National Technology Systems for Manufacturing in SubSaharan Africa

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National Technology Systems for Manufacturing in
Sub-Saharan Africa

• Carlo Pietrobelli
• Director of CREI, University of Rome III
• c.pietrobelli_at_uniroma3.it
• www.pietrobelli.tk
• from joint work with the late Sanjaya Lall,
  Oxford University

UNCSTD, Rabat 10-12 November 2005
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Research questions

• Both a theoretical and empirical objective
• Theoretically How useful is NIS literature for
  developing (African) countries? How to introduce
  a systemic approach in the study of these
  countries?
• Empirically How to explain SSA poor
  manufacturing performance? May a systemic
  approach help?

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Manufacturing Performance

• worsening manufacturing performance over time
• with minor exceptions for Kenya and Uganda (from
  tiny base)

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Comparative Manufacturing Performance

• Worse in comparative terms
• SSA vs. other developing countries

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Manufacturing Performance Regional shares of
global MVA 1980-2000
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Manufactured Exports (world market shares)
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Changes over time in world market shares for
manufactured exports
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Evolution of Manuf. Exports by Technology

• the evolution is worse than for all manufactured
  exports
• some signs of improvement over time emerge
• yet, this is misleading, as if we put these
  countries in comparison with other (dynamic)
  developing countries
• .the picture is discomforting.

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Comparative Evolution of Manuf. Exports by
Technology

• SSA is not sharing the same trend towards trade
  in medium- high tech manufactures prevailing
  worldwide
• Most manufacturing in SSA is technologically
  backward and local market-oriented
• SSA has attracted less export-oriented FDI

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Similar results looking at MVA Africa is lagging
in upgrading its structure (once South Africa is
excluded)
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Traditional Explanations of this poor performance

• Africa is commonly perceived to have poor
  framework conditions for growth and
  competitiveness
• Social and political disturbances, ethnic
  conflict
• Poor macro management and heavy debt burden
• External shocks (droughts, wars, refugees, AIDS)
• Distance from major markets and high transport
  costs
• Fragmented markets within countries and the
  region
• Being located in the tropics
• Deficient infrastructure, high shipping costs,
  weak ICT
• Weak governance and unpredictable policies
• Corruption and rent seeking
• High business costs, red tape
• Investor perception as high risk region,
  contagion effect of unstable economies
• Collier and Gunning (1999), Devarajan et al.
  (2002), Sachs and Bloom (1998), UNIDO IDR 2004

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These matter but they dont explain the
competitive lag fully

• Business costs are not high relative to
  industrialized regions (East Asia or LAC)
• Even countries with good business climate do
  poorly in industrial competitiveness
• Coastal African countries may do better than
  landlocked ones but are still weak globally
• Access to rich markets for manufactures with
  Lomé, AGOA and EBA has actually been very
  favorable to Africa (esp. compared to China)
• There are thus STRUCTURAL problems in SSA that
  deter a vigorous supply response

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Search for a convincing explanation The
Conceptual Approach

• Idea that innovation occurs in a system (i.e.
  interacting firms, organizations, research
  bodies, policy makers involved in technological
  activities)
• Central role of tacit knowledge, innovation
  uncertainty, and continuous interactions between
  agents
• Most LDCs do not create new frontier
  technologies (i.e. do not have innovation
  systems)
• However, they do have national systems within
  which they import, absorb, master, adapt and
  improve upon new technologies
• Such technological efforts are vital, and they
  have systemic elements
• Technology systems in LDCs are more prone to
  failures

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Two different notions of innovation systems

• Spatial local, national, continental
• Sectoral technological, industrial

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National Innovation System the founding
fathersFreeman, Lundvall, Nelson
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Key features of a national innovation system

• Education and training
• Industrial structure
• Scientific and technological capabilities
• ST strengths and weaknesses
• Interactions among the various components of the
  innovation system
• Absorption from abroad

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For example from UNCTAD WIR 2005Innovation
Capability Index is average of1. Technological
Activity Index (with equal weights) RD
personnel US patents Sc.Publications2. Human
Capital Index (with increasing weights) Literacy
2ary enrolment ( of age group) 3ary enrolment
( of age group)
Both Quantitative and Qualitative Factors
contribute to the Definition of a National
Innovation System
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UNCTAD Innovation Capability Index
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Selected Countries UNCTAD Innovation Capability
Index
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Qualitative Differences in National Innovation
Systems

• Interactions between public and business
  institutions
• Models of corporate governance
• Willingness of firms to work for the national
  advantage
• Willingness of firms to co-operate
• Regulation and competitive practice ensured by
  governments and their actions
• local knowledge.

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Combining qualitative and quantitative elements,
it emerges that nations are different

• This is hardly a new discovery, and it was an
  issue fully debated in the philosophy of history
• Philosophy of history assumed that this would
  lead nations to have a different destiny. Is it
  possible to predict from their differences what
  will be their development?
• What are the implications of all this literature
  for developing countries?
• Globelics (www.globelics.net ) was created in
  2002 and works today to address such challenge

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From National Innovation Systems to National
Technology Systems
Access to foreign technology
Firms are central actors
Efforts to master technologies and learn
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The Empirical Exercise

• Technology systems in five Sub-Saharan African
  countries
• Ghana and Uganda (the earliest liberalizers)
• Zimbabwe the most industrialized (before its
  recent problems)
• Kenya the next most industrialized in East
  Africa
• Tanzania one of the weakest.
• Field visits in 2000 and 2001, qualitative and
  quantitative analyses.

