MSQ, Coega SEZ to build R100m medical device factory

South African 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 this 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 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, he said.

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

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 around 400 people and hopes to double its head count 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 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 importing 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 also grow global sales.  

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.

In addition, it was also well positioned to adapt to manufacturing bespoke products and partnering with developers of other compatible products.

Nyembezi said innovative products such as a diagnostic box that would replace the 80 to 90 tests currently carried out by the three dominant players in this market and required a single drop of blood rather than the numerous vials currently taken was set to turn this market segment on its head.

When it comes to pharmaceuticals, MSQ has about 100 dossiers that allow it to manufacture and distribute generic medicines, as well as two revolutionary biological products, throughout South Africa, Namibia and Botswana.