THE ROLE OF RESEARCH AND

DEVELOPMENT IN THE
INDUSTRIALIZATION PROCESS IN
KENYA

Moturi C. and Ogada T.

Kenya Industrial Research and Development Institute
(KIRDI)

Technical workshop on Industrialization

22nd November 2006, KICC, Nairobi 1
CONTENTS

Background

2
Background

The Kenyan economy has enjoyed both periods of great

advances and disheartening downturns.

Incidences of poverty and unemployment, meagre foreign

exchange earnings (exports of primary product mainly -
agro-produce) have resulted in unfavourable balance of
payment and low per capita income

It is estimated that > 60% of Kenya’s population live

below the poverty line

3
contd

While, the overall population growth rate has

experienced a decline over the last 2-decades,
unemployment continues to increase

As a result, lack of productive employment opportunities

has led to a fall of real wages in nearly all the sectors of
the economy

As well, the population pressure on agricultural land and

the associated decline in individual holdings have
resulted in low and decreasing productivity
4
contd

It has been acknowledged that in order to cope with

these challenges, the economy will have to consistently
grow at between 8-10% annually.

Thus, through rapid sustained economic growth,

national wealth can be created, leading to increased
employment and incomes and viable enterprises

These in turn will provide the resources to support

measures to alleviate poverty, protect vulnerable groups
and provide rising standards of living for Kenyans
5
contd

It is well recognized that industrialization is a means

through which Kenya can accelerate its economic
growth

Indeed, all indicators show that Kenya’s goal of rapid

and sustained growth cannot be achieved in the absence
of industrialization, as has also been demonstrated in all
NICs

6
Indicators of Industrialization and
Industrial Competitiveness

Manufacturing Value adding per capita (MVA)

measures the level of industrialization of a country

Manufactured exports per capita is a measure of the

ability of a country to produce goods competitively

7
 MVA as % GDP

Country 1980 1990 2000

KENYA 9.6 10.1 10.3

KOREA 22.8 28.8 35.1

MALAYSIA 19.4 26.5 36.9

8
Industrial Development Policies in Kenya

Since independence (1963), it has been recognized that

the informal sector has potential in employment and
wealth creation in Kenya

The GoK has therefore continued to react positively by

facilitating MSEs to generate sustainable employment
and income by formulating various policies to address
constraints affecting the sector

The following is thus, a summary of the key

government policy papers that have been developed
over the years
9
contd

Sessional Paper No 10, 1965

The Sessional paper on “African Socialism and its

Application to Planning in Kenya” set the pace in the
introduction of small enterprises in the economy.

The paper sought to indigenise the economy by

encouraging foreign enterprises to equip Kenyan
Africans with necessary skills through training,
apprenticeship programmes, to enable them operate
private business
10
contd

Sessional Paper No 10, 1973

The desire to Kenyanize the economy was further

amplified by the Sessional paper on Employment.

It attempted to assist small enterprises to access

working sites, credit, managerial and technical
services, skill upgrading and business training services

11
contd

Sessional Paper No 5. of 1982

The Sessional paper on “Science and Technology for

Development” Recognized that Science and Technology
provide the knowledge with which to identify
opportunities and to increase growth rates (by making
capital and labour more productive).

The Paper recommends that the GOK should deliberately,

but conscientiously expand its research system to cover
all sectors of the economy
12
contd

It also recommends:

Increased levels of funding to 1% of GDP for

Research and Experimental Development.

Acquisition and Transfer of Technology

Policy

Capacity Building for Technological

transformation

13
contd

Sessional Paper No 2, 1985 on Unemployment

The paper appreciated the importance of MSE sector

in the economy and sought to encourage it to expand.

It however fell short of providing concrete solutions to

the sector’s accessibility to credit, technical and
marketing assistance

14
contd
Sessional Paper No 1, 1986
The paper on Economic Management for renewed
Growth together with the Sixth National Development
Plan (1989-1993) tried to accelerate MSE growth by
seeking to
amend the rules and regulations that inhibit MSEs
To limit unfair trade practices by large scale firms
To change cost-price relations in favour of MSEs
To address constraints that limit access of MSEs to
finance and credit.

15
contd

Sessional Paper No 2 of 1992

The Policy paper on “Small Enterprise and Jua Kali
Development in Kenya” was released to address
similar problems affecting MSEs

However, it emphasized on the creation of an enabling

legal and regulatory environments that support the
sector’s graduation into formal sector

16
contd
Sessional Paper No 2 of 1996
The Policy paper on “Industrial Transformation to the
Year 2020” is indeed the basis of this presentation.

