Boosting business competitiveness in Africa with IP and innovation*

By McLean Sibanda, Managing Director, Bigen Global Limited, Mauritius, South Africa, and Professor Tom Peter Migun Ogada, Executive Director, African Centre for Technology Studies and Chairman of the Kenyan National Commission for Science, Technology and Innovation, Nairobi, Kenya

*This article was first published in Issue 5/2019 of the WIPO Magazine.

Estimates suggest that by 2050 Africa’s population will double, rising from 1.2 billion today to 2.4 billion, with over 60 percent of people under the age of 25. Such a large young population presents significant opportunities and challenges. On the one hand, with a higher proportion of economically active people, African countries could benefit from accelerated economic growth. On the other hand, low levels of industrialization in most African countries, and associated high youth unemployment, are of growing concern.

How can policymakers in Africa ensure inclusion of the continent’s youth in the global economy? What initiatives are needed to develop the requisite skills and expertise for Africa’s youth to participate in innovation and tomorrow’s knowledge-based economy? What should African governments do to accelerate the transition from natural resource-intensive to knowledge-based economies? And how can policymakers promote innovation through better understanding and greater use of intellectual property (IP) rights to boost the competitiveness of African businesses and put the continent’s economy on a sustainable footing?

Economic diversification is a priority for African countries, especially in sectors with the potential to create employment and produce high-value outputs.

Opportunities and challenges

Over the past two decades, countries in Africa have achieved rapid and sustained economic growth rates. Projections by the International Monetary Fund (IMF) and African Economic Outlook 2019 suggest that this trend will continue. Uganda, Benin, Kenya, Tanzania, Senegal, Ivory Coast, Ghana, Rwanda, Ethiopia and Libya are set to enjoy growth rates ranging from 6 percent to 11 percent. High demand for African exports and relatively easy access to finance as well as microeconomic reforms and improvements in the business environment are important drivers of this growth. The concern, however, is that the number of jobs available to the expanding working-age population – projected to be almost 1 billion by 2030 – has not kept pace with this economic growth. Data for 2017 show that unemployment rates (7.5 percent) in African countries are well above the global average (4.3 percent). Only 40 percent of the workforce is engaged in productive employment, with 70 percent are in vulnerable employment.

Most employment opportunities (65 percent) arise within the agricultural sector, which represents over 15 percent of the continent’s GDP, followed by services, particularly financial services and telecommunications. Close to 80 percent of jobs are found in the informal sector. However, manufacturing – the sector with the greatest scope to add value to raw materials – accounts for just 6.5 percent of jobs. This is not surprising given the low levels of industrialization in African countries compared to the rest of the world.

Unemployment is a big issue in Africa, especially given the size of its young population, which is disproportionately higher than most developed economies where the population is aging. Policymakers, therefore, need to find ways to increase industrialization, enhance manufacturing capabilities and productivity, and improve business competitiveness. In so doing, the aim is to reduce the dependence of African countries on the export of primary raw materials. Such dependence leaves them vulnerable to volatile commodity markets and fluctuations in the global economy. Economic diversification is therefore a priority for African countries, especially in sectors with the potential to create employment and produce high-value outputs.  

Creating jobs and business growth with IP and innovation

History shows us that an environment in which innovation and use of the IP system thrive creates opportunities for employment and socio-economic development. The experiences of countries such as Japan, the Republic of Korea and, more recently, China, attest to this. If African countries are to compete in the global knowledge economy, the development of vibrant innovation ecosystems supported by balanced and effective IP systems is essential. This is a critical step in fulfilling the aspirations of African countries to become producers of high-value knowledge-based goods and services. Only then will it be possible to succeed in reversing existing trends – where Africa imports most of what it consumes – and for African countries to start adding value to the products they export. Innovation and IP lie at the heart of this process.

Investment in research and development (R&D) and innovation supports the production of new and improved technologies to address local needs, while creating opportunities for business growth and employment. The IP system also facilitates effective transfer, adaptation and assimilation of technologies developed elsewhere to African countries. Countries that have robust innovation ecosystems underpinned by a balanced and effective IP system have benefitted in terms of increased economic growth, employment, tax revenues and foreign direct investment, as well as access to high-end technologies through technology transfer agreements.

An effective IP system is an integral part of a thriving innovation ecosystem. It provides incentives to invest in R&D and other innovation and enables firms to commercialize and monetize their innovations, and to justify and sustain R&D investments. 

