Webinar held on 2nd December 2021
Authors: Josephat Okemwa and Moses Owidhi
Cite: Okemwa, J.M; & Owidhi, M.J (2022, April 06). Building innovation capabilities for sustainable industrialization in Africa: Status and prospects.
Background to the webinar
Despite the high potential of Africa in advancing its industrialization mainly in resource-intensive sectors, the rate of progress is too slow to meet the emerging demands. Empirical evidence on the reasons for this problem is inadequate and patchy. Based on work done by the three AfricaLics VFP Post-docs in their capacity as guest-editors of a special issue on Innovation and Development, the webinar deliberated on the possibilities and barriers for building innovation capabilities for Africa’s sustainable industrialization. Also, it highlighted a series of articles on building local technological capabilities and their implications for formulating and implementing policies in Africa’s industrialization agenda. The webinar attracted over 60 participants from within and outside Africa. It was designed to be interactive and engaging such that the participants freely expressed opinion about the topic of discussion. This was achieved through plenary presentations, as well as the use of chat box. The speakers were, Dr. Abdi Y. Ahmad (Adama Science and Technology University, Department of Technology and Innovation Management, Ethiopia; Dr. Charity Osei-Amponsah (International Water Management Institute, IWMI) and Dr. Kassahun Yimer Kebede (Addis Ababa University).
Key Messages
- Africa needs a holistic approach to achieve sustainable industrialization including a paradigm shift in the education systems by introducing hands-on experience within the education programs.
- Micro and small enterprises build innovation capabilities through informal learning and practical experiences.
- Large enterprises have high capabilities for product, process, and market innovations.
- For Africa to move to a more sustained industrialization, there is need to focus on small and micro scale enterprises to help them build their technological and innovative capabilities so that they can improve their production processes, productivity, and general performance.
- The SMEs have the potentials of unlocking local capabilities through vertical and horizontal linkages.
- Renewable energy projects have created avenues for capability building along the value chain.
Introduction
Sustainable industrialization remains central to Africa’s development agenda (Padmashree Gehl Sampath and Banji Oyelaran-Oyeyinka, 2016). However, there are several barriers and opportunities that will have extreme effects on the pathway towards achieving a sustainable industrialized continent characterized by a more balanced socio-economic development; a continent that has greater intranational, regional and local integration at different levels; and lastly a continent that make use of its natural resources in a sustainable manner. Currently, industrialization in Africa is largely undeveloped, non-sustainable and characterized by low accumulation of innovation capabilities and skills, limited capital investment, overexploitation of natural resources and environmental pollution and, finally, by high income inequalities and social exclusion. In view of the above, the key question of the special issue guest-authored by the post-docs and of their research was “how can Africa build innovation capabilities for sustainable industrialization”? This question was also the core issue for the webinar.
Innovation capabilities and learning mechanisms: insights from Ghanaian fresh fruit processing enterprises
Dr. Charity Osei-Amponsah presented research from Ghana showing that various enterprises – micro, small and large scale – have provided different learning mechanisms through which various innovation outcomes have been produced. Micro and small enterprises have the potential of building innovation capabilities through informal learning and practical experiences. This is because, the owners manage these enterprises by holding several roles including technologist, engineer, and administrator. Also, they rely on internet in search of technological knowledge and capacity. Processing and market access innovations, niche market and diversification of products and policy strategies are less aligned to peculiarities of micro and small enterprises. Large enterprises on the other hand use a lot internal and external formal STI and science-based learning mechanisms. Also, the large enterprises have high capabilities for product, process, and market innovations. In addition, they are more likely to generate novel and incremental innovations.
Most African countries have a lot of small and micro enterprises (in Ghana for example, this category constitute 85% of all firms whereas medium and large enterprises only constitute 15%). Most small enterprises, however, are operating in difficult policy environment with inefficiency in processing applications and other processes vital for the small enterprises to thrive. Therefore, for Africa to move to a more sustainable industrialization, there is need for the continent to focus on improving the conditions of small and micro scale enterprises and help them build their technological capabilities so that they can improve their production levels and productivity. Large enterprises have proven to be better connected and can argue their cases.
