African innovators...

African innovators can lead the world

In an interview for African Business Magazine, infoDev Program Coordinators, Ellen Olafsen and Jonathan Coony illustrate how Africans are emerging as future leaders in the global marketplace by harnessing their innovative and entrepreneurial spirit.

In which fields do you think African countries have the greatest potential to become centers for innovation?

From infoDev’s perspective, there are several innovative sectors performing very well in Africa at the moment. One very successful one, with a lot of growth potential, is the mobile innovation sector (ICT services through mobile devices). Kenya has emerged as a regional powerhouse for mobile innovation.

As an illustration, Google Chairman Eric Schmidt visited Kenya and four other countries in the sub-Saharan African region in January 2013, and he only had words of optimism about the region and its burgeoning technology industry. He also visited the iHub and infoDev-supported mLab (mobile applications laboratory, based at the Nairobi iHub). Also Senegal is a rising powerhouse and bolstering IT and mobile companies throughout West Africa, thanks to increasingly successful ICT incubators such as CTIC Dakar.

infoDev, through its mLab and mHub programme, has helped to incubate and cultivate many successful mobile technology entrepreneurs in Africa. Another innovative sector with a lot of growth potential is agribusiness: Africa has the potential to create a trilliondollar food and agribusiness market, provided that farmers get better access to help them grow and trade their products and agribusiness producers get better connected to markets, as also noted by this recent World Bank report on agribusiness.

Several countries in Africa (notably Kenya, Ethiopia, South Africa) are stimulating and developing an innovative renewable or clean energy sector, making real strides in the provision of off-grid electricity.

The pioneering efforts by African nations to address their off-grid power needs provide important lessons and a tremendous laboratory for this work. Excellent innovations in solar energy, but also wind and biomass, are taking place, targeted to local and regional market needs, stimulating an innovative clean-tech sector in Africa.

Since most African countries do not have an existing 20th century energy infrastructure, they can “leap frog” with next-generation technology to a cleaner, more reliable and less costly model. There is also a great amount of entrepreneurial and innovative energy.

What should business communities and governments do better to help countries fulfill their potential for innovation?

There are many factors that contribute to a productive innovation ‘eco-system’. There is no “one size fits all” approach to innovation. Public and private sector partnerships are key, taking into account typical public sector roles such as creating the right regulatory environment, infrastructure, a strong education system, capacity and institutions for research and development, and the private sector commissioning R&D and financing innovation and innovative entrepreneurs. Enlightened, targeted public-sector interventions may be difficult to design, yet they are critical in driving innovation. There are successful examples out there, but there is not one blueprint.

We can look at the example of Finland. The country has long committed exceptionally strong resources to investment in human capital, through its education system. In addition, through TEKES – the Finnish Funding Agency for Technology and Innovation, founded in the 1980s – Finland has deliberately guided “applied R&D” investment toward commercial applications. That R&D funding is driven through several channels: private companies, universities and state-supported research institutes – with an emphasis on R&D collaboration between academic researchers and the private sector.

Second, consider the Republic of Korea. Since the 1960s, the South Korean government has devoted enormous resources to building a ‘knowledge economy’. Government-inspired, knowledge-based growth – through education, advanced job-skills training, and innovation-focused R&D – and lately supported by heavy investments in broadband – has helped the country to become a leading tech-sector and industrial country.

infoDev has found that business incubators can be important change agents in the innovation and entrepreneurship ecosystem of developing countries: for banks, incubators offer a way of reducing risks of investing in start-ups and SMEs; for policy makers and regulators, they provide first-hand feedback on what is needed to stimulate SME start-up and growth; and for universities, they offer opportunities to commercialise research and expose student entrepreneurs to the real world of business.

Also, at infoDev, we always hear from entrepreneurs, start-ups etc. that access to finance is key. The growth of innovative, early-stage enterprises in developing countries is often hampered by a lack of both appropriate financing and targeted technical assistance. Supporting innovative entrepreneurs to get out of the ‘Valley of Death’ with early-stage financing is a cornerstone of development as it helps to enable more sustainable businesses, leading to job creation and economic growth. For agribusiness, we argue that policy makers must invest in infrastructure – roads, electricity and irrigation – and regulators must at least remove disincentives for entrepreneurs, industry and financiers to invest. The requirements for the clean tech/ clean energy sector are not much different. Business communities need to ensure productivity, and consistent quantity and quality at the farm level, combined with market intelligence, business capacity and technology access.

What is infoDev doing to facilitate agribusiness innovation in Africa?

Over the past year, infoDev has engaged more than 600 agribusiness stakeholders in Africa, focusing on Senegal, Ethiopia, Tanzania and Mozambique, to create Agribusiness Innovation Centres which will focus on filling one of the most critical gaps in the African agribusiness industry today, and that gap is market access.

When you mention ‘market access’, we’re not simply talking about buyer linkages, though that is a critical element. We’re talking about providing entrepreneurs with both the knowledge they need to make good business decisions regarding product development, analysis, certification and opportunity identification, as well as direct linkages with buyers in key domestic, regional and international markets.

