Private Investment in Agricultural Research and Technology Transfer in

Africa

Carl Pray, David Gisselquist, and Latha Nagarajan

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The purpose of the paper

• Document the amount of private sector R&D and technology transfer in SSA

• To describe its impact (not in presentation)

• To suggest government policies - options to encourage the private sector to play a larger and more constructive role in the future

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Based on project “Measuring Private Research and Innovation in South Asia and Sub-Saharan Africa” Gates Foundation (2009-2011)

Kenya – Hannington Odame, Elsie Kangai & David Spielman

Senegal - Gert-Jan Stads and Louis Sène

South Africa - Johann Kirsten, Ruan Stander & Choolwe Haankuku

Tanzania – Hannington Odame, Elsie Kangai/Oscar Okumu

 Rose Matiko Ubwe, and David. J. Spielman

Zambia – Mick Mwala and David Gisselquist

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The Industries that introduce new agricultural technologies and conduct agricultural research

• Agricultural Inputs – Seeds– Pesticides– Fertilizers– Animal genetics– Feed – Veterinary pharmaceuticals

• Large scale agriculture – tea and coffee plantations, floriculture

• Processing industries – sugar mills, tobacco companies

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Sources of innovation from Private Sector:1/3 own R&D, 10% public R&D, ½ imported

Activities # of organizations

reporting innovations

Source of innovations (number of organizations with each source; organizations may have >1 one source)

Developed in-country Imported fromOwn R&D Other R&D* Parent firm Other source

A. Inputs supplySeeds 31 12 4 12 10Fertilizers 4 2 1   1Pesticides 12 3   6 5Ag Machinery 7 3 3 3 1Livestock, fisheries inputs

9 4   3 4

B. Large scale production Crops 6 2 2 3 2Livestock          Fisheries          C. ProcessingCrops 5 3     2Livestock 3 2 1    Fisheries 3 3   1  Totals 80 34 11 28 25

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Cultivars primarily from private sector in South Africa, Tanzania & Zambia; from public in Kenya and Senegal

Crops Kenya Senegal South Africa* Tanzania ZambiaPrivate Public   Private Public   Private Public Private Public   Private Public  

A. Cereals

  Maize 67 70   2 8   482 16 37 10   105 8  

  Rice   7     16   0 0   5     2  

  Wheat   7         61 20   5   13 4  

  Sorghum 1 7         67 4   2   1 3  

  Barley 1           12 1 2          

  Finger millet

  1         0 0         1  

  Pearl millet   3         0 0         3  

B. Other food crops

  Sweet potato

  5         ? ?   6     5  

  Cassava   9         0 0   5     4  

  Potato             66 15       3    

  Sunflower   3   3     61 5 2 3   6 0  

  Soybeans   5         84 8       11 2  

  Cowpea 1 3         0 2   1     1  

  Groundnut         7   2 11       4 1  

  Common bean

  12         95 16   8   6 4  

  Sugar cane   10   1     37 ?            

C. Fibres, drinks, drugs

  Tea 1 4         ? ?            

  Coffee             ? ?   9        

  Tobacco             10 11 3     6    

  Cotton       2     33 3         1  

Total# 71 146   8 31   1010 92 44 54   155 39  

Number of cultivars registered 2000 to 2009

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Private R&D Expenditures SSA, South AsiaMeasures Kenya Senegal South

AfricaTanzania Zambia Bangla

DeshIndia

Private R&D (In 2008 Mill.US$)

1.6 -3.2 3.6-4.7 41.0 – 50

0.9 -1.8 1.3-2.5 10-20 251.0

Private R&D as % of Ag GDP

0.25-0.05

0.18-0.24

0.49-0.60

0.015-0.03

0.05-0.09

0.07-0.13

0.12

# of Scientists

12 61 201 32 25 119 2190

– Seed industry about 40% of R&D– Processing industry 30% of R&D

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What explains patterns of private research?

