Innovation, Growth and Development in Africa

1. Innovation, Growth and Development in Africa Second Meeting of the Committee on Development Information, Science & Technology (CODIST-II) Addis Ababa, Ethiopia 02 – 05 May 2011 Emmanuel NNadozie Director of EDND, UNECA

2. Objective of the presentation To understand how innovation contributes to growth and development in African countries the paper: Reviews the current literature on innovation, growth and development in Africa to highlight the state of affairs and examine the role of the state. Examines the type of studies undertaken, their focus and main findings. Assesses the role of African governments in fostering innovation Recommends actions to improve state effectiveness in fostering innovation.

3. Outline What is innovation and what do we know about the links with economic growth and development? Innovation, growth and development in Africa: Type of studies and focus Main findings The role of African governments in fostering innovation Current role How to improve that role

4. What is innovation? A definition of Schumpeter, 1934 innovation is the implementation of a new or significantly improved : product or process, marketing method or organizational method It may be introduced in business practices, workplace organization or external relations.. Innovation is about a different employment of the economic system's existing supplies of productive means. The vectors of innovation are entrepreneurs (individual, local firms, Multinationals/FDIs)

5. Innovation, what do we know in general? Global Innovation & Competition Trends They are characterized by: Speed-up in creation and dissemination of knowledge Increased trade liberalization Increased globalization Increasing role of FDIs and MNCs Increasing importance of ICTS Increasing importance of education and training, and high level human capital Increased importance of innovation for economic growth and development

6. Innovation, what do we know in general? Knowledge is very important for innovation: A Knowledge index (2006) Source : www.worldbank.org/kam

7. Innovation, growth and development in Africa : states of affairs of the literature The literature on innovation and development in Africa is scarce, which highlights the need for more studies. It includes books, research papers and institutional reports from research centres and organizations. It involves quantitative and qualitative studies. The focus have been on the economy as a whole or on specific sectors such as agriculture, health, ICT, etc.

8. Type of studies and focus Quantitative studies: they include descriptive, comparative, multivariate analyzes… They investigate on: the links between innovation and economic performance; the determinants of adopting innovation; African countries capacity to adopt innovation. the position of Africa in comparison to other regions in terms of financing innovation, Etc.

9. Type of studies and focus Qualitative studies: Contributions are more normative (indicate how innovation should be harnessed to contribute to growth and development in Africa) than positive (describe the actual contribution of innovation to growth in Africa).

10. Main findings These studies show that the contribution of innovation and knowledge to growth in Africa is below the potential and could be harnessed more effectively. The findings are presented according to the research question and by sector. Link between innovation and growth in Africa With a clear and focused innovation strategy in some well identified sectors such as agriculture, health, ICT, arts, Africa can add at least 2 percent to GDP growth annually;

11. Main findings Intensity of Investment in R&D in Africa : low Only South Africa invests 0.9 percent of its GDP in R&D; In the rest of SSA it is generally less than 0.3% of GDP. The potential for private sector contributions to bridging financing gaps is hampered by the high business risk attributed to the costs of doing business. Africa’s innovation capacity Africa does not appear among the firsts innovators in the world : the Global Innovation Index of INSEAD, ranking more than 130 countries yields for 2010: South Africa is the first African country on the list, and is 51st; next come Mauritius 73 th , Mauritania 78th and Kenya 83 th.

12. Main findings Determinants of innovation (adoption by firms) the extent of innovation is positively related to: the education level of the entrepreneur technical manpower, training expenditures, external technical assistance, the size of the firm and its involvement in exporting, etc Innovation is greater in firms located in conurbations compared to firms located in large and small towns.;

13. Main findings Agriculture sector Africa lags behind on the adoption and use of technology for farming and fertilizers. In 2008 there were : 15 tractors per 100 km2 of land in SSA vs183 in South-Asia; farmers in SSA applied only 9.4 kg of fertilizer/ha while the figure was of 143 kg/ha in South-Asia and Latin-America. Raising yields on key crops to 80 percent of the world would increase the annual value of Africa’s agricultural production by US$235 billion over the next two decades; Improvements in African agriculture would have a huge impact on growth and job creation.

14. Main findings information and communication technologies (ICT) sector Improvements in ICT added as much as 1 percentage point to Africa's per capita growth rate in 2001-2005 compared with 1991-1995, accounting for over half of Africa's improved growth performance observed between the two periods. growth in Africa’s mobile communications market has outstripped growth in the global mobile market by a factor of 2 to 1 over the past five years; at the end of 2009 there were almost 450 million mobile subscribers. Internet usage growth has shown a similar trend

15. Main findings ICT sector (cont’d) One of the most famous ICT related innovations is Kenya’s Safaricom M-Pesa project. It is an innovative solution that enables customers to transfer money by phone. M-Pesa is popular today and provides services to over 9 million customers across many countries in the region. Health sector An example of innovation in the fields of production, organization, process and marketing techniques is Kenya producing today pharmaceutical products which are sold to Novartis for the manufacturing of artemesinin products.

16. The role of African governments in fostering innovation Current role African leaders recognize the role of science and innovation in economic transformation and they are putting a growing emphasis on this matter. The 8th African Union Summit held in January 2007 In Addis Ababa adopted a series of regional decisions on science and technology for development. The decisions are part of a growing body of guidance on the role of science and innovation in Africa's economic transformation. African leaders are working together on the ICT front, the pharmaceutical and in agriculture front, sponsoring regional initiatives and projects.

17. The role of African governments in fostering innovation A few examples of initiatives: Comprehensive Africa Agriculture Development Program (CAADP), launched in 2003 by the African Union and NEPAD to support increases in agriculture production and productivity; the Regional Communications Infrastructure Program, an ICT project to bring broadband to East Africa ; the Yaoundé Process to help develop tools and policies needed to develop the pharmaceutical industry. At national levels, governments are increasingly devoting attention to the quality of their universities and research centers.

18. How to improve the role of the State? Some Recommendations Supporting more country-based studies for a deeper understanding of how innovation can serve as a veritable engine of long-term growth and development; Creating the right incentive framework for innovation: macro-economic stability, affordable and easy access to capital, openness to trade, appropriate competition policy laws, a solid intellectual property rights and patent laws regime and an overall good governance regime;

19. How to improve the role of the State? Some Recommendations (Cont’d) Improving the quality of education: especially tertiary education; universities; and vocational training schools; Developing partnerships with universities and the private sector and providing incentives for business to invest in research and development. Creating a favorable environment for FDI as these are proven to be an important vector of innovation and work at improving the business environment for local firms.

20. How can ECA support innovation in Africa? Contribute to Dissemination of existing knowledge: It is thought that more significant than the creation of new technical or policy knowledge, at least in the short run, is the dissemination of knowledge that already exists somewhere in the world to meet the needs of developing countries. Support the development of indigenous capability ECA can help to establish or strengthen the relevant institutions, providing technical assistance and training in order for countries to acquire or increase the ability to use the knowledge locally.