OP-ED

Innovation is crucial to Africa’s development

By Liezl Rees 9 August 2018

Students learn the technique of seed sowing during a programme run at the SEED Rocklands Urban Abundance Centre in Cape Town, South Africa, 05 September 2017. EPA-EFE/NIC BOTHMA

The Global Innovation Index (GII) 2018, a study published by Cornell University, INSEAD Business School and the World Intellectual Property Organisation, finds that sub-Saharan Africa has performed ‘relatively well’ on innovation. This bodes well for African development in the fourth industrial era.

Innovation is vital to economic growth and competitiveness. It plays a critical role in job creation through increased productivity, improving the lives of the poor by providing better products and services, generating higher levels of income and returns, attracting investment and building infrastructure. Nowhere is this more relevant, and needed, than in Africa today.

The Global Innovation Index (GII), now in its 11th edition, is a quantitative tool ranking economies by their capacity for, and success in, innovation. The ranking looks at performance across 80 indicators, which are divided into seven areas. Five of these areas focus on innovation input: Institutions, Human Capital and Research, Infrastructure, Market Sophistication and Business Sophistication. The other two focus on innovation output: Knowledge and Technology Outputs, and Creative Outputs.

Africa’s performance on the GII 2018

South Africa, in 58th position, is ranked the top performer in the region in 2018. South Africa’s strengths lie in its sophisticated market and business sector, access to credit, market capitalisation, university and industry research collaborations, cluster development and intellectual property payments.

In second position, Mauritius (75th) boasts political stability and safety, government funding of secondary students, efficiency of energy use and trade.

Kenya is third in sub-Saharan Africa, and 78th position globally, thanks to superior access to credit – particularly microfinance loans, innovation linkages and exports of creative services such as R&D financed abroad, workforce efficiency and printing and other media.

Also featuring in the top 100 are Botswana (91), Tanzania (92), Namibia (93), Rwanda (99) and Senegal (100).

The GII further categorises economies that perform at least 10% above their peers at their level of GDP. These are termed “innovation achievers”. Since 2012, Africa has churned out more innovation achievers than any other region. This year, out of the 20 countries in this category, six were from sub-Saharan Africa: South Africa, Kenya, Rwanda, Madagascar, Malawi and Mozambique. Factors contributing to their performance in this area included their ability to harness science, technology and skilled labour so as to attract higher foreign direct investments, and increase incomes for their companies.

Despite the improved performance of several sub-Saharan African countries, the region lags the rest on the GII 2018 tally.

Should Africa be modelling China?

In 2016 China was ranked in the top 25 on the GII, and has steadily improved to 17th position in 2018. Malaysia, in 35th position, is the only middle-income country moving closer towards the top 25 ranking.

According to the GII, China’s innovation strengths and improvements lie in its global R&D companies, hi-tech imports, the quality of its publications, and tertiary enrolment.

In absolute values, and in areas such as R&D expenditures and the number of researchers, patents, and publications, China is now 1st or 2nd in the world, with volumes that overshadow most high-income economies,” the report notes.

As a result of China’s phenomenal performance on the GII rankings over the last few years, it has been lauded as a model for how other low and middle-income economies can improve on their innovation capabilities, in spite of their level of income.

Low and middle-income countries do have a unique opportunity to take advantage of and benefit from innovation in China, and as a result, experience accelerated growth while investing far less than China. However, without certain factors in place, countries cannot realise the enormous potential gains from innovation.

For example, if a company invests in innovation but cannot import the equipment required to implement the innovation, returns will be low. In addition to this, companies investing in innovation, but with a scarcity of skilled workers to implement it, will have low returns. And, if a company invests in innovation but does not have adequate management capacity to take advantage of it, again returns will be low.

China had years of government-led industrial growth to build a steady stock of physical and human capital, before it began to expand its innovation. It is now reaping those rewards. If African countries wish to follow China’s rapid growth in innovation, a few critical areas need to be addressed:

  1. Policy and institutional improvements: Institutions can reduce transaction costs and uncertainty, influencing the propensity of companies to innovate. If enforcement of regulations is weak, and there is an absence of intellectual property rights, innovation is likely to be hindered.
  2. Regional integration: Due to their low level of savings, African countries must remove all non-tariff barriers which inhibit regional trade and investment, and slow down the formation of regional value chains.
  3. Human capital: Innovation is driven by people. Quality education and skills development is therefore critical. Governments, the private sector, academia and civil society need to work together to not only create an enabling environment for innovation, but one that ensures real results around innovation at scale.

The future of economic growth lies in the innovative capabilities and outputs of countries. Given Africa’s demographic profile, with the majority of its population under the age of 20 – the true adopters of technology – Africa is well positioned for innovative approaches and new technologies towards inclusive growth. But to achieve these ambitious goals there need to be innovative approaches to policy. DM

Liezl Rees heads the Centre for African Business (CAB) at the Johannesburg Business School (JBS), University of Johannesburg.

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