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Fostering technological capabilities in sub-Saharan Africa

Summary

This policy brief discusses some key issues regarding technological capabilities in manufacturing in sub-Saharan Africa. It looks at what these capabilities are and how they can contribute to competitiveness and development. It also examines the current situation in sub-Saharan Africa and discusses policy implications for the region.

Introduction

Sub-Saharan Africa's recent industrial and technological performance has been disappointing. Despite many years of economic liberalisation, the manufacturing sector in most countries is tiny. Firms are smaller, less efficient and less innovative than in other developing countries.

In addition to political and governance problems, the region's industry suffers from structural constraints. The supply of modern skills and physical infrastructure, for example, is weak and inadequate.

Most importantly, African firms' technological capabilities and the underlying technology system are poor. These major stumbling blocks for manufacturing development require an effective response from policymakers.

Acquiring technological capabilities

Technological capabilities are the skills — technical, managerial or organisational — that enable firms to efficiently use equipment and information, and improve technology.

Technological capabilities in developing countries commonly differ from those in the developed world because technologies are often imported — and local firms must be able to master, adapt and improve them. In-house efforts also need to compensate for insufficient supplies of human capital, advanced machinery and technological knowledge often found in developing countries.

Firms can be induced to develop technological capabilities and exert appropriate efforts through international trade and domestic competition policies. But they must still rely on existing capabilities, such as skills, technology, finance and infrastructure. Being able to compete with imported goods, for example, depends on local skills and a firm's own technological efforts.

We can categorise technological capabilities by their complexity. [1] Less complex capabilities are 'routine' or 'adaptive and replicative', while more complex ones are 'innovative and risky'.

Capabilities can also be categorised by their function. Investment capabilities, for example, include assessing the feasibility and profitability of a project, defining it, sourcing the most appropriate technologies, negotiating their purchase, building equipment, and recruiting and training skilled personnel.

Production capabilities allow a given technology to be efficiently operated and improved. Specific skills include trouble-shooting, quality control, equipment stretching, scheduling workflows, inventory control, monitoring productivity and innovation following basic research.

Linkage capabilities include establishing links among enterprises and with service suppliers or science and technology institutes like universities or standards bureaus.

The level and depth of a country's technological capabilities affect its industrial performance. [2]

Technological capabilities and competitiveness in sub-Saharan Africa

But measuring this can be difficult. Although formal research and development as a share of national income can be used to measure a country's technological activity, to be relevant to production and manufacturing it is better to look at the level of research and development that is financed by productive firms. Even this measure, however, does not account for all the informal and incremental activities that build and improve technological capabilities.

The few available data for sub-Saharan Africa suggest that the continent lags behind other developing regions. Many firms are technologically isolated, working in an information-poor environment where interactions with other firms and organisations are often restricted and collective support systems are largely non-existent or poorly delivered (see Box 1).

Box 1: Weak collective support systems in sub-Saharan Africa

The relationships between firms and technology institutions in sub-Saharan Africa are weak. A recent study notes that the continent has few collective services — in contrast to other developing regions such as Asia or Latin America. [3]

Business associations and other industry-specific organisations do exist, but they deliver virtually no technology services to their members. Neither are collective support systems, like technical extension centres, much used.

The Bureau of Standards is an exception that is consistently drawn on — particularly by food processing and metalworking companies in Kenya. African firms also use training services extensively.

In Zimbabwe the links between manufacturing and science and technology institutes are particularly weak. [4] While the research institutes do little to establish working relationships with local companies, the firms think poorly of institutes' abilities and expect little from them. As a result, technology institutions do no industrial research, and are used by just a few companies that, for the most part, simply want to access testing facilities.

One explanation for these weak relationships is that government-run support services are centralised, isolated and are neither close to, nor familiar with, their clients' needs.

Another explanation is that because civil servants are paid so little, it is almost impossible for government institutions to attract staff with desirable skills and competence.

In either case, the differences in background, attitudes and 'technological language' between firms and institutions, combined with the lack of cooperation between public and private support service providers, makes it hard to link the two communities.

African firms are forced to rely almost exclusively on their own learning to build technological capabilities. But such efforts are often limited, and lack continuity due to poor financing and insufficient awareness of their usefulness.