Unlocking the potentials of SMEs in building local technological capabilities in agro-processing industry: case of Ethiopia’s edible on processing.
In his research from Ethiopia, Dr. Abdi Yuya found that micro small enterprises have remained detached from the medium and large enterprises despite the policy interventions aimed at helping micro small enterprises to link medium and large firms and then link them back to the agricultural sector. Also, there is no favorable market and policy incentives to support learning and innovation. Most of the micro-small enterprises fail not only in tapping into emerging opportunities but also in terms of coping with challenges associated with the dynamics of the technological, regulatory and market environment. Another issue is that there is limited production of raw materials and supply in the agro-processing sector due to seasonal differences in productivity of the agriculture sector (which in turn is related to the rain dependent agricultural systems). Also, political economy issues have rendered good policies ineffective thus leading to low capability creation. Lastly, there are inconsistencies between policy instruments and difficulties in managing the micro economic imbalances which are considered important by the policy makers. Nevertheless, research has shown that the SMEs have the potentials of unlocking local capabilities. To benefit from global value chain, there is need to strengthen linkages (horizontal and vertical) to develop local production.
Opportunities for localization and learning along the value chains of renewable energy: Case of solar PV systems in Ethiopia.
Many developing countries including Ethiopia are focusing on renewable energy projects. The key question is, do these projects provide learning opportunities to build local capabilities along the value chain of renewable energy technologies?
Insights from research conducted by Dr. Kassahun Yimer Kebede and colleagues on the case studies in Ethiopia show that there are opportunities to build technological capabilities along the solar PV value chain. These opportunities for instance, could be developed in connection with public procurement in large scale projects, where some of the required inputs could be sourced locally more specifically for solar PV technology rather than shipping all the way from China. Research on specific projects in Ethiopia showed, however, that agreements and contract issues with suppliers did not consider the local content and that input suppliers always ship everything from abroad. The research project thus found that materials would be sourced from overseas companies who have been awarded the contracts. This implied wasted opportunities in terms of building local industry. Again, another interesting opportunity lost in terms of the way project management is performed relates to excessive use of foreign experts for managing projects – leading to limited or no local capability building. Potential remains, however, for technical transfer activities to be linked to local content requirements, where hired local experts would work together with foreign experts. Such efforts could, if properly managed, benefit local industries.
Pioneer projects, where local actors are involved, learning by doing and learning by interacting are also an option in Ethiopia. The lessons learnt can be used in subsequent projects, which may gradually increase local capabilities in terms of sourcing input and experts. Regarding value chain potential, Dr. Kassahun Yimer Kebede noted that, installation, commission, operation, and maintenance of renewable energy projects on the downstream side could be the best and most viable option to build local capabilities and – in the longer run – enter the global value chains of renewable energy. There are, however, several challenges including unstable policies. Therefore, the learning curve would be in and out. Also, lacking institutional memory and carefully designed policies would be a barrier to build local capabilities as would lack of finance and foreign currency.
General recommendations for Sustainable Industrialization
- Enabling policy and programming environment is crucial to meet sustainable industrialization.
- Increase investment portfolio since the financing of industrialization is low in Africa and we need to improve.
- Improved local content research and innovation development including building local capability to support younger generation through setting startups.
- Diversification of products based on comparative advantage by building our capacity along those resources and come up with products that we can produce locally.
- Promote appropriate infrastructural development by building parks where we can cluster enterprises and startups and they can learn from one another.
- Improve access to ICT use including digitization.
- Enhanced knowledge in resource-recycle and reuse (e.g renewable energy) as most enterprises produce a lot of waste that they cannot recycle.
Holistic approach to industrialization
- Policy, programs and projects-there is need to have an enabling environment to help build technological capacities for these enterprises to move sustainable industrialization forward.
- In-depth understanding of the complexity of industrial system in Africa to attract/invest more research and investment.
- Green/clean industrial production strategies (climate crisis in mind) to products that we can call green.
