Agriculture, manufacturing and services are the major economic sectors in Africa. Three out of every five persons in Africa is involved in small-scale farming, yet this form of agriculture is grossly inefficient in the development and adoption of appropriate innovations. Most technologies introduced into the agricultural sector have had the transfer process fraught with diverse challenges. How can African countries overcome these challenges? Recently, although Africa’s manufacturing sector is underperforming, the service sector has become a significant contributor to GDP on the continent. Yet, innovation in both sectors remains poorly understood in Africa. How are African manufacturing and services firms faring with development and adoption of innovation? What options exist for overcoming constraints to innovation in Africa’s small-scale agriculture, and in the manufacturing and services industries? Based on a recent collection of empirical work, we propose some answers to these questions and more in this two-part blog series.
In Africa’s Small-scale Farming
Although almost one quarter of the gross domestic product of sub-Saharan Africa comes from agriculture, most of the agricultural production relies on crude tools and methods. The resulting inefficiency and low productivity , particularly in small-scale agriculture (which is the largest employer of labour in the region) is responsible for continued poverty and several losses including losses due to low crop harvests, low animal products, and wastage of outputs, among others. While the challenges are massive and require multi-pronged approaches to overcome them, some dimensions that can be explored are highlighted below.
Brokerage to the rescue: Agricultural production involves several actors. These include input suppliers, primary producers (crops and livestock farmers), product aggregators, marketers, processors, support service providers (finance, health, research, policy, etc.) and consumers. In Africa these actors, especially those directly involved in primary production, are among the least educated and poorest in the world. While the activities of these actors immensely affect one another, their operations are often isolated, uncoordinated and sometimes antagonistic. For instance, innovations generated by research institutions are mostly far removed from the realities of smallholders. They are therefore inadequate and not embraced. Thus, the imaginary link connecting them together (their respective agricultural value chains) remains generally very weak, and in some instances, broken.
One of the reasons for this disconnect is that these actors consider their relationship with others as linear rather than as webs in which all the components are interdependent. An approach to fixing this is the engagement of boundary-spanning actors, who are able to look at the value chains in entirety, understand the different sides of the divide and are capable of brokering active engagement and feedback (not just communication) among them. For ease of understanding, we can divide the actors in the agricultural innovation system into smallholders, innovating units (research institutions, businesses, etc.) and funding/policy support institutions. We also consider the boundary-spanning actors (brokers) as individuals, groups and organizations that are accepted by all actors. They are recognized by the actors as dependable and viable allies with strong local and global connections. They earn this status, reputation and legitimacy through antecedents, consequences, measures and processes over time.
Brokers within the agricultural innovation system should drive the diffusion of information, knowledge and funding among the different divisions of the system. Good brokers must be able to access global knowledge and technical innovations. Importantly, they must be willing and able to diffuse these within the region. Identifying brokers and creating effective brokerage within the agricultural innovation systems in Africa cannot be accomplished by some one-time silver bullet. Rather, pragmatic, coordinated and sustained efforts are required. Hence, policy instruments should be created to encourage and fast-track the emergence of brokers in the sector.
Institutional highways for importing fitting technology: An average man spends 12 days to plough 1 acre of land using a hoe for 5 hours of intensive labour each day. It takes an average tractor operated by only one man 3.5 hours to achieve the same result. Clearly, technology and mechanization are drivers of agricultural productivity and growth. However, African agricultural industry has remained primarily rudimentary and labour intensive. With the abundance of models around the world, African countries generally do not need to reinvent the wheel of agricultural innovation. They essentially need to identify appropriate technologies that are developed in other climes, then import, adapt and diffuse them into their societies.
For several decades, there has been a heavy reliance on technology (especially tractors) from advanced countries, with minimal positive outcomes in terms of developmental and economic growth. Recently however, there has been an increase in access to agricultural innovation from emerging economies, particularly from China, with comparatively larger impacts on the African agricultural system. This is especially true concerning Tanzania as it is with other African countries. One of the plausible reasons is that the developmental contexts (production skills, technological capabilities and purchasing power) of many recently developed countries (like China) are similar to those of the African countries.