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Access to Foreign Technology

• many informal ways of importing technology
  copying, reverse-engineering, migration, trade
  fairs, technical journals, . Hard to measure
• We choose to focus on (easier to measure)
• Imports of capital equipment
• Technology Licensing agreements
• Foreign Direct Investments (FDI)
• then after accessing firms need to learn how to
  make good use of it!

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Equipment Imports (by technology)

• SSA relies on Equipment Imports more than on
  other sources of access to foreign technology
• Yet only India at similar (low) levels
• Other developing countries import much more.

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Foreign Direct Investment

• A gradual increase in inflows into SSA, but the
  regions share remains very small
• FDI concentrated in few resource-rich countries
  (Angola, Nigeria, South Africa)
• very little inflows in the manufacturing sector
  imply little technology inflows

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Foreign Technology Licensing

• SSA (excluding South Africa) paid US84 million
  in 1997 for imported technology (1.5 of the
  amount spent by the developing world)
• Kenya US39 million, South Africa US258
  million
• In the same year, Thailand spent US813 million,
  India US150 million and China US543 million
• Licensing is clearly not a major channel of
  foreign technology inflow into SSA

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Framework for Technological Efforts and Learning
Skills

• Technical skills for industry (natural sciences,
  maths, engineering)
• Dispersion is wider for technical subjects than
  for general enrolments
• 3 countries account for 44 of all developing
  countries tech.enrol.s (China, India, Korea)
• 10 countries account for 76 of all developing
  c.s
• SSA has 12 of dev.ing c.s population but 3.1
  of tech.tertiary enrolments

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Across Regions (tertiary enrolments as of
relevant age group)
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Within Africa (tertiary enrolments as of
relevant age group)
Korea and Taiwan at 50-70
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Technological Efforts

• Much effort is informal, yet only formal efforts
  could be measured
• RD useful also in developing countries to adopt,
  master, adapt (Cohen and Levinthal)
• Micro studies provided evidence of scarce
  additional informal, firm-level efforts (tried
  with ISO)

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Technological Efforts
No. of ISO 9000 certificates obtained another
measure of technological activities (related to
quality management) in developing countries.
Indicator of competitiveness as particularly
important for exports
Little more than 1 of ISO 9000 certificates in
the world granted to SSA including South Africa.
Very low levels of TC by international standards,
with Kenya ahead of the others, and Zimbabwe
slightly behind.
The ISO 14000 certificates are primarily
concerned with environmental management a
further sophisticated form to measure
technological activity the African lag is even
more pronounced.
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ST institutions in SSA

• .... The essential public goods of
  technological efforts
• Metrology, Standards, Testing and Quality
• Standards as technical specifications and rules
• Increasingly demanded in world trade
• Reduce transactions costs, asymmetries,
  uncertainties
• Metrology provides measurement accuracy and
  calibration to apply standards
• Contribute to diffusion of technology
• RD Institutions

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Institutions for Metrology, Standards, Testing
and Quality (MSTQ)

• Ghana Standards Board (GSB)
• Standards Association of Zimbabwe (SAZ)
• Kenya Bureau of Standards (KEBS)
• Tanzania Bureau of Standards
• Uganda National Bureau of Standards (UNBS)

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RD Institutions

• The largest and most active public RD
  institutions in most African countries are
  involved in agriculture rather than
  manufacturing.
• Analysed in details
• Ugandas National Agricultural Research
  Organisation
• Ghanas Food Research Institute
• Ugandas Industrial Research Institute, a
  regional East African Community project in the
  1970s
• Tanzanias Industrial Research and Development
  Organisation
• Kenyas Industrial Research and Development
  Institute
• Ghanas Industrial Research Institute

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Ghanas Technology System
Firms, productive sector
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Summing up on ST Infrastructure

• Frequent features
• lack human and physical facilities
• infrastructure is small, passive, ineffective
• personnel with poor motivations and wages
• weak ability to develop, adapt and disseminate
  industrial technologies
• little contacts and little credibility with
  productive sector little awareness of its needs
• this also reflects technological apathy in much
  of local industry firms do not demand
  technology, they are not active and aware of
  their technological needs
• little relations with educational institutions,
  Universities regarded too far from needs of
  industry
• little systemic interaction among them

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Conclusions and Policy Implications

• Despite liberalization and structural adjustment,
  manufacturing performance is disappointing
• The analysis of the inadequacies of the
  technology system often neglected by literature
  on Africa
• Need to strengthen
• the elements of the system and
• their interactions
• Two policy priorities
• 1. Strengthen technology strategy formulation
• ST policy only exists on paper, with low
  governments priority, and
• both governments and industry lack a technology
  culture, do not appreciate its importance
• 2. Coordinate and plan the technology system
• policy formulation is uncoordinated and spread
  over different bodies, often too weak to
  coordinate efforts.