- Inclusive and equitable capacity building and income distribution.
- Efficient and context specific technology transfer within specific value chains (learning from experts).
- Specialized industrial parks and economic zones where we can put specific processing enterprises in these parks.
- Cheap and easy to use renewable energy.
Discussions and Conclusion
Concerning whether there are ways in which firms can build their innovation capabilities for future competitiveness without being lost in the current market, it was suggested that the government should invest effectively in infrastructure; get the policy prescriptions right and implement policies effectively. Clustering in capability building, especially among the micro and small fruit processing companies, may lead to improved capabilities, but clustering alone is not enough. Strong policies are needed to enable clustering of these enterprises so that they can learn from one another and support the industrialization agenda. New and emerging digital technologies present an opportunity towards developing local innovation capabilities and sustainability industrialization in so far as they are generally regarded as enablers in building capabilities. But a paradigm shift in the education systems is required by introducing hands on experience within the education programs. Also, we need to take vocational schools seriously as they play an important role in industrialization. Finally, improved coordination among public entities and in the national innovation systems is essential.
References:
Padmashree Gehl Sampath and Banji Oyelaran-Oyeyinka (eds, 2016): Sustainable Industrialization in Africa – Toward a New Development Agenda – available at: https://link.springer.com/content/pdf/10.1007%2F978-1-137-56112-1.pdf
Abdi Yuya Ahmad (2020) Unlocking the potentials of Micro and Small Enterprises (MSEs) in building local technological capabilities in agro-processing industry, Innovation and Development, DOI: 10.1080/2157930X.2020.1836460
Charity Osei-Amponsah (2020) Innovation capabilities and learning mechanisms: insights from Ghanaian fresh fruit processing enterprises, Innovation and Development, DOI: 10.1080/2157930X.2020.1845481
About the speakers
Dr. Abdi Y. Ahmad is a lecturer at Adama Science and Technology University (ASTU), department of Technology and Innovation Management, Ethiopia. He obtained his Ph.D. in Innovation Economics from Aalborg University through Africalics’s PhD. fellowship program. His research interests are in the areas of innovation and Development including firm-level learning and innovation, local value chain development and industrial capability with focus in Africa. Abdi was a postdoctoral fellow at Aalborg University hosted by the department of Business and Management, Denmark. He was a co-guest editor for a special issue on ‘Building innovation capabilities for sustainable industrialisation in Africa: Status and prospects’ for the Innovation and Development Journal.
Dr. Charity Osei-Amponsah is a social scientist with about 10 years research experience in agriculture-related issues, particularly working in the areas of innovation systems, agricultural partnerships, institutional and political economy analysis. She is currently a Regional Researcher with the International Water Management Institute (IWMI). Prior to joining IWMI she worked at the Science and Technology Policy Research Institute of the Council for Scientific and Industrial Research (CSIR-STEPRI) as a senior research scientist. Charity was a postdoctoral visiting fellow under the AfricaLics postdoctoral visiting fellowship programme, hosted by the Department of Business and Management, Aalborg University, Copenhagen Campus in Denmark. During the 2-year fellowship period, she served as a co-guest editor for a special issue on ‘Building innovation capabilities for sustainable industrialisation in Africa: Status and prospects’ for the Innovation and Development Journal. Charity has a postdoctoral and PhD from the Wageningen University, in the Netherlands.
Dr. Kassahun Yimer Kebede has been a lecturer, researcher, and consultant for over 15 years. He has received his BSc degree in Industrial Engineering (Mekelle University, Ethiopia), MSc in Management of Technology (Delft University of Technology, Netherlands) and PhD in Technology Management (Ritsumeikan University, Japan). Kassahun was a postdoctoral visiting fellow under the AfricaLics postdoctoral visiting fellowship programme, hosted by the Department of Business and Management, Aalborg University, Copenhagen. During the fellowship period, he served as one of the co-guest editors for a special issue on ‘Building innovation capabilities for sustainable industrialisation in Africa: Status and prospects’ for the I&D Journal.