Africa R&D: Are we Consumers or Innovators?

Research and Development (R&D) is a word often used by governments and research agencies, but really it is a business phrase, rather than an academic one.

In South Africa, for example, the National Research Foundation has set as its target:

NRF Target

R&D can be defined as those activities a business may involve itself in without any promise of immediate returns. By drawing on the latest findings of scientific research, it can develop new applications/products to sell. Sometimes it can simply improve on existing products/applications.

Companies conduct research for its commercial viability. That is what distinguishes research carried out by companies versus research done by universities and research councils. It is a way of looking at scientific research for its potential utility.

Many governments across the world co-operate with business by creating tax rebate incentives for those who undertake R&D.

Sometimes it is unclear what activities fit into R&D and which ones fall into the day-to-day operations of the business. Government’s all over the world are continuously reviewing the terms and conditions. But once an R&D ‘invention’ has been made, and a product has been developed, it can make a lot of money for the company. Governments’ in turn benefit from all the tax revenue they are able to collect from well performing companies.

That is why the Department for International Development in the UK (DFID) invested in the early R&D of M-pesa.

How M-pesa was R&D

M-pesa is a money transfer service. It enables people who have access to a mobile phone but do not have or have only limited access to a bank account, to send and receive money, top-up airtime and pay bills.

The idea came about as it was noted in Ghana and other parts of the continent, people started using their cellphone airtime credit as a form of currency. For example, if a relative needed a bus fair to come to the city, they would be sent airtime to their phone, and then they would try to sell that airtime to someone in the village, in order to get cash for traveling. The challenge then became: How do you take this informal practice already being done by consumers and turn it into a viable business?

Many companies began to toy around with the idea. Gamos, a UK-based company, working with the social factors surrounding technology use and transfer, conducted research in places such as Ghana. The idea was eventually presented at the British Commission for Africa and to DFID.

R&D Pilot

DFID connected Gamos with Vodafone, London Head Offices, who then agreed to back the idea. Vodafone piloted the concept in Kenya with funding from DFID.

When Vodafone started to make money from increased subscribers to the M-pesa money service, Britain benefited as the company out-performed rivals from other parts of the world. The country also got to retain its highly skilled people. Its people could be paid competitive salaries in relation to the rest of the globe. The British government also made a lot of money when the equity share of the company became in-demand. And as people traded the shares in the stock exchange it collected VAT, and other duties.

The only problem, as in the case of M-pesa, is that since the funding for the R&D came from the British government it was chanelled primarily to British companies (Vodafone, Gamos) who stood to benefit the most out of the deal.

So despite the product being developed in Africa, and for African consumers, the R&D funding came from abroad.

This is part of the phenomenon of globalization of technology and economy. The flow of products from raw material to sellable goods criss-cross the world to the benefit of powerful countries.

Global Players in R&D

According to the Harvard Business Review, companies, particularly those in highly industrialized countries, feel the need to:

establish a presence at an increasing number of locations to access new knowledge and to absorb new research results from foreign universities and competitors into their own organizations. Second, companies competing around the world must move new products from development to market at an ever more rapid pace.

This so that they can retain market position as leaders (in business, innovation, etc). As a way of pre-empting the global shift, companies:

Build R&D networks that excel at tapping new centres of knowledge and at commercializing products in foreign markets with the speed required to remain competitive.

There is however a downside to this market orientation. When the financing of R&D locally shifts to global players, money leaves the continent for the financial markets of London, New York and Tokyo, so too does the intellectual property (IP). Africa then becomes the loser in the deal. That is why some people say globalization is neo-colonialism. It allows the same Western powers who colonized Africa, to come again and plunder its human potential.

Africa’s Lost Opportunity

The case of M-pesa should teach us a lesson. Had an African government for example been the one who funded the R&D for the invention of a cellphone money service, a lot of that wealth that is unlocked by innovation, would have remained in African hands.

We can argue that local governments benefited from the outcome of a savvier population. They also benefited from the operational profits of the money service from which they were able to receive tax. But really that is the smallest piece of the pie. It ignores all the money the IP holder makes, as they roll out the invention in other countries, just as Vodafone did.

Vodafone went on to introduce M-pesa in Romania, Tanzania, Mozambique and South Africa. Roll-out in South Africa was unsuccessful. The company took a decision to pull the M-pesa product out of South Africa at the end of June 2016.

To find out why, purchase the full  e-book here. §

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