of medicinal plants.

· Provide short courses in the propagation, cultivation, and marketing of medicinal plants for a range of farming skills and literacy levels.

Recommended action for optimizing the existing market information systems is:.

· Develop a marketing information system appropriate to existing trade networks and appropriate to market participants' skills.

7.3 Recommendations for minimizing constraints in market supply

Recommended actions for addressing the negative policy environment and obstructive regulatory mechanisms which impact on the supply of plants are:

· Inform policy-makers of the negative impact of current policies and regulations on consumer welfare, industry sustainability, economic development and biodiversity.

· Inform policy-makers of both the cost savings and potential opportunities which the medicinal plant trade creates.

· Inform market players of the need to lobby for policy-change and reform of regulations concerning the trade in medicinal plants.

· Inform decision-makers of the potential human and economic development opportunities associated with the indigenous medicine trade.

· Use international case studies as examples for South African policy-makers.

· Develop support for policy-reform in leading political figures. There needs to be a champion for the reform of government policies in the trade of plants and plant products.

· Establish a medicinal plant strategy unit for southern Africa to develop coordinated policies between states and to generate information for informing policy-at a national and international level.

Recommended actions for addressing institutional constraints regarding market supply are:

· Identify sources of funding from outside of government departments to reduce conflicts over already limited government resources.

· NGOs, government departments and market players should collaborate and develop partnerships with international funding agencies to obtain resources for new initiatives.

· Develop an advocacy programme for showing the benefits of developing the medicinal plant trade to government officials in local, regional, and national governments. This action would be closely associated with the medicinal plant strategy unit recommended above.

· Establish a team of collaborators in government departments who should be stakeholders but who may not have the resources to lead any projects.

Recommended actions for limiting the disunity in the markets due to competition are:

· Inform market players of the potential benefits of greater market unity by using international examples.

· Organizational development should be promoted within various sectors in the industry.

· Promote the lobbying ability of market players through training courses.

· Promote the development of a cross-sectoral organization which could represent the interests of all market players.

· Promote a focus on personal business development to promote widespread support from all market players.

Recommended actions for promoting business skills within the medicinal plant market are:

· Basic literacy courses should be provided for gatherers and street traders.

· Courses in business skills should be developed for a range of enterprises.

· Courses on beneficiation at various stages in the marketing process should be developed and provided to market players, especially at gatherer and trader levels.

Recommended action for promoting more efficient marketing is:

· Development and implementation of a market information system and should include:

- selecting locations for market information systems,
- identification of participants in market information systems,
- gathering information required to design a market information system,
- design a market information system, and
- implement a market information system.

Recommended actions for promoting the quantity of plants supplied to markets are:

· Programmes for the management of wild plants and the cultivation of plants are required at a range of scales to supply urban, rural and international consumers, and for supplying commercial processing of phytomedicines.

· Investment in cultivation must be made to reduce the reliance on wild plant stocks for the medicinal plant industry.

· The most popular species are an immediate priority that should be focused on, and include the nine species which are a focus of the market survey.

· Forest species are a higher priority than other species, and cultivation should be priority due to the small areas of forest remaining in South Africa.

· Slow growing forest species which are unlikely to be cultivated by commercial enterprises will need to be the focus of government and NGO activities.

· Grassland, savannah and thicket species should be the focus of management as relatively large stocks still remain on commercial farmland.

· Research needs to quantify and identify sustainable harvesting strategies for the wild plant stocks on commercial farms.

Recommended actions for promoting the quality of plants supplied to markets are:

· Research should identify genotypes with high potential for commercial purposes, and then conduct trials for the selection of high yielding varieties,

· High yielding variations within species need to be propagated and disseminated to farmers.

· Research should take place into the development of efficient packaging and storage of plant medicines.

· Promote the development of hygienic and convenient market places for consumers and traders.

Recommended action for research on the medicinal plant markets is:

· There should be a reorientation of research investment regarding medicinal plants, with a shift from pharmacological studies to research which identifies effective methods of sustaining market supply and improving the quality of products currently consumed.


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