Accelerating growth in Africa: Role of innovation and technology

By Abdullateef O. Otuyiga

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frica is blessed with a lot of riches; from the gold in Ghana and South Africa; diamond in Sieraleone; oil in Nigeria; tantalite in Egypt, sad to say, we are not a wealthy continent because we have not been able to accelerate our natural resources more– with the brains of innovation and technology– that could pave the way for the sustainability of our continent’s economic growth.

Obviously, all Africa countries are blessed with natural resources, but the abundance of resources we have, have not made us featured among the developed countries of the world. The rate of graduates we produced or still producing are not encouraging without adequate employment, even though we have qualitative and quantitative education. The question is, are there technological facilities that could boost and facilitate growth in countries where students can demonstrate higher ability, have higher growth rates over time? It is a pity that the scourge of COVID-19 in the world has further added more salt to our injuries, hindering the progress , not only our educational system, but also our economic growth in general. This means that –new innovation and technology to panel–beat the scare of the pandemic is needed.

Currently, there are a few of them, but we need more. And the way to create more is through innovation. Innovation is, absolutely, the key to African stability and growth in the coming decades.

One of the major benefits of innovation is its contribution to economic growth. Simply put, innovation can lead to higher productivity, meaning that– the same input generates a greater output. As productivity rises, more goods and services are produced – in other words, the economy grows.

Innovation and productivity growth bring vast benefits for consumers and businesses. As productivity rises, the wages of workers increase. They have more money in their pockets, and so can buy more goods and services. At the same time, businesses become more profitable, which enable them to invest and hire more employees.

The ability of a country to sustain rapid economic growth, in the long run, also depends on the effectiveness with which its institutions and policies support the generation with education, technological transformation, and innovativeness of its enterprises (Ethiopian Science and Agency Technology (ESTA) 2006).

The drivers of previous growth in China will no longer work. Three and a half decades of growth were predicated on a few fundamental factors: market-oriented institutional reforms, low wages, and a large working-age population. But both the reward and the price of development is that wages have risen.

The working-age population has been shrinking for more than five years. With the global financial crisis of 2008, even though overall debt declined after 2015, it rose once once again in 2019–reaching 285 percent of GDP by the third quarter of 2020. We shouldn’t forget the scare of COVID–19 in their economy, and have they been able to recover to pre–pandemic growth levels?

According to Geoffrey Okamoto, First Deputy Managing Director, IMF China Development Forum in a presentation on Global Economy 2021: Prospects and Challenges in March 20, 2021, said, ‘the global recovery has been incomplete and unequal. It is incomplete because despite a stronger than expected recovery in the second half of 2020, GDP remains well below pre-pandemic trends in most countries.

Of course, China , in many ways, has already completed its recovery, returning to its pre-pandemic growth levels ahead of all large economies. But growth still lacks balance, with private consumption lagging investment. There is expectation that consumption will catch up, as investment growth normalizes.

The African countries are much farther from the development frontier than China. So, by economic theory, they should be able to gain even more from investments in adapting and adopting innovations. And yet investments in research and development are lower in Africa than anywhere in the world. What’s missing? The resolution to the “innovation paradox” lies in complementarities. In other words, without certain other factors in place, countries cannot realize the enormous promised gains from innovation. If a firm invests in innovation, but cannot import the machines that they need to implement the innovation, then the returns will be low. If a firm invests in innovation, but has insufficient trained workers or engineers to implement it, then the returns will be low. Also, if a firm invests in innovation, but lacks the management capacity to take advantage of it, then the returns will be low.

Before China really started expanding in innovation, it had years of solid industrial growth, building a firm stock of physical capital. It also had strong investments in human capital, with a broad investment in basic education and growing investments in higher education. It even scores quite on measures of management, but many African countries struggle with each of these elements. And of course, capital and management don’t come from nowhere. They are dependent on a range of underlying economic policies: the cost of doing business, the protection of intellectual property rights, and trade policies, among others. We see that the returns to innovation are dependent on these other factors.

To increase innovation capacity, African countries can invest in three aspects of innovation policy needs. The first include managerial and organization capabilities. These come first because they allow organizations to adopt existing innovations on the advances that rich countries make, capturing exactly the returns that the economist Joseph Schumpeter predicted nearly a century ago. A second part of that first step is to start collaborative projects with higher performing countries (like China).

The second step involves building technological capabilities, so that countries adapt and create more of their own innovations. And the third step involves investing longer term in technological programs. Most African nations need to invest in all three steps.

In a survey of management practices across firms in many countries, the four lowest participating countries were all in Africa, and they weren’t Africa’s poorest nations, which didn’t even participate. They were countries like Ghana, Tanzania and Ethiopia. Other countries, like Kenya and Nigeria, did better, but still below India and significantly below China, which places between Chile and Argentina on management scores.

Of course, there are examples of innovation in Africa, and despite low average investment in innovation. We cannot forget that a good example is mobile money, whereby people with a mobile phone can deposit, transfer, or withdraw funds without even having a bank account. It was first introduced in South Africa and the Philippines, but Kenya and Tanzania were the two countries that really saw a rapid rise in mobile money usage, all in the mid-2000s. In 2015, more than 222 million mobile money accounts were registered across Africa, and African countries account for more than half of all mobile money services worldwide, and mobile money has had a sizeable economic impact.

Abdullateef O. Otuyiga could be reached via olakunlelateef18@gmail.com