In this column called “The Indicator,” we will be taking an economic or financial statistic from East Africa and breaking it down into bite-sized nuggets of knowledge for investors.
This month’s indicator figure is 816.
816 of what?
There are a total 816 innovation professionals in East African Community (EAC) countries as identified by inclusion of the word “innovation” in their current public job description according to a series of searches using the popular professional social networking site, LinkedIn.
This Indicator figure certainly does not incorporate all people involved in innovation, but seeks to use this metric as a rubric to stimulate discussion on the importance of innovation in East Africa for business competitiveness.
What do you mean by innovation professionals?
Innovation is defined as the process of creating a new method, process, product, or service.
People whose job is focused on innovation are considered innovation professionals who are typically responsible for uncovering and prioritizing challenges companies face and developing and integrating internal and external solutions to solve problems and adapt to challenges.
Why do companies employ innovation professionals?
Innovation professionals help companies increase revenue, decrease costs, and be more competitive in the market.
Customer preferences, technology, competition, and regulations all change over time which creates challenges for companies who need to adapt to changing market demands in order to sell products and services to existing and new customers.
Companies that are dedicating budgets and people to innovation are more likely to be better at listening to their customers, paying attention to the market, building things for that market and growth and are less likely to get disrupted or out-competed by startups and innovative companies.
Also Read: FDI in East Africa declined in 2019-report
What industries have the most people in East Africa dedicated to innovation?
Companies providing information technology services lead with 120 people dedicated to innovation.
The IT industry is followed by banking and financial services with 79 innovation professionals, followed by non-profit and development with 51; telecommunications with 29; consumer goods and services with 15; agriculture and farming at 11; and other sectors having the remainder.
Which EAC country has the most and which the least innovation people?
Kenya has the majority of innovation professionals in EAC countries with 500 of the total or 61% and has the greatest density of innovation professionals at 102,780 innovation people per capita.
Kenya is followed in quantity by Uganda with 131 innovation or one innovation professional per 326,107 Ugandans.
Tanzania has 94 innovation professionals, but only one per every 599,149 Tanzanian residents. Rwanda has 79 innovation professionals but the second highest per capita in the EAC with one for every 155,696 Rwandan residents. Burundi is the lowest with 12 innovation professionals or one for every 931,667 residents.
How do the number of innovation professionals compare to elsewhere in the world?
At a rate of 213,125 innovation professionals per capita, the EAC is above other regions of the continent but far below other more developed countries. Closest to the EAC, Ethiopia has one innovation professional per 1,174,194 residents. Nigeria has one innovation professional for 251,476 residents, Ghana has one per 202,517, and South Africa has one per 33,988 residents.
Elsewhere, Brazil has one innovation professional per every 47,614 residents; India has one per every 214,762 residents. Israel has one per 5,553; the US has one per 5,210; Germany has one for every 6,386 residents; and the UK has the highest among countries surveyed at one innovation professional per 3,912 residents.
On a cumulative basis the US has approximately 63,000 innovation professionals or 77 times more than in the EAC. Despite being 5% of the population size of the EAC, Israel has double the innovation professionals compared to the EAC.
Are the numbers of innovation professionals in the EAC likely to increase or decrease?
They are likely to increase. The quantity and severity of challenges facing companies in the EAC and the quantity of underserved customers is increasing rapidly as East African youth comes of age and as markets increase in complexity and maturity.
Companies are likely to dedicate more resources to finding solutions or they will fail to adapt and likely be out seated in the market by startups or more dynamic firms.
What is being done to encourage innovation in companies in the EAC?
The basis for new innovations for business applications is uncovering new ideas in science and technology and this typically has been seen through investment in university research. Rwanda has seen very good progress in recent years in attracting Carnegie Mellon University and African Leadership University to establish facilities in Kigali.
Another element of encouraging innovation is through supporting investment in seed and growth venture capital funds and Kenya has seen strong progress through several dozen investment firms having a presence there to invest in startups and growth companies.
Modernizing government policies and procedures is crucial to establishing an enabling environment, for example the transformational growth of M-pesa in Kenya and Tanzania could not have happened without cross cutting government collaboration.
EAC governments can also help by sponsoring innovation conferences such as Smart Africa and promoting innovative firms to expand outside the EAC which has seen limited traction.
Development partners such as the World Bank and others are working to enhance innovation through the Digital Strategy for Africa which seeks to invest US$25 billion in the next 10 years.
How can I learn more about initiatives to support innovation in the EAC?
The following programs cover regions beyond the EAC and attracting their attention, funding, and support to EAC companies and programs is an opportunity that can be taken up by motivated organizations:
- Smart Africa – https://smartafrica.org/about/overview/–
- World Bank Digital Strategy for Africa – https://www.worldbank.org/en/programs/all-africa-digital-transformation
- East Africa Venture Capital Association – eavca.org
About the authors:
David L. Ross is Managing Director of Stratera Capital, Founding Manager of the Industry Innovation Lab at Carnegie Mellon University Africa, and US Ambassador to the Open University of Tanzania. He is active in growing companies in Eastern and Southern Africa through primary investment, investment advisory, strategic partnerships, and executive education. Connect on LinkedIn at http://www.linkedin.com/in/davidlross1 or at [email protected]
Catherine Mandler is a Senior Analyst at Stratera Capital. Connect on LinkedIn at http://www.linkedin.com/in/CatherineMandler or at [email protected]