But technological efforts in sub-Saharan Africa have not sparked a dynamic development process.

Data from Ghana and Zimbabwe suggest that production and investment capabilities can significantly improve firms' relative technical efficiency in manufacturing. [5,6] And in Kenya, Tanzania and Zimbabwe, firms that are larger, with longer production experience and more internal training, have also proved locally competitive. But even in the best African firms, technological activity is still lower than in other developing countries in Asia or Latin America. [6,7]

Industrial competitiveness in sub-Saharan Africa is also poor. Manufacturing value added per capita is not only lower than most developing regions of the world, but, contrary to the global trend, it is not growing (see Table 1).

  Manufacturing value added per capita (in 1995 US$)
  1990 2002
Industrialised economies 5,161 5,839
Transition economies 863 596
Developing economies 221 356
East and South-East Asia 247 576
South Asia 48 75
Latin America and the Caribbean 670 674
Middle East and North Africa 273 365
Sub-Saharan Africa 99 89
excluding South Africa 33 33
Table 1: Regional manufacturing production per capita between 1990 and 2002. [8]

Similarly, some African countries' international competitiveness in manufacturing has not improved since 1990 (see Table 2).

Trade liberalisation is not producing fast and dynamic growth because technological capabilities are inadequate. Despite low wages, sub-Saharan Africa has failed to take advantage of the fast growing global production system for low-tech goods like clothing or footwear. Exports of more sophisticated products are virtually non-existent.

Manufactured exports per capita, 1990 and 2002 (US$)
  1990 2002
Burundi 1.0 0.4
Cameroon 40.3 39.2
Central African Republic 7.3 19.5
Ghana 15.2 25.6
Kenya 22.2 19.2
Malawi 5.6 6.2
Mauritius 1,129.5 1,323.9
Nigeria 1.0 0.5
Senegal 65.1 32.8
South Africa 287.7 336.7
Tanzania 2.4 4.1
Zimbabwe 55.3 58.4
Comparisons:    
China 41.6 234.5
Chile 152.2 398.0
Malaysia 1,286.5 4,120.5
Mexico 159.4 1,450.4
Sri Lanka 56.6 177.5
Taiwan 3,148.7 6,563.7
Table 2: Sub-Saharan Africa's international competitiveness in manufacturing between 1990 and 2002. [8]

Policy priorities

Policymakers need to respond to the limited technological development of companies in sub-Saharan Africa by adopting a firm-level focus, building and strengthening technological capabilities.

They need to promote a culture of technology and innovation. Industry is rarely aware of the importance of firms working together on technology. There is little understanding of 'innovation' — why it is useful for business or how it can boost efficiency and productivity for firms in developing economies.

But promoting a technology culture takes time and means changing entrenched attitudes in both industry and government. It requires concerted information and persuasion campaigns, and advocacy work involving the private sector and industry associations wherever feasible and appropriate. Efforts are needed at all levels of society, beginning with formal education and continuing with business communities, public institutions, intermediate institutions and civil society — Malaysia, Singapore, South Korea and Taiwan have all made these kinds of efforts to great effect.

Human capital and skills also need improving. This requires a long-term commitment to basic and advanced technical education through, for example, targeted university courses, such as those offered in Brazil and Mexico.

The biggest policy gap in Africa is perhaps the lack of official appreciation of how important technology development is to manufacturing growth and competitiveness. Institutional mechanisms for evaluating and setting science and technology priorities are rare — national strategies largely consist of statements of good intent that are over-ambitious and rank low in governments' priorities. [5]

This differs greatly from the situation in Asia, where the electronics industry for example has benefited enormously from the high priority policymakers have given to upgrading technology and creating a science strategy.

New promising efforts are, however, emerging at the regional level in Africa — through, for example, Africa's Science and Technology Consolidated Plan of Action, developed by the New Partnership for Africa's Development in 2005.

Not only must Africa acknowledge the importance of science and technology for development, it must also provide supporting infrastructure and encourage links between public institutions and industrial firms, drawing on external support if needs be. Mauritius is a rare example of how external projects can help to build technology support (see Box 2).

Box 2: Promoting technology support in Mauritius

Mauritius is probably the most impressive newly industrialised country in Africa. It has grown rapidly in the past 20 years, with manufactured exports rising from 27 per cent of total exports in 1980, to 68 per cent by 1996.