Nevertheless, existing policy and institutional frameworks in Africa do not sufficiently support and facilitate technology transfer from emerging economies. A close observation of the Tanzanian landscape helps us to identify some institutional adjustments that must be made to enhance agricultural technology transfer and diffusion. First, since different types and qualities of machines are required for different soil types, machinery importers, dealers and distributors must ditch the one-size-fits-all concept. They must also incorporate the supply of spare parts, repairs and maintenance into their portfolio of services. A fairly straightforward way to incentivise this paradigm shift is to create specific but comprehensive criteria required for the continued certification of machinery importers, dealers and distributors.
There must be policies to prevent, deter and punish supply of fake spare parts within the system. Financial institutions must be encouraged to provide equitable lending facilities for accessing small tractors from emerging economies. This is especially important because these tractors tend to be more profitable than those from developed countries. There is need for capacity building for users (operators) as well as government institutions and agents who intersect with the agricultural sector. Moreover, educational institutions should incorporate relevant contents into their curricula. Making these institutional adjustments will be analogous to constructing highways that facilitate smoother transfer of appropriate technology for African agriculture.
Innovation in Africa’s Manufacturing and Service Firms
While most of Africa’s agricultural sector operates as an informal economy (usually not formally registered with the government and generally not taxed or monitored by government), the manufacturing and service sectors are more formal in nature. Innovation is more prevalent in these sectors than in the agricultural sector. The rest of this article and the second part of the series will focus on how innovation can be enhanced in Africa’s manufacturing and service firms, and within the continent’s economic space.
One-size-fits-all policies cannot work: Innovation in terms of introduction of new products or services is one of the important ways through which companies retain relevance in today’s highly competitive market. A firm’s capability to create new products or services is typically a result of its absorptive capacity, that is, its ability to acquire, assimilate and exploit new knowledge. A comparison of the innovation landscape of companies in these two sectors in Nigeria reveals that companies’ absorptive capacities influence their product innovation differently.
The level of education of the employees drives product innovation in the manufacturing sector – firms with a larger share of employees with tertirary education tend to do better. However, the presence and quality of collaboration with external entities (knowledge institutions, other companies and other actors) drive product innovation in the service sector. Investments in machinery and internal research and development (R&D) are generally low and more common among older manufacturing firms than newer firms.
Policies targeted at the manufacturing sector should aim at increasing the availability of employees with adequate higher education. This can be done by improving the overall quality of higher education and incentivising science-related courses. The government should lessen the burden on manufacturing firms involved in R&D by introducing fiscal incentives like tax rebate, soft loans, etc. Policies targeting the services sector should facilitate exchange between knowledge institutions (universities) and firms in this sector, especially the small and medium enterprises which are in the majority. It is important that bespoke policies on training, intellectual property and funding are formulated for the manufacturing and service sectors across African countries to maximize their potentials for the benefit of the people and the continent.
This article has explored some options for overcoming the constraints to innovation in African firms with particular reference to the agricultural, manufacturing and service sectors. In the second part, we will discuss innovation in African firms with a focus on intellectual property, access to external R&D, and the effects of imports and exports.
This article is based on:
Abiodun Egbetokun, Richmond Atta-Ankomah, Oluseye Jegede & Edward Lorenz (2016) Firm-level innovation in Africa: overcoming limits and constraints, Innovation and Development, 6:2, 161-174, DOI: 10.1080/2157930X.2016.1224619
Olawale Oladipo Adejuwon (2016): Bridging gaps in innovation systems for small-scale agricultural activities in sub-Saharan Africa: brokers wanted!, Innovation and Development, DOI: 10.1080/2157930X.2016.1195089
Andrew Agyei-Holmes (2016): Technology transfer and agricultural mechanization in Tanzania: institutional adjustments to accommodate emerging economy innovations, Innovation and Development, DOI: 10.1080/2157930X.2016.1196545
M. G. Ukpabio, A. D. Adeyeye & O. B. Oluwatope (2016): Absorptive capacity and product innovation: new evidence from Nigeria, Innovation and Development, http://dx.doi.org/10.1080/2157930X.2016.1215801