Other services that will be provided by these innovation centres include pre-commercial financing, business development services and mentoring, and access to collective procurement arrangements and shared facilities that leverages economies of scale to reduce the cost to the individual business.

What sorts of innovations in Africa in the field of agribusiness are exciting you?

Product, process and business model innovation that creates expanded business opportunities for African enterprises and enables them to generate significant income and create sustainable jobs. For example, a Senegalese entrepreneur whose business was to process cashew nuts, realised that he could actually create another product from the cashew apple, which is normally just waste. Now he exports over 100 tons of all-natural cashew-apple butter, including to the US.

There are talented entrepreneurs in every country across Africa who are developing innovative products like this – baobab energy bars and liqueurs, and hoodia supplements for dieting are other examples.

Now, innovation catering to Western markets is one thing, but innovation that captures the growing market for consumer-ready foods within Africa is also very exciting. In this market, it is more about business model innovation – for example, the move to more economical package sizes for local populations who (a) cannot afford a bulk purchase (e.g. 1 litre of cooking oil vs 200ml) and (b) cannot store it.

Finally, local equipment manufacture that is appropriate to African conditions is increasing. It is exciting when such locally manufactured equipment produces the quality needed by the market – for example, African-made low-cost, robust machinery for cassava processing and sunflower presses are now available, and from what I hear, they work better than those imported from Europe.

Could you name a couple of things that need to change in African countries to further boost agribusiness innovation?

The classic issues that hamper progress of the agribusiness sector also hamper agribusiness innovation specifically. This includes insufficient infrastructure (transport, cold chains, electricity and water); and regulations and policy measures that disincentivise local investment – for example, one of the countries we work in subsidises imported palm oil while the country could produce much healthier cooking oil from sunflowers for local consumption.

Some innovative entrepreneurs also avoid acting on their business ideas due to fiscal disincentives and corruption; a larger more successful enterprise gets noticed by the formal and informal “tax man” . Above and beyond tackling these constraints, there is a need for innovation in financing products for agribusiness entrepreneurs that do not yet have the collateral required by commercial banks today.

In terms of skills, the most common area where agribusiness entrepreneurs seem to need assistance appears to be in all aspects of marketing broadly defined. There are vocational training programmes that focus on processing techniques, etc. at the micro scale, but few initiatives are available to help entrepreneurs increase their understanding of the market and how to approach it.

We hope that the implementation of our AICs can play some part in overcoming challenges such as these by illustrating in practical terms how shared value in agribusiness is possible to realise.

Are there any particular innovative energy projects or products in Africa which have struck you as particularly unique or interesting?

Africa’s energy needs are particularly acute for those that don’t have access to the electricity grid. In Kenya, for example, only 25% of the population has access. Many more people have access to cellphones than to the power grid and this disparity is growing.

As a result, Africa is leading in the innovation of advanced sources of off-grid power. Most of these take advantage of the global drop in the price of photovoltaic cells to use the region’s abundant sunshine but other novel products use wind, biomass and small hydropower.

These innovative energy products have direct applications to Africa but also contribute to a global movement towards more distributed generation.

Even industrialised countries are seeking to replace the centralised model of large power plants and expensive (and vulnerable) transmission and distribution lines with multiple power sources located much closer to the demand for electricity.

This makes the entire grid much more robust, usually less costly and almost always more environmentally friendly. The pioneering efforts by Africans to address their off-grid power needs provide important lessons and a tremendous laboratory for this work.

One company being supported by the Kenya Climate Innovation Centre is selling an off-grid solar panel that provides the needed electricity only when the user sends in his payment via mobile phone (a technology also driven by Kenyans).

Then the company turns on the solar power station through a remote sensor and allows the product to give the needed electricity. This solves the important problem that many users do not have the
cash to pay for such a system and leasing business models come with heavy transaction costs.

Could you describe in a couple of sentences how infoDev's work in this area is progressing, especially with the Climate Innovation Center?

The Kenya CIC is progressing very well. There has been a tremendous interest from Kenya innovators to access the services the CIC provides, including technical assistance (business advisory), facilities, information, grant funding, and international connections. To date, nearly 80 companies have approached the CIC, and contracts for services have already been signed with 17 of these. The majority of these are in the renewable energy field.

In addition, the Kenya CIC is now linked with the East Africa Climate Innovation Network, which creates a community of innovators in clean energy and other technologies across all countries of East Africa as well as with component suppliers in Asia and elsewhere.

Could you name a couple of things that need to change in African countries to improve energy innovation?

Many factors are in place to make Africa an active, important player in energy innovation. Certainly the demand is there and will continue to grow for years to come. There is also a great amount of entrepreneurial and innovative energy. Africa will no longer need to be a technology taker from the West/North but can play a more active – and profitable – part in the earlier stages of energy innovation for themselves and globally.

That said, barriers remain. The access to risk taking and patient finance is a major problem and contrasts sharply with other countries and regions that have driven innovation. This finance needs to come from the private sector but be driven and motivated by government and multilaterals. Skills in technology development also need to be developed, from the simple entrepreneur to established companies seeking to venture into new fields and technologies.

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