(i) Drug imports
31. Drug imports were, until recently, handled by parastatals in most SSA countries. The majority of these drug companies were poorly managed and developed serious financial problems because of their high overhead and the below-cost pricing of the drugs, frequently forced upon them by central ministries under the mistaken impression that the producer would not pay the full price. As a result of these restrictive policies, only a part of the demand was satisfied through official channels and an active parallel (black) market emerged outside the control of the government.
32. Over the last decade, several SSA countries have liberalized both imports and distribution. Chabeuf (1990) reports that of the 29 countries he surveyed, 18 had liberal imports and 22 liberal local distribution. This liberalization seems to have had a positive effect on drug use. Although confounded by climate and price differences and illegal trade between countries, this study's data show that between 1985 and 1988, for example, the average consumption of drugs in countries with a government monopoly was US$ 0.14 per VLU per year, whereas the consumption in countries that had adopted a freer trade policy was US$ 0.46 per VLU per year.
33. However, external donors continue to finance parastatal drug import and distribution companies, in particular their rehabilitation. The rationale put forward is that (i) the private sector is not interested in servicing the remote areas, (ii) parastatals are better able to handle the donations in veterinary drugs, and (iii) parastatals are needed to generate funds for the government livestock services. In such externally funded projects, privatization would be sought, once the parastatal is rehabilitated. However, in almost all Bank projects reviewed, full rehabilitation seems always "just around the corner" but never still fully achieved, and none of the parastatals under rehabilitation in Bank (and other donor) funding have yet been privatized.
34. One might thus question the wisdom of continued support for parastatal drug companies. Experience shows that the impact of parastatal companies is very limited. In the few countries with only private importers, distribution to the remoter areas is as good or better than it is under any parastatal company. Furthermore, the private sector tends to lose interest in participating when a public company is already involved, as implied by the lower consumption in countries that have maintained a parastatal company besides the private importers in comparison with those that relied entirely on the private sector for their imports. Even in the semi-arid pastoral rangelands where the density of livestock and humans is low, it is difficult to justify keeping the government in charge of drug distribution. Distribution through local herders' associations under the umbrella of a national federation, as done in the CAR (Annex 2) provides a far superior alternative, and perhaps this ought to be considered as the future model in these countries. Even in those cases where the public sector needs to be involved in drug distribution, it should be in support of the private sector by distributing drugs in remote areas, and should not move into import or wholesale trade. Furthermore, rather than maintaining costly parastatals, it could be envisioned to subcontract drug distribution in remote areas to private distributors, compensating them with a special subsidy for the extra cost involved.
35. Although many African countries have been moving toward freer foreign exchange markets, currency restrictions in several countries are still preventing drugs from becoming widely available. A common approach to this problem is to have outside donors refinance the revolving funds, but this is only a temporary solution and drug supply comes to a halt the moment the foreign exchange source dries up. When foreign exchange controls are lifted problems are not over yet, as normally there is an initial period of high inflation, which makes it difficult to refinance revolving funds. Where the average turn around time for drugs is longer than six months, the purchasing power value of the local currency during this period can drop dramatically allowing only a small part of the original stock to be replenished. The problem is especially acute in public sector agencies or projects where price changes are generally slow and well behind the pace of inflation. In such circumstances, countries need a very dynamic price mechanism with a high margin to achieve a continuous alignment between sale price of drugs and the exchange rate.
(ii) Vaccine production
36. The growing public sector involvement in vaccine production is of considerable concern. The number of vaccine production laboratories in SSA has virtually doubled in the past 10 years and all major and most smaller livestock-producing countries now have their own vaccine production laboratories. This trend accelerated in the mid-1980s following the 1982 Rinderpest outbreak and the resulting scramble for scarce Rinderpest vaccine. In the wake of this strong expansion, however, there is a large excess capacity in the region. Furthermore, the vaccines used for the most common diseases (Rinderpest, common poultry diseases like New Castle disease) are produced more economically in established large-scale laboratories. Except for two private laboratories in SSA, all laboratories are government-owned and usually under the supervision of the livestock department. Because of the existing excess capacity, practically all laboratories have operating deficits, and what should be self-financing operations depend on subsidies from the government, frequently even above the direct payment of salaries from the treasury. Production costs of about US$ 0.10 per dose are calculated, with a sales price ranging from US$ 0.03 to US$ 0.05 per dose.
37. This proliferation of national vaccine laboratories is not justified, especially now that emergency buffer stocks of Rinderpest vaccine are being maintained in selected SSA laboratories under the Pan African Rinderpest Campaign (PARC). The frequently heard argument that local operations reduce foreign exchange needs is not very strong as the process requires a high share of imported supplies. Regional cooperation, and consolidation of the many small national laboratories into larger, more specialized regional laboratories needs therefore to be pursued and once consolidated, privatization sought of those larger laboratories. Any plan for the construction of new laboratories, or the expansion of existing ones, seems only justified if it would attract private interest. Most existing national laboratories are too small to attract such attention, and-like parastatal drug import and distribution companies-none in SSA have yet been privatized. Reforms have been limited to reducing the most obvious distortions, for example, by organizing vaccine production in separate self-contained and self-financing units that charge real prices.
(iii) Drug distribution
38. Until recently, only the staff of veterinary services were allowed to distribute drugs, and this is still the case in some countries. Such restrictions were fully justified in the first half of the century, when drugs were not charged to the producers, were expensive in relation to livestock prices, contained ingredients toxic to humans, and improper use produced serious side effects. In the past three decades, however, mass production techniques have reduced drug costs, and research has eliminated many unwanted side effects, on the other hand, the deteriorating quality of government services in the field, strongly restricted drug distribution, and as a result, a flourishing black market developed in many SSA countries. With the aid of external support, many countries have therefore introduced more liberal distribution, although like in the other policy thrusts, progress is partial. Several countries maintain an unjustified discriminatory system, allowing government technicians to distribute and apply prescription drugs, but prohibiting private technicians to do so.
39. An important issue concerns the drug types that can be purchased without prescription. Proponents of a liberal policy argue that it is necessary to include the crucial drugs on the non-prescription list, to interest nonprofessionals operating private veterinary care and to limit the much more dangerous black market, now rampant throughout SSA. Opponents of free distribution point to the danger of drug resistance as a result of incorrect dosage by layman and the competition these laymen would pose to self-employed professional veterinarians. Preliminary experience seems to justify a liberal policy, as it seems to reduce black marketeering and adulteration. In the CAR, where drugs have become more available through the Fédération Nationale d'Eleveurs Centrafricaine (FNEC) (Annex 2), the share of drugs purchased by herders on the black market fell dramatically. Furthermore, surveys showed that the majority of the herders and lower-level technicians are capable of handling most drugs very properly.
