Healthcare company MSQ Health is positioning itself to become South Africa’s third active pharmaceutical ingredient (API) manufacturer.

The company, which has set its sights on becoming a market leader in a sector dominated by imports, has teamed up with the Coega Special Economic Zone (SEZ) to build a R100-million greenfield medical device factory.

It states that the country’s API industry is dominated by two large players, “but we believe there is room for a third API manufacturer in South Africa and we are putting up our hands”. “I believe that Coega could also be the ideal location for this,” MSQ director Themba Nyembezi said last week.

The new facility will enable MSQ to consolidate its two existing medical suture and textile manufacturing facilities into one. It will relocate plant from its Cape Town and Port Elizabeth operations, while also investing in new machinery from its Chinese technical partner, Zende.

This will free up the Cape Town factory to focus on plastics manufacturing. Further investment to replace dated and inefficient machinery there would allow it to better compete against imports.

COO and acting CEO Dr Carl Montague said medical textile and plastics manufacturing was not compatible. Staff from the textiles side in Cape Town would be absorbed by the plastics business.

Montague added that MSQ would start relocating machinery to the new facility by June 2019, with occupation set for this month. The plant would be operational by October.

The facility, which will initially comprise a 5 900 m² manufacturing plant, could potentially be expanded in future to include complementary and new businesses.

Because the manufacture of medical textiles and sutures is very labour intensive, “extra hands” will be needed and the company envisages creating between 100 and 150 new jobs in a region where unemployment is high.

MSQ currently employs about 400 people and hopes to double its headcount by 2021, Nyembezi said.

According to Nyembezi, the local medical device industry is large but undeveloped, with imports accounting for up to 90% of the market in value terms. He said MSQ was well positioned to change this dynamic.

At present, 60% of MSQ’s output is sold into the private sector, with large hospital groups accounting for most of the offtake. Just 10% is sold to the public sector. “This is an area in which we are keen to be active. It is driven by price, tenders and quality,” he said.

MSQ Pharma MD Glen Sullivan pointed out that, through this investment, MSQ was gearing up for the introduction of the National Health Insurance (NHI) in South Africa, which is expected to drive a higher proportion of local content.

At present, there were a lot of low-quality imported products in the market and, with its ISO 9001 and 13485 accreditations, MSQ would be increasingly competitive in this space, he noted.

Currently MSQ, which recently won a large public-sector tender, supplies more than 50% of the sutures in South Africa.

Nyembezi said the facility’s location within the Coega SEZ, with its associated tax incentives, would enable the company to better manage the import of raw materials, increasing local content and growing exports. This would free up working capital.

At present, 20% of product is exported to 43 countries in Africa, Europe and the Middle East, leaving significant capacity to grow global sales as well.

Sullivan noted that the new manufacturing facility would be the “biggest sterilising outfit in the country” and would be well placed to contract-manufacture and support other medical businesses that were too small to invest in such a sophisticated facility.