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THANK YOU!Carlo PietrobelliCREI, University
of Rome III, Italyc.pietrobelli_at_uniroma3.itwww.
pietrobelli.tk
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Related References

• Lall S. and Pietrobelli C. (2002) Failing to
  Compete Technology Development and Technology
  Systems in Africa, Cheltenham, UK and Lyme, US
  Edward ELGAR, October.
• Lall S. and Pietrobelli C. (2005) National
  Technology Systems in Sub-Saharan Africa, in
  International Journal of Tecnology and
  Globalisation, Vol.2 No.2.
• Lall S. and Pietrobelli C. (2003) Manufacturing
  in Sub-Saharan Africa and the Need of a National
  Technology System, in M. Muchie, B.Å. Lundvall
  and P. Gammeltoft (eds.), The Making of African
  Innovation Systems, Aalborg University Press.
  www.globelics.org/index.php?modulehtmlpagesfunc
  displaypid3

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The structure of manufactured exports
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Emerging exports and the lack of a technology
system rose exports from Uganda (Lall,
Pietrobelli 2002, BOX 5.3)
Cut flowers are a non-traditional commodity for
Uganda, and their exports have notably increased
since 1993. However, like all new industries, the
flower industry in Uganda is suffering from
several difficulties related to the absence of
all the public goods that are provided within a
developed technology system. The lack of
technology and marketing support institutions
hindered the emergence of innovating
entrepreneurs, and may threaten the consolidation
and sustainability of the initial success.
Let us briefly review the history of this
industry in the country. In 1993 and 1994 five
farms perceived the profit potential and began
investing. A loan obtained from the Africa
Project Development Facility (APDF) helped to
hire a foreign consultant to carry out a
feasibility study of a rose farm. The warm
climate and the abundant rainfall and water near
Lake Victoria appeared very favourable factors to
rose farming. These growers mainly opted for the
highest grade of roses (tea hybrids, the long
stem big flower heads variety) that pay the
highest prices in the Dutch auctions in
Amsterdam. However, as temperatures never fall
below 16 near Lake Victoria, the roses tended to
ripen earlier than elsewhere, and never reached
the length and head size of the competing roses
from Northern Kenya and Arusha (Tanzania). Thus,
they had to be sold at a discount and would have
needed a different marketing strategy. No expert
or farmer could forecast it, and the industry
pioneers were forced to learn at a dear price.
Now Ugandan production is more diversified, with
several varieties farmed on 75 hectares, and with
the tea hybrid and the sweetheart short
stem-smaller head varieties accounting each for
half of total production. According to some
experts, the latter may be more suitable to
Ugandas conditions, allowing more abundant but
lower quality production than elsewhere. In the
following years, other farms followed six in
1996-7 to reach a total of eighteen by September
1999. In the early stages of the life-cycle of
the industry in Uganda, the inexperienced
entrepreneurs obtained their technology mainly
from foreign experts (for feasibility studies)
often from the neighbouring Kenya, and from
utensils suppliers offering advice and appliances
(e.g. cold stores, steel greenhouses) at very
costly prices. Now all the essential technical
inputs still have to be acquired abroad. The soil
sample testing needs to be made in foreign
laboratories (e.g. in Holland). NARO provided no
technical knowledge, as the industry was totally
new to the country. The inefficient cold storage
facilities at the airport further damage flowers
quality. Moreover, the country suffered from the
lack of the marketing skills to sell in the
distant European markets. Detailed knowledge of
the characteristics of this market and of the
roses that could be produced locally was absent,
no conscious effort was made to acquire it, and
local institutions could not help. Similarly, the
idea of what pricing strategy to adopt is very
vague, as the world increase in flower production
is making it a high-volume low-margin activity.
All the Ugandan farmers targeted the demanding
Dutch auction, charging a 25 percent commission
on gross sales and requiring very high quality.
Only after years of experience, it has been
realised that Ugandas climatic conditions and
the countrys weak technology support system only
allow large volumes. For the last three years
average prices of Ugandas hybrid tea and
sweetheart varieties have been lowest when
compared with those from other neighbouring
countries, like Kenya, Tanzania, Zambia, and from
India and Israel. In turn, this should require a
different marketing strategy targeting retail
shops and supermarkets in Europe, where demand
looks very promising, and the quality concerns
are less stringent. Recent concerns have emerged,
as the Amsterdam auction classified Ugandan
flowers exports as second grade, and the European
Union is imposing increasingly strict
environmental rules (New Vision). Local
institutions could not help enterprises to
address these difficulties, and no strategic and
comprehensive response has been designed or
implemented. In sum, the industry clearly enjoys
a promising potential, as revealed by the export
growth figures, but little is being done to make
this process sustainable by helping firms to
upgrade quality and device a consistent marketing
strategy. The absence of a technology system may
hamper the consolidation of this initial success,
and its diffusion to new enterprises. Sources
Pietrobelli, 2001, from interviews to staff from
Uganda Flowers Exporters Association (UEFA),
Sept.1999, and New Vision, Kampala, 9 September
1999.