INNOVATION

The value of research and development

Why Kenya needs to invest in research and development

In Summary

•A modest increase of one per cent of GDP in R&D spending can potentially lead to a 2.2 per cent increase in economic growth

 

In this age of accelerated technological development, it is trite that innovation is a key factor of economic growth. Through innovation, new ideas are introduced into the market, novel methods, and practices that increase productivity and maximise on efficiency are developed, and more consumer-centric products and solutions arrived at. However, while the debate on the economic benefits of innovation is widespread, public discourse on the backbone of innovation is largely and unexpectedly missing.

Research and development (R&D) is oftentimes referred to as the fuel – or the backbone – of innovation. Through R&D, the invention of better production techniques and the promotion of more efficient processing methods are introduced into the market and serve to benefit the economy in the long run. Simply stated, R&D activities enable scientists and researchers to develop new knowledge, techniques, and technologies. As technological advancements are made, industries can produce more with either the same or fewer resources, thereby increasing productivity, and ultimately economic growth.

In Kenya, the benefits of R&D efforts are largely evidenced in the health sector. With diseases and conditions such as Tuberculosis, Malaria, and HIV/AIDS has negatively impacted the life expectancy of the ordinary Mwananchi from historical analysis, efforts to develop key solutions to these challenges led to the increase in tailored R&D efforts. This, in turn, led to Kenya being a top contributor to the medical field, with specific focus on the treatment and management of Tuberculosis, Malaria, and HIV/AIDS. This is particularly key in the current COVID-19 environment. Due to established medical R&D facilities, Kenya is actively involved in the global effort to produce a COVID-19 vaccine.

The R&D success story that is noted in the Kenyan medical field can be replicated in other industries, provided that adequate resources are made available. This will serve to fuel growth in the respective industries, given the link between R&D and economic growth. A number of studies in the recent past indicate that a modest increase of one per cent of GDP in R&D spending can potentially lead to a 2.2 per cent increase in economic growth. This is untapped growth that would serve to fit into Kenya’s accelerated development narrative.

While the untapped growth promised by R&D activities is indeed desirable, it is imperative to separate the roles of the private sector and government in both incentivising increased spending on R&D and financing R&D efforts. While R&D efforts have been largely spearheaded by the government in the health sector, the same model may not work elsewhere.

In the spirit of free-market economics, the role of government in R&D should be maintained to creating an environment that promotes and rewards R&D efforts by private sector players that will serve to benefit the country at large. This includes the introduction of fiscal measures, such as tax rebates and tax allowances, that incentivise private-sector funded R&D activities.

Karen Kandie – MD IDB Capital