A lot has been said in the last couple of months about developing the African continental into a regional hub for vaccine manufacturing. Today the continent, which is home to more than 17 per cent of the world’s population, imports almost 99 per cent of its routine vaccines.
By Nicky Gouder
Last month, European Commission President Ursula von der Leyen announced at the G20 Global Health Summit in Rome, a Team Europe initiative on manufacturing and access to vaccines, medicines and health technologies in Africa. The initiative will help create an enabling environment for local vaccines manufacturing in Africa and tackle barriers on both supply and demand sides, backed by €1 billion from the EU budget and the European development finance institutions such as the European Investment Bank (EIB).
With an industry as specialised as vaccine manufacturing, apart from being able to attract investment from the global manufacturers, being able to attract, transfer and retain knowledge is a crucial element to the long-term success of this industry.
Taxation can be an important tool in obtaining this goal. Firstly, it is important to acknowledge that tax and fiscal policy cannot be the only tool at the country’s disposal to develop this industry. This is one cog in the wheel when building such an ecosystem, including a niche regulation relating to the pharmaceutical industry, banking and a solid infrastructure which can attract the global players and industry talent to Rwanda.
Policies need to be introduced in such a way that they are a tool to attract talent and knowledge, but also ensure that this is passed on to the local work force who are going to be the key element of the success of the industry as the need for competent and technical human resources grows. This can be done in several ways.
Providing reduced personal income tax rates to highly specialised individuals, with a certain salary package, for a few years, can be used to attract these individuals to come to work and live in Rwanda. When attracting the global players, one important factor which is taken into consideration, is how their work force, who will relocate to Rwanda, will be impacted from a tax perspective in terms of the personal income tax on the salary they receive. Rather than taxing them at the standard rates, providing a reduced rate of between 10% – 15% on their total salary package could be very attractive, particularly when the personal income tax rates paid in their country of residence could be anywhere between 40% – 50%.
From an administrative perspective, the process for foreign nationals to obtain a visa and residence permit, and tax registration in Rwanda, must be smooth and quick. This also links to the need for authorities, both tax and immigration authorities, to transform digitally to ensure that the administrative process of relocating to Rwanda is not long and burdensome, as this will result in the loss of talent to other jurisdictions.
Transfer of knowledge
Rwanda must ensure that the talent, which is imported, does not remain centralised in the hands of a very few, non-local, individuals, but that it is transferred to the local work force. This will ensure both the success of the industry but will also help with reducing the unemployment rate. Providing tax credits to companies based on the number of individuals they employ, could be one of the ways of ensuring that this goal is achieved. One can also consider limiting the number of years during which the individual may benefit from the reduced personal tax rate of 10% – 15%, mentioned in the previous paragraph. This will require companies to ensure that, during this period, knowledge is transferred to the local work force and is not lost when the foreign individual might decide to leave Rwanda following the expiration of his/ her beneficial tax rate period.
These are exciting times for Rwanda. In developing such policies, it can learn from successes and failures of other jurisdictions which have managed to develop new industries over several years which are now one of the main contributors to their GDP. Malta, an island with a population of just 500,000 and with no natural resources has managed this, through a mix of niche regulation related to pharmaceuticals and other tax and fiscal incentives. Today, it is home to world’s leading generic pharmaceutical companies and medical device companies that use Malta as their manufacturing hub to access the European market. Rwanda can replicate this for vaccine and pharmaceutical manufacturing and become Africa’s regional hub with an unparalleled growth potential.
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