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Can Africa Leapfrog The Innovation Gap?

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Here’s a challenge for you:  Ask any man or woman on the street in the U.S. if significant innovations are solely or predominantly the province of the world’s most advanced countries, especially the wealthiest of the G-20 nations.

For the most part, that’s been true historically, in no small way because of the plentiful resources, both financial and human, possessed by those countries.

However, I would bet it will come as a shock to them that not only are the emerging markets increasingly the locus of significant innovations in the world economy, but in certain activities, even some sub-Saharan African countries have very quickly become the leaders of the pack.

In fact, there actually are locales on the African continent where there are substantial technology incubators stimulating wholly new, homegrown inventions, not simply the adaptation or adoption of existing technologies. Who woulda thought?

But unlike the advanced countries, in Africa and in other emerging markets the drive for innovation stems from the necessity to make up for the inadequacies or in some cases the sheer absence of elements fundamental to development of an economy.

If you're one of those rare people in the U.S. that actually has been following Africa's comparatively robust, steady economic progress over the last decade and a half--in contrast to its dismal, volatile growth over many decades before--this really should not come as much of a surprise.  For the others of you, it's largely understandable.  After all, Africa is the 'continent of economic misperceptions'.

It’s hard to not celebrate the rise of sub-Saharan Africa’s ‘new’ entrepreneur. Pick up any magazine focused on business in Africa and you’ll see for yourself the sheer number of stories devoted to innovation and you’ll sense the giddiness that runs through most of them.  In many respects this is warranted.  After all, this is a region where just under half of its 800-plus million people lives in poverty and where the absolute number of the poor is increasing.

The giddiness, however, may be premature.  For one, the process of economic development is everywhere notoriously complex and nonlinear. Moreover, in the case of Africa, the vast majority of its countries possess huge numbers of unemployed youth and adults.  This poses significant risks for innovations that, by dint of their productivity-enhancing nature, result in actually reducing the need for labor.  That outcome, especially with respect social stability and poverty reduction could be worse than the status quo ante.

In short, African entrepreneurs may well find themselves on a knife edge.

Any economist worth his or her own salt will tell you that advances in technology propel growth.  At its root, innovation—which ultimately is driven by a quest to solve some type of challenge or capitalize on a new opportunity—enhances productivity, whether measured in terms of time-savings or greater output produced from the same input. And, increased productivity of either labor or capital or both is a fundamental determinant of whether a country prospers or a business proves to be successful.

Think back to the revolutionary advent of semiconductors. The impacts on the U.S. economy (as well as others) from the late 1950s American invention of the microchip—a tiny integrated circuit manufactured through an automated process--have been not only successive reductions in the amount of space taken up by electronic components, but also an exponential increase in the power and sophistication of the electronic devices in which they are incorporated.  The most obvious manifestation of this today is our smart phones.

Many economists believe that the invention of the microchip has not only fundamentally changed the productivity architecture of the U.S. economy as a whole, but that its direct as well as its indirect effects on growth are inadequately captured by official economic statistics.

Of course, an innovation need not solely be the discovery of a fundamentally novel, sophisticated process or product (“invention”); it can also be the development of a new approach in the application of an existing technology—whether complex or not—in order to address a need otherwise not realized (“technology adaptation”); or the wholesale utilization of an existing technology without any modifications in its use or design (“technology adoption”).  All other things equal the outcome is invariably a rise in productivity.

In fact, the term ‘technology’ means different things to different segments of society, and its usage has changed with time.  Today the term is often associated with electronic or digital products and services.  But in fact older and more basic products and processes qualify as technology too.  Indeed, at its core, 'technology' is the practical application of knowledge to achieve a particular objective and it often will evolve over time.

Think about the invention long ago of the common nail.  Someone had the brilliant idea that banging into separate pieces of wood a sliver of metal was an effective way of holding the wood together. Presumably the initial method for accomplishing this was to use a rock to pound in the metal sliver.  In time, there was the invention of the hammer.  By dint of its design utilizing a long handle to create leverage, attached to a heavy piece of metal with a smooth 'head' to do the pounding, it provided a far more effective, consistent and accurate approach to the use of nails.

