| Summary: | Contemporary academic and professional discourses on local African pharmaceutical manufacture have concentrated on technology, technology transfer, economies of scale, human capital, and markets for drugs; neglecting the financing of working capital and capital investment and the role played by banks. When finance is discussed, it is not discussed in depth and it is divorced from innovation and complexities surrounding financing of local African pharmaceutical manufacture. In this study, I investigated the financing of antiretroviral drugs (ARY) manufacture in Zimbabwe focusing on sources of finance for working capital requirements and capital investment to import technology. I also investigated technological capabilities surrounding access to finance and loan origination at pharmaceutical companies and banks respectively. Using a case study approach and multiple methods for data collection, I interviewed over 50 respondents from three Zimbabwean pharmaceutical companies, nine commercial banks, and one regional financial institution in addition to local and regional pharmaceutical manufacturers and policy makers in 2011 . I used examination, tabulation, categorisation and testing of data using both quantitative and qualitative evidence for data analysis. In line with literature on Zimbabwean enterprise finance, banks provided working capital finance but not capital investment finance. Bank short-term finance in conformity with African finance literature was characterised by high interest rates, high interest spreads, and low lending. The politics of lending offered an additional explanation to adverse selection and moral hazard explanations for the low lending, high interest rates, and high interest spreads in Zimbabwe. Pharmaceutical companies financed capital investment and a portion of working capital with internal funds, compromising rapid technological capability upgrading and innovation. Dependence on internal resources to fund capital investment and technology imports was driven by lack of investment and project finance capability to access offshore loans; as local banks could not advance foreign currency long-term loans. The theoretical implications of this study paint to the need to unravel an African context of the finance and innovation nexus surrounding technological capability upgrading and innovation in local African pharmaceutical manufacture.
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