Potential benefits of IP

Companies use IP rights strategically to develop, trade in, and secure income from their innovative products and services. These rights help companies gain and maintain a competitive advantage in markets at home and beyond. Firms with an effective IP strategy generally enjoy a stronger negotiating position, achieve greater success and have a higher market value than those that do not. This is particularly so in a highly competitive global market where cross licensing is increasingly prevalent, especially within the pharmaceutical, automotive, and information and communications technology sectors.

IP awareness is particularly important among small and medium-sized enterprises (SMEs) as these companies generally drive economic growth and job creation. Those that embrace IP rights tend to fare better in terms of growth, income and employment, than those that are unaware of how IP can support their business.

Consumers and society as a whole also stand to gain. IP rights support the process of bringing a product to market, thereby providing consumers with access to an expanding range of innovative products and services. Of course, IP rights also safeguard consumers from counterfeit and pirated goods. Such illegal activity undermines legitimate businesses and their ability to invest in product development. It also puts consumer health and safety at risk.

Broader understanding of the benefits that can flow from innovation and access to an effective IP system will help ensure that Africa’s inventors, creators and entrepreneurs can readily and effectively protect and harness the value of their IP assets and thereby create opportunities for employment, wealth creation and economic growth.

Building bridges between academia and business

Universities and research institutions, as well as knowledge-based SMEs, are the backbone of economic activity in most countries. These actors have a critical role to play in transforming African economies and in making them more competitive globally. Their ability to innovate and to develop frontier technologies and knowledge are central to boosting Africa’s ability to fulfill more of its needs and to produce and export high-value products and services and thereby establish itself as a global economic player.

More and more, policymakers in Africa are recognizing the critical role of universities, research organizations and SMEs as producers of new knowledge to address local needs. They also acknowledge the need to strengthen links between academia and business to ensure research programs generate outputs that are relevant and useful to society. Policies that encourage active use of IP rights to protect and leverage the economic value of the new technologies, products and processes that these important actors generate – for example, through licensing and startup schemes – will enable them to secure sustained research funding and promote business growth.

By linking IP and innovation, policymakers have an opportunity to create favorable settings for African businesses to compete in global markets. The emergence of companies like Sasol in South Africa and MPESA in Kenya attest to this. The experiences of certain Asian countries also offer interesting insights about how to achieve sustained economic growth by encouraging the generation, acquisition and use of IP. For example, 60 years ago, the Republic of Korea was poorer than Mozambique. However, its commitment to innovation and the strategic use of IP has enabled it to emerge as a leading economy. The Republic of Korea’s experience highlights what can be achieved when governments adopt a long-term and deliberate focus on innovation, and strategic use of IP to build on a country’s strengths.

Marrying upstream research with downstream commercialization

As traditional generators and disseminators of knowledge, in general, the research activities of universities and research institutions are concentrated upstream in innovation value chains. In contrast, SMEs tend to focus downstream, adapting and applying new knowledge to produce goods and services that the market can consume.

To create optimal conditions for knowledge generation and its subsequent commercialization, policymakers need to address many challenging questions. For example, to what extent should universities and research institutions operate downstream on commercialization issues to ensure the relevance of their work? What support mechanisms (policy incentives and structures) are required to increase both upstream and downstream activities to serve society? How can universities support efforts to upgrade technological and manufacturing capabilities of African countries? What type of support should SMEs receive to encourage them to embrace innovation? How can countries strengthen academia and industry linkages and encourage them to use the IP system?

Collaboration is central to developing thriving innovation ecosystems

Consideration also needs to be given to ways to encourage academia, industry and governments to work together to improve awareness of the economic benefits that can flow from strategic use of IP. Such collaboration is central to justifying and securing research funding, and is particularly important in the context of the Fourth Industrial Revolution, in ensuring that research programs are relevant to local and future needs. Such collaboration also promises to deepen understanding of the implications for innovation and IP of the on-going digital transformation. This will enable African countries to take advantage of potential opportunities and to anticipate and mitigate the challenges arising from the rapid deployment and uptake of advanced digital technologies. Only by working together will it be possible to encourage broader use of IP to boost business development and competitiveness.

The goal, of course, is to ensure that academic and research institutions in Africa become part of a fully integrated national innovation ecosystem, where all players, including businesses, are embracing innovation to create the technologies required to address societal needs and challenges. The creation of opportunities for decent employment and heightened global competitiveness are critically important by-products of this process. How successful we are in achieving this goal will determine how far Africa will be able to increase its share of global IP production in a rapidly evolving technological and economic landscape.

Today, there is a pressing need for dialogue to support the development of an African roadmap for IP and innovation. Such a roadmap will give added impetus to efforts across the continent to improve employment prospects and living standards by leveraging Africa’s wealth of talent in an era of rapid technological transformation.