This document discusses innovation in the African food processing sector. It defines innovation and outlines the OECD's definition. It finds that innovation increases value addition and the probability of trade participation more in food processing than other sectors. However, only one-third of African food processing enterprises report innovating, with little difference between food and non-food sectors. The level of reported innovation and investment has declined over time. Drivers of innovation include firm leadership and investment capacity, economic growth conditions, business obstacles, and vertical coordination platforms. The conclusion emphasizes that more innovation is needed in African food processing to meet growing urban demand but capabilities and incentives are currently limited.

1. Director, Operational Support, AKADEMIYA2063
Innovation in African Food Processing
Sector : Patterns and Drivers
Getaw Tadesse

2. #2022ReSAKSS #2022ATOR
The concept and measurement of firm-level
innovation
• The definition of innovation has evolved to include
Both high-tech technologies and indigenous innovation
Imitation as well as invention
Products as well as process innovation
Inputs and outputs of innovation
• The OECD definition (OECD, 2018)
“A new or improved product or business process (or combination thereof) that differs
significantly from the firm’s previous products or business processes and that has been
introduced on the market or brought into use by the firm.”

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Innovation and value addition
• Innovation increases the value addition by food processing firms …
• The effect is more significant in food processing sector than others
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Food processing firms
Non-food processing
firms
63.5
66.7
68.9
68.6
Percentage
of
value
addition
Average share of value added in food and non-food processing firms in Africa
Firms witout innovation Firms with innovation

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Innovation and participation in trade
• Innovation increases
the probability of
participating in GVC
• The effect is stronger
in food processing
sector than others
3.4
0.3
4.1
1.0
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Food processing Non-food processing
Differences in share of export between
innovative and noninnovative firms in PP
Direct export Indirect export

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The level of innovation
• Only one-third of African food processing enterprises report
innovation
• No difference between food and non-food sectors
29.8
33.9
16.1
33.6 34.3
15.4
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Product innovation
(invention+imitation)
Process innovation R &D
7.1. Percenatge of enteprises reported innovation
Food processing Nonfood manufacturing

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The level of innovation
The number of firms reported innovation and investment has
declined over time

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Typology of innovation drivers

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Firm’s leadership and investment
capacity
• Firms with female managers innovate more than firms with
male managers
• Smaller firms innovate less than larger firms
• Firms invested on R&D innovate more than firms without
investment
• However, investment in R&D is not a necessary and
sufficient condition for innovation
24% of firms innovated without formal investment in R&D
About 27% invested, but not innovated yet

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Economic growth and
innovation
• Firms in countries with a
growth rate of 6% and above
innovate more than countries
in countries with lower growth
rates

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• The experience of malt barley value chain in Ethiopia indicates that vertical
coordination offer a win-win solution
• Breweries ensure quality raw materials to innovate new products
• Farmers secure market and receive premium price
• However, the coordination works better and sustains through third party
intermediation
⁃ Public supports : NGOs, GOs
⁃ Producer organization
Vertical coordination as a win-win
innovation platform

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• Firms with obstacles innovate
more than firms without
obstacles
• Firms innovate to cope with
business obstacles
• This may compromise their
long-term competitiveness
Business obstacles

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Conclusion
• For Africa, innovation in food processing sector is more critical than
other sectors
• Supply diversified, convenient and cheaper foods for the growing urban consumers
• However, African processors are not yet innovating enough
• Limited capability and disincentives related to institutional and policy obstacles
• Governments and other value chain actors should focus on
• Building the capacity of SMEs through targeted leadership and financial supports
• Creating enabling environment, particularly on innovation platforms and public services such as
ICT, energy

13. THANK YOU