   Kenya Senegal

South Africa Tanzania Zambia

Bangladesh India

Priv R&D (In 2008 Mill.US$) 1.6 -3.2 3.6-4.7 41.0 – 50 0.9 -1.8 1.3-2.5 10-20 251.0

Market Size Ag GDP (2008 Bill.US$) 6.3 2 8.3 6.2 2.8 15.1 218.1

Policies Nom. rates of assistance to Agric. (2000-04) 9.3 -7.5 -0.1 -12.4 -28.5 3.9 15.8

IPR Index(2005) 3.22 2.93 4.25 2.64 1.94 1.87 3.76

Ease of doing business (2009) 98 152 34 128 76 107 134

 Government research Govt. scientists (2002) 704 116 677 513 120 1610 5103

University Scientists (2002) 180 22 137 84 22 197 8045

Public R&D (2002 Mil.US$PPP) 263 50 585 78 197 218 2713

Public R&D intensity 1.22 1.21 2.16 0.28 0.44 0.36 0.37

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South Africa, Tanzania, and Zambia fit economic models, Kenya and Senegal do not

• South Africa has most private R&D the biggest markets, does not tax agriculture, has strong IPRs and business climate, and substantial public sector research

• Tanzania and Zambia has least because markets smaller, heavy taxation of ag, weak business climate and IPR and relative small public sector R&D.

• Kenya have much less R&D than expected. It has a substantial market, it supports agricultural sector, business climate and IPRs are middle of these countries and public sector is relatively large

• Senegal has more R&D than expected since its ag sector is so small, it taxes agriculture, has poor business climate and a small public sector research program.

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Historically gradual growth in R&D until recent spurt

• Got rid of colonial monopolies and monopsonies but sometimes replaced them with government monopolies

• Liberalization – Trade barriers– Allowing entry of new firms and foreign firms

• Increased government support of agriculture….

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Examples of growth – Seed Industry

• Liberalization starts in 1990s – – 1990s government monopolies on improved seed sales broken– 2000s Parastatals dissolve in Tanzania and Zambia, not Kenya– Gradual reduction in trade barriers to seed imports

• Support for seed companies and research • Impact of changes

– Industry grows• Spread of regional multinationals like Seedco and Pannar, • National companies Western Seed and East African seed company. • MNCs get serious about Africa

– Many new varieties available – Increased seed trade

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Examples of Growth of Innovation and R&D Processing

• Same stages of colonial to nationalization to privatization as seed– Breakup of regional markets reduces market size

• Impacts differ by country– In Senegal privatization of cotton and groundnut industries

has shifted research from the public to private sector– In Kenya liberalization has created more competition in

some processing industries which is good for farmers but may initially lead to less research

– Privatization in Zambia &Tanzania led to increased foreign investment in some industries like sugar where Illovo has bought government mills and is bringing in new technology

• Regional multinationals --- Illovo, Kenya Breweries, SABMiller

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Could African agribusiness research accelerate like India since the mid 1990s?

Industry 1984-85 1994-95 2008-09

Millions of 2005 US$Seed and Biotechnology 1.3 4.9 88.6Pesticides 9 17 35.7Fertilizers# 6.8 6.7 7.9Agricultural Machinery 3.7 6.5 40.5Biofertilizers & Biopesticides na na 1.3Poultry and feeds na 3.5 7.8Animal Health 0.9 2.7 18.6Sugar 0.9 2.5 10.8Biofuels 0 0 13.1Food, Beverages & Plantations 1.3 10.3 27.0Total 23.9 54.1 251.3

Indian Agribusiness R&D Expenditure

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It is possible that growth will accelerate• Currently Agribusiness in 5 African countries spend as much

as $62 million: > the $54 million India spent in mid 1990s • Market for new technology is growing:

– Harmonization and regional integration has helped to open up bigger markets but they still are limited relative to India’s

– A few African firms are globally competitive – SABMiller in beer, SAPPI and Mondi in paper & forestry, South African citrus – but are not exporters like Mahindra and Mahindra in tractors and UPL in pesticides

– Regional and national companies are competitive – Tropicasem, Seedco, Pannar, Illovo.

– Some investments by science based MNCs (which account for 40% of India private R&D) – Pioneer and Monsanto.

– Investments by MNCs land-based or generic technologies from South– Indians investing in sugar mills & tea plantations; Brazilians in biofuel, Indians & Chinese in generic pesticides and machinery

• Appropriability (IPRs) getting stronger but still weak outside South Africa

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Policy options – Some more general policies – some Science and Technology Policy• Further reductions of trade barriers to technology introduction and trade

leads to larger markets and more incentive to invest in innovation and research

• Development of universities, public research, and training of scientists is essential

• Privatization along with anti-trust increases competition, technology transfer and eventually technology development

• Public private partnerships can stimulate the development of appropriate research and technology development

• Gradual strengthening of IPRs when agriculture and agribusiness have started to grow is important