Flash forward: today, the otherwise separate hammer and nail actually have been combined into one tool--the pneumatic (or compressed air powered) nail gun, which holds numerous nails within the device itself and by simply pulling a trigger a nail is automatically fed into the firing chamber.  The efficiency gains are unsurpassed.  Yet at its core, the pneumatic nail gun employs the very same concept discovered ages ago: attaching together pieces of wood (or other materials) by driving in a nail with the use of force.

So what are some of the recent innovation breakthroughs in sub-Saharan Africa?  Here are some examples:

Mobile Banking.  Certainly, the advent of mobile banking in Kenya in the last decade is among the best known homegrown inventions on the continent.  Indeed, it epitomizes how advances in technology emanating from emerging markets actually find their way to advanced country markets on later.  This phenomenon is emblematic of how the traditional pattern embodied in the “product life cycle” is being turned on its head.

Mobile Phone Solar Charging.  With unreliable or often absent electrical grids across much of Africa, the use of mobile phone charging devices can be very difficult. Fenix International, a venture-backed private company introduced “ReadySet’, which is a portable solar-powered mobile phone charger designed for the African market. The result is not only greater use of otherwise8 idle phones enabling users to engage in mobile banking or to more effectively time when to harvest crops by being able to keep track of daily fluctuations in prices in the market which is often in a distant location, but also more revenue coming to the phone companies.

Resistant Crop Storage Bags. West and Central African farmers teamed with agricultural researchers from Purdue University to develop a triple-layered air- and water-tight storage bag, which provides extreme protection from moisture, pests, and high temperatures for a variety of crops, including peas, maize, sorghum, wheat, rice, nuts, and beans.  The result has been that farmers can time their plantings to favorable weather conditions and bring harvested crops to market at a time when prices are higher so as to generate greater income. In addition, the bags help farmers reduce reliance on pesticides, making agricultural communities healthier overall and enhancing food security. And these bags are manufactured and distributed locally, creating a new labor-intensive industry.

Educational Tablets.  Local educational software firms in East Africa, in collaboration with nongovernmental organizations, have developed a new pay-per-view tablet that allows teachers to customize courses, pulling information from different textbooks and other reading material in an economical way.  The changeable course materials help schools and their teachers overcome deficits in the educational infrastructure, and the pay-per-view rate results in less cost to students than that of a traditional textbook or laptop.

Cargo and Health Care Service Delivery by Drones.  In advanced economies, drones are not yet in widespread use for product delivery.  In parts of Africa, however, they’re already being used to overcome poor transportation networks, especially in the healthcare industry. In May 2016 the United Parcel Service established a joint venture with robotics maker Zipline to begin making up to 150 deliveries a day of transfusion blood to 21 rural clinics in western Rwanda. Drones are also being tested in Malawi to deliver blood samples of rural area infants for highly specialized HIV testing in the capital city’s major hospital.  Outside of the healthcare area, research is underway in Kenya on long distance unmanned drone cargo shipments as a run-up to a commercial robotic cargo drone test flight planned for 2017.  At the same time, plans are underway to establish a 'drone port' in Rwanda, with the goal of operating the first commercial cargo drones by 2020.

To be sure, we all should be rooting for Africa’s success to capitalize on its newly found innovation path.  Hopefully, this will help countries on the continent achieve a bona fide 'economic takeoff', something that has been more than illusive for many decades.  But a lot depends on just how African businesses as well as policy makers actually harness this opportunity.  In light of the 'initial conditions' in most African countries today, in particular, the staggering unemployment rates, innovations whose dominant focus is on raising labor productivity and thus likely shedding workers, carry significant downside risks.  Should they be realized, Africa's takeoff could be yet again jeopardized.

*  This column and a succeeding one draw from two recent studies of mine for the International Finance Corporation (IFC), the private sector arm of the World Bank Group:  "African Homegrown Innovations Take Off",  EM Compass Note 7, September 2016, International Finance Corporation, and "How To Stimulate Innovation By Africa's Private Sector", EM Compass Note 8, September 2016 

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