The paper proposes measures to remove bottlenecks

that hinder the potential MSEs in serving as seed bed
for industrialization

It also proposes;
to review government procurement regulations and
procedures to allow MSEs to provide goods and
services to Government
The rationalization of licensing regime to make it
simpler and cheaper
17
contd

Perhaps more importantly, the paper recognizes

that in order for Kenya to achieve and maintain
competitiveness in the global market, technology,
among others, will play a major role

It also encourages;

Private sector to invest in technology

development (independently or in collaboration
with public R&D institutions)

18
contd
Economic Recovery Strategy for Wealth and
Employment Creation (2003-2007)
The release of the blueprint became necessary to address
the twin challenge of;
Creating Employment
Creating Wealth
Reducing Poverty
It emphasized on the desire to facilitate MSEs to graduate
in employment size.
This was further strengthened by the release of Sessional
Paper No.2, 2005, on Development of Micro and Small
Enterprises for Wealth and Employment Creation for
Poverty Reduction, which sought to enhance the capacity
of MSEs to generate wealth as well as durable and decent
jobs
19
contd

The blueprint also recommends “Enhanced support for

R&D for industries by reviewing the tax incentives for
doing research and zero rating research-related
equipment”, among others

20
Vision 2030

The Vision envisages a globally competitive and

prosperous nation with high quality of life by 2030

Per capita income ranking among the five highest in

Africa

Eliminating absolute poverty and building an equitable

and just society

Becoming Africa’s most competitive economy

10 % growth in GDP for the next 25 years

21
The Missing Gap
It can be clearly noted, from the above review, that the
proposed interventions have not necessarily yielded the
expected results

This is evident in the manner in which new policies

continue to be formulated to address more or less the same
problems that previous policies were meant to tackle.

It is also evident that the gap between MSEs and Medium

enterprises on one hand and that between Medium and
Large enterprises suggest that few of the MSEs graduate
to the Medium level
22
Schematic Diagram illustrating the Missing Gap
in the MSE Growth
(Ref: Based on Data from GoK Statistical Abstracts)

Large (21%)

A Medium A
(14%)

MSEs (65%)
23
contd

While MSEs generate employment and wealth, the

majority are unable to grow vertically, thus resulting in
the gap between MSEs and the Large enterprises, i.e.
the missing middle/gap

It is now well acknowledged that without vertical

growth it would be difficult for MSEs to generate
sustainable employment and serve as seedbed for
industrialization.

24
contd

3 Major constraints continue to hinder the vertical

growth of the MSE sector, i.e.;

Lack of Credit
Low level of Education
Negative “Jua Kali” Attitude
Lack of Market Information
Lack of Technology Advancement

As well, limited work sites and lack of clear vision

also contribute to the slow growth of the sector
25
Technology Acquisition

There are 4-broad means of acquiring technology, i.e.;

Indigenous R&D
Direct foreign investment
Purchasing or leasing “off-the-shelf”, and
Overseas training and study tours
Accessing patent documents in the public domain

26
Mandate of Universities and R&D
Institutions
Universities R&D
Institutions

R&D

Teaching
Extension

Capacity Building
New knowledge Technological
Knowledge Transfer development
27
e.g. KIRDI Mandate

The mandate of KIRDI at inception – in 1942, was

to initiate and develop local industries to relieve the

industrial goods shortages occasioned by the second
world war

Derived from the S&T Act, 1979, Cap 250;

To carry out Research and Development in Industrial
and Allied Technologies, including:
Civil engineering, Mechanical engineering, Textile
technology, Electrical engineering, Mining, Power
resources, Chemical engineering, Industrial chemistry,
Food technology, Ceramics and technology,
Environment, Information technology
28
OPERATIONAL ENVIRONMENT

The GOK adopted an Industrialization strategy for

achieving:
sustainable economic growth, rapid employment
generation and poverty eradication,

thro’ competitive production and consumption

It is however, well recognized that for the last 10 years

or so, the Industrial sub-sector in Kenya has been on
the decline, and that,
29
contd

the country is faced with;

Low capacity utilization

Declining productivity, and
Limited technological advancement

All of which are indicators of inadequate application of

R&D Products

30
Research Products and IPRs-1
The direct product of research is knowledge.
It can be in the form of

New Technology
New Product
New Process
Improvement in existing product, process or
technology