Technology support in Mauritius has grown with manufactured exports, supported by external projects.

Several institutions are involved in metrology, standards, testing and quality, productivity improvement, training and support for small and medium sized enterprises. The official body in charge of these services is the Mauritius Standards Bureau (MSB), which, according to field surveys of local enterprises, provides high quality services.

In the mid-1990s the World Bank gave Mauritius US$3.5 million loan as part of a Technical Assistance to Enhance Competitiveness project. The local government gave the MSB US$1.5 million at the same time. The bureau was also 'twinned' with the Singapore Institute of Standards and Industrial Research to upgrade its expertise. Both the World Bank project and the twinning arrangement have greatly enhanced MSB capabilities.

The Technology Diffusion Scheme (TDS) was a World Bank project, set up in 1994, to create a market for technology services by lowering their cost for a limited time. It was hoped that subsidising costs would support private firms' demand for consulting services, increase the use of these services and make them more accepted by industry. This was expected to generate spillover effects for other firms. The project started with US$2.7 million to be disbursed over four years. It was set up under the Ministry of Industry and Industrial Technology, and managed by a private sector contractor. Preliminary indications show that the project has been successful.

North-South partnerships can also help build science and technology capacity. In this regard, an 'innovation system' could provide a framework for building the collective capacity of networks of universities, research institutes and government organisations, interactively linked with a view to innovate.

This contrasts with the conventional view of capacity development as accumulating stocks of research infrastructure and trained scientists, so the traditional objectives of North–South partnerships need rethinking to include institutional learning and change.

African policymakers must also plan and coordinate their efforts across the whole technology 'system'. Formulating policy needs to be a joint effort across ministries if it is to implement change. But government agencies in Africa can sometimes jealously guard their turf — unwilling to part with the information, functions and resources that a coordinated effort would need. [5]

Moreover, they rarely involve the private sector when designing and implementing a technology strategy. Yet without knowing what firms want or need, a technology development strategy is unlikely to succeed.

Policies to develop technological capabilities often have the broader objective of fixing market failures and imperfections in sub-Saharan African economies. But who should take charge of this task? The discussion is no longer about whether one should rely on one of two extremes (the state or the market). A public policy to promote capabilities needs to elicit information from the private sector on significant business opportunities and constraints.

This implies a greater reliance on identifying markets' needs and a more proactive role for the government. Markets are powerful but they are not perfect, and the institutions needed to make them work are often weak. A clever, dynamic and pragmatic partnership between the market and the government is needed.

Policies to promote industry and technological capabilities should be conceived as a process of economic self-discovery in a broad sense, with an interactive process of strategic cooperation between public and private sectors.

Carlo Pietrobelli is professor of economics at the University of Rome, Italy, where he directs the Centre for Research on the Economics of Institutions c.pietrobelli@uniroma3.it

References

[1] Lall S. Technological capabilities and industrialization. World Development 20, 165-186 (1992)

[2] Lall S. Competitiveness, Technology and Skills. Edward Elgar, Cheltenham (2001)

[3] Biggs T. and Shah M.K. African Small and Medium Enterprises, Networks, and Manufacturing Performance. World Bank Policy Research Working Paper 3855. Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/
WDSP/IB/2006/02/17/000016406_20060217164841/Rendered/PDF/
wps3855.pdf
 (2006)  [64KB].

[4] Lall S. and Pietrobelli C. Failing to Compete: Technology Development and Technology Systems in Africa. Journal of African Economics 13, 195-198 (2004)

[5] Pietrobelli C. National Industrial Systems in Africa. Background paper for World Industrial Development Report 2002–03. Available at: http://http://www.unido.org/userfiles/hartmany/IDR-pietro-reviseddraft2.pdf (2003)

[6] Lall S., Barba-Navaretti G., Teitel S. et al. Technology and Enterprise Development: Ghana under Structural Adjustment. International Journal of African Historical Studies 30, 159-161 (1997)

[7] Lall S. ed The Technological Response to Import Liberalization in Sub-Saharan Africa. Palgrave Macmillan (1999)

[8] United Nations Industrial Development Organization, World Industrial Development Report 2005. (2005)