Pharmaceutical giant GlaxoSmithKline (GSK) is the latest multinational firm to exit Kenya amid below-budget sales and global overhaul of the firm.
The firm, which makes Sensodyne, Augmentin and Panadol, will cease operation at Nairobi’s Industrial area plant and instead adopt a distributor-led model to supply the regional markets with its products.
The move, which a GSK spokesman confirmed Wednesday, would result in an unspecified number of job losses.
GSK will join a list of global manufacturers, including Reckitt Benckiser — the maker of Dettol –, Cadbury and Colgate-Palmolive that have stopped local production following increasing costs and uneven business environment.
The exit of GSK comes as the firm races to overhaul its global business in shifts that saw it spin off its consumer health unit, which owns the Sensodyne and Panadol brands.
GSK turned down a £50 billion bid from Unilever for the unit at the end of last year, arguing that it undervalued the company.
The review of the Kenya operations comes nearly five years after the pharmaceutical giant announced it was cutting back operations in Africa in search of competitive business.
It stopped marketing medicines to healthcare professionals in 29 sub-Saharan African markets, but continued running local operations in Kenya and Nigeria while retaining representative offices in Cote d’Ivoire and Ghana.
“Yesterday, we informed employees in Kenya that we will move to a direct distribution model and our operations will be transferred to third-party distributors,” GSK said in an e-mail response to the Business Daily.
“We will continue to supply our needed medicines and vaccines in Kenya, and we will work with our distribution partners towards a smooth transition in 2023.”
Following the closure of the Kenyan plant, the firm is now left with operations in six African markets — Algeria, Egypt, Morocco, Nigeria, Tunisia and South Africa.
In Kenya, GSK has made a bigger impact with its malaria and HIV/Aids drugs and other over-the-counter antibiotics and painkillers such as Augmentin and Panadol.
The pharma created the groundbreaking malaria vaccine, Mosquirix, which was piloted in Kenya last year, aimed at taming deaths especially among children.
Its exit follows disappointing sales for many pharmaceutical companies in the region in the face of competition from cheaper generics from India and locally manufactured medicines.
While Kenya has struggled to retain and attract multinational manufacturers, it has recently become a magnet for technology firms and financial service companies seeking a hub for a larger share of the African market.
Global tech giants, including Microsoft, Alphabet Inc and Facebook, have been increasing investment in Kenya in recent years to take advantage of growing economies with rising access rates to the Internet by a youthful population.
But industrialists, especially multinationals, are constantly on the hunt for bargain production locations much like they do tax havens.
A market index report released by global strategy consultants Wilson Perumal & Company in 2019 labelled Kenya as a complex market for foreign firms seeking to invest and establish a presence in Africa.
In the report that was released in a joint partnership with the Wall Street Journal, Kenya was classified as a ‘builder’ market, which meant that the country is attractive for production but less desirable as an end market.
The GSK move is a dent in Kenya’s manufacturing industry, which has been wobbling for some time due to increasing costs of production.
According to the Economic Survey 2022, manufacturing registered a 6.6 per cent growth last year, compared to 10.1 percent in 2020.