31
Research Products and IPR-2
Publication a traditional R&D output
The dissemination of knowledge through publications
is not enough.
R&D is only useful if its products can lead to
Economic development
Industrialization
Job creation
Poverty Reduction

It is only through transfer of knowledge that a R&D

Institution can become relevant to the society

32
Research Products and IPR-3
Knowledge generated may be made available free of
charge
Effective transfer of knowledge can only be realized
through
Legal protection and
Commercialization
Knowledge can only be commercialized if it becomes a
property

It must have a Legal Owner

It must have a value
There must be a market for it
33
Research Products and IPR-4

There are two types of Assets

Tangible Assets – Raw material, land, building,
machinery
Intangible Assets – knowledge

Old Economy New Economy

Tangible property Intangible Property

Research Products belong to a class of intangible property

called intellectual property assets

34
Commercialization of Research Products

35
1. Methods of Commercialization
There are Four Methods through which an
Intellectual Property Assets can be
commercialized
Licensing
Sale
Own exploitation – start up companies
Joint ventures

36
 2. Evaluation of the Impact of R&D

The contribution of R&D Institutions towards a country’s

development can be measured through quantity of
IP Assets generated
IP Assets Licensed
Income from Technology Licensing
Companies created directly based on the product
of R&D
Jobs created
Consultancy offered

37
Examples of Technology Transfer Activities
from R&D Institutions

38
1. Numbers of Patents Filed by Universities
1995-2003

Japan 5,506
China 13,353
Korea 5,272
Singapore 993
India 467
Thailand 139 (granted)

39
2. Kenyan Patent Application Situation (1993-2003)

SMEs (Jua Kali) 116

Industry 45
R&D Institutions 14
Individual from university 2
Secondary School 1
University (MU) 1

The culture of innovation has not been developed

Researchers in Universities and R & D Institutions innovate
daily most of the innovation go unnoticed.

40
3. USA Situation. Association of University
Technology Managers

Over 3000 Technology Transfer Offices

University and research center licensing (2000)
3765 license agreements
US $ 1.3 billion income

Since 1980
3500 companies formed based on R&D Products
400,000 jobs created
US $ 50 billion generated annually on sales
US $ 10 billions received as tax revenue

41
 4. Massachusetts Institute of Technology

1500 patents granted since 1986

600 active licenses
80 new licenses per year,
20 new spin out companies per year
US $ 25 million gross annual income

42
5. Sweden. Chalmers University of Technology

has created 240 companies from its products of

R&D during 30 years from Its Technology Park

43
6. India. Council for Scientific and
Industrial Research (CSIR)

42 Laboratories
Each laboratory has Technology Transfer Offices
1995-1999, filed 170 patents
A patent on a polymer used in coating compact
disks (30 % of compact disks produced world-
wide)

44
7. Korea

Technology Transfer from 19 Private Universities

Year No of Technologies Income from TT (KWon)

2001 58 473 million
2002 102 983 million
2003 133 1913 million
293

By 2004 Seoul National University had been granted 260

patents

45
8. Singapore
National University of Singapore and Nanyan Technological
University
56,000 students
Has technology transfer offices for
Research Collaboration
Contract Research
IP Management
Technology Transfer
Entrepreneurship
Key Statistics (1998-2002)
500 Patents filed
107 technologies licensed
136 research agreements signed worth US $ 42 million

46
9. China

Over 2000 university-run S&T Enterprises

238,000 staff out of which 78,000 Researchers
45.2 million TRW in sales
5600 technologies transferred
40 % of R&D funding come from private companies
Beijing and Tsinghua Universities
spinned-off over 120 high tech companies,
some spin off companies listed in the Chinese Stock
Market

47
10. Lessons Learnt
Research can lead to technological and economic
development
For this to be realized in African R&D Institutions, there is
need to
Increase Investment in R&D by our governments
have in place innovation and inventive support structures
and
enabling policy incentives

48
Key Constraints in promoting
industrialization through R&D

49
KEY ISSUES IDENTIFIED

Low Funding of STI

Low utilization of IPR
Low level of commercialization of STI findings
Low level of utilization of Reverse Engineering
Inadequate Technology Transfer policy
Lack of entrepreneurial culture
Weak linkages between STI organizations and SMEs
Weak marketing practices in STI and SMEs
Inadequate utilization of local knowledge
Weak linkages and networks amongst STI institutions
Inadequate utilization of cleaner production techniques

50
Key Issue1.
Low Funding of STI

Objectives and Strategies

• 1. To increase funding of R&D from 0.3 % to at least 2-3 % of the G
• Lobby government through sensitization

2. To formulate national industrial research programs

• Undertake industrial research needs assessment in the identified
strategic areas
• Develop mechanism for funding

3. To Establish a National Industrial Research Fund

• Lobby government and development partners through sensitizat

NOTE: The GoK must fund strategic research

51
Key Issue 2.
Low Utilization of IPR
Objective

1. Promote the generation, protection and utilization of

intellectual property assets in STI organizations and SMEs

Strategies

Create an IP literate STI personnel

Create focal IP points in STI Institutions and SMEs
Develop IP policies in STI organizations and SMEs
Provide policy incentives for the generation,
protection and commercialization of IP Assets

52
Key Issue 3.
Low Commercialization of R&D and innovations

Objective

4. Promote commercialization of innovations and R&D outputs

Strategies

Create technology transfer offices in STI organization

Develop technology incubators
Develop technology parks
Create venture capital
Create industrial innovation fund
Establish Units for prototype development in STI
organization
Promote use of business development services
53
Key Issue 4.
Low Utilization of Reverse Engineering

Objective

5. Promote technology development through reverse

engineering
Strategies

Strengthen industrial and technology information

center
Promote use of patent documentation for R&D and
innovation
Promote patent mining
Promote industrial exchange
54
Key Issue 5.
Inadequate technology transfer policy

Objectives

6. Review and develop technology transfer policy

7. Formulate appropriate laws and regulations to back the
policy

Strategies

Review existing policies on technology transfer

Develop appropriate Sessional paper
Review and update laws and regulations relating to
technology transfer

55
Key Issue 6.
Lack of entrepreneurial and technology culture

Objective

8. Promote entrepreneurial culture in STI activities

9. Promote technology culture among Kenyans
Strategies

Strengthen formal entrepreneurial education

Nurture entrepreneurship among the youth
Demystify STI
Create awareness on the importance of STI to development
Reward creativity and innovation

56
Key Issue 7.
Weak linkages between STI Organizations and
Industries
Objective
10. Strengthen linkages between STI organizations and
industries
Strategies
Embracing entrepreneurial culture in STI organizations
Generate technology oriented SMEs from R&D
outputs
Promote business linkages with industries
(consultancies and contract research)
Promote the uptake of R&D outputs by industries
Provide policy incentives for industries to finance
R&D
Finance joint R&D activities between industries
and STI institutions
57
Key Issue 8.
Inadequate utilization of Traditional knowledge
and local resources
Objective

11. Promote the use of TK and local resources

Strategies
Develop policies that promote increase local contents in
technology
Utilize TK in technology development and
utilization
Develop technologies for value addition to local
resources
Promote a culture that encourages consumption of
locally manufactured products

58
Key Issue 9.
Weak linkages amongst STI Organizations

Objective

12. Promote networking and collaboration amongst STI

organizations

Strategies

Undertake capacity audits in industrial research

amongst STI organizations
Promote joint and multidisciplinary research
Promote sharing of research equipment

59
Key Issue 10.
Weak marketing practices in STI Organizations
and Industries

Objective

13. Strengthen marketing practices in STI organizations and

industries

Strategies

Embracing marketing culture in STI organizations

Embrace strategic marketing practices in industries
(SMEs)

60
Conclusions

Rationalize and priotize R&D activities in line with high

potential sectors/clusters of the MSEs that will serve as
seedbed for industrialization

Establish Technology Service Centers to serve as hub for:

Technology identification, sourcing, Negotiation and
Technology acquisition

Establish Technology and Business Incubation Centers

There must be a deliberate effort to embrace STI as a tool

for industrial and economic development
61
Conclusions contd

Lead Technology missions and study tours

Establish functional partnerships with relevant
Government Ministries and other Departments, NESC, etc
Establish functional partnerships with local, regional and
international Organizations & RTIs
Lobby GoK to support initiatives to develop the NIRP and
establish a NIRF along the lines of ARF
Kenya must attract, train and retain high calibre scientists
and engineers to drive the process of industrialization
Kenyan must embrace entrepreneurial and technology
culture in order to industrialize

62