SR article

Innovation Analysis

In this article you can find an analysis about the technological innovation systems in our internship project and in Zambia in general.

This is an innovation analysis of Zambia, divided in two parts. The first parts contains a project related innovation analysis, based on seven functions. The seven functions as explained by Hekkert et al. in ‘Functions of innovation systems: A new approach for analyzing technological change’ are necessary functions that need to be met, so that an environment can be created wherein technological change can take place. [1] The functions are part of a framework, which is created to solve issues concerning other frameworks explaining technological change. These issues were that the other framework was to static and that it did not include micro-level economics. All of the functions are correlated and do affect each other. The second part of the analysis is a national innovation analysis about Zambia. Relevant topics for our project are business systems, education and research, and networks of infrastructure and frameworks.

Entrepreneurial activities

The first of the seven functions is the one of the Entrepreneurial activities. According to van de Ven, who is cited by Hekkert et al., there are three types of questions that need to be answered from the perspective of the individual firm. We will try to answer these questions from the perspective of Necor (the local partner in Zambia) within the renewable energy market for Zambia.
The first question is: ‘which functions will the entrepreneur perform?’. Necor will perform the installation, maintenance and reparations on the solar mini-grid system. Secondly the question ‘which organizations should the firm link to, in order to perform other functions?’ should be answered. The organizations Necor should link to are FuturaSun to begin with, because they deliver the solar panels, but also Zoona (pay-as-you-go card shops) and ACRA (social awareness for solar energy). In the end the public company ZESCO is also a key partner, since Necor has to come to an understanding with ZESCO, so they can be the sole supplier of energy in the region. [2] The last question is: ‘which organizations will the firm compete with on certain functions?’. The firm will compete with all organizations of solar panels from all around the globe, but also with the suppliers of energy in Zambia, so: ZESCO, Copperbelt Energy Corporation and Lusemfwa. [3] Overall Necor is scoring well on the questions asked.
The internship we will do, is in a rural village without any connection to the aforementioned entrepreneurial questions. Therefore there are no necessary points of actions they have to be taken for a good implementation of the project, since these points are not involving the research we will conduct for the project.
                                              

Knowledge transfer & knowledge diffusion through networks           

The sector wherein Necor is acting, is the one of the renewable energy market. Within this market there is a high volume of R&D worldwide, because the technological gains are high. But there is hardly any R&D and patents development in this sector in Zambia. [4] So we could simply state that this function is all imported from outside of Zambia due to knowledge transfer. This makes the country highly dependent on foreign actors and that is not good for the development of the energy sector. The country is trying to level up with the R&D by getting the knowledge transferred from the foreign actors by workshops, co-ownerships, consortiums wherein several parties work together and a normal interaction in knowledge occurs.
The network to spread the acquainted research is small but sufficient. It is sufficient because the foreign countries come themselves to implement their businesses, they do not need an extra network to interact with others. This is not helping in spreading the knowledge to Zambian companies / individuals, but they do not have this goal, so that is why this network is sufficient at the moment. However, if Zambia would like to increase knowledge, they should take care of more educated Zambian engineers in this field of practice.
 

Guidance of the Search

According to Energy Minister Dora Siliya the Zambian government is investing in renewable energy, which includes solar energy. [5] So this creates a guideline for entrepreneurs that want to do new investments.

The government investing in renewable energy is an activity that belongs to the Guidance of the Search function. To stimulate these entrepreneurs the transfer of renewable energy technology is being promoted. FuturaSun and Necor are companies that follow these requirements, by producing and implementing solar panels and solar mini-grids. 

Market Formation

The demand that is relevant for our project is the demand for electricity. We are working with rural villages that have no access to an electricity network.
There is already an energy market in Zambia. There are three main energy companies, namely ZESCO, the Copperbelt Energy Corporation and the Lusemfwa Electricity Company. ZESCO, providing 76% of the total energy of Zambia
, is the biggest out of three. [6] For our project it is important that the solar mini-grid is not being implemented in a village that is near an area where ZESCO delivers electricity. That would cause a huge competition, which will be a disadvantage for FuturaSun and Necor.

Resources mobilization

The key resources for our project are institutions that want to invest in solar energy, microcredit options for the villagers that have no money right now and transport of the solar panels to the villages. Further resources that are needed are described in our project plan. The needed resources are available to mobilize our solar mini-grid project.

Creation of legitimacy / counteract resistance to change

The population of the rural village where the solar mini-grid is being implemented has almost no access to electricity. There are only a few households that use a very little form of electricity. So our project will have a big impact on the lifestyles and routines of the villagers. To counteract the resistance to the changes of the livelihoods of the population of the rural village it is important that we have a good and transparent knowledge transfer and diffusion. We will create knowledge transfer through workshops and interviews in the village. 

Business systems and markets

As mentioned in the ‘Institutional Analysis’, Zambia currently has very few state owned companies and has a dualistic economy structure. In the main sectors one company has the biggest market share of about 50%, the other half mainly consists of very small companies, a monopolistic competition. [7] These markets where the big companies have a lot of power create an unfair competition for the smaller enterprises, in most sectors there is not a level playing field. The example relevant for us, about ZESCO is mentioned above at ‘Market Formation’.

Education & Research

school system zambia.jpg

Figure 1: Official school ages by level of education Zambia

Education is organised as can be seen in figure 1. [8] Primary schools are state-owned and free of fees, with exception for the private schools. In the bar graphs you can see the enrolment rates. Secondary schools charge fees and are not as widespread as primary school. Therefore the enrolment rate of secondary school is much lower than primary school, the exact numbers are not available at UNESCO. Tertiary education can be followed at universities and colleges. Due to fees it is inaccessible for many, above that they select the best students for tertiary education because there is not enough capacity to accept everyone. [9] Most research is done at universities and research institutions of Ministries. [10] If only a small fraction of the population gets access to tertiary education, it will also affect the amount and quality of research. In figure 2 education charts can be found for Zambia.

enrolment ratio primary education.jpg

Figure 2: Gross enrolment ratio [i] and Net enrolment rate [ii] Primary education Zambia

[i] Gross enrolment ratio: Number of pupils or students enrolled in a given level of education, regardless of age, expressed as a percentage of the official school-age population corresponding to the same level of education.

[ii] Net enrolment rate: Total number of pupils or students in the theoretical age group for a given level of education enrolled in that level, expressed as a percentage of the total population in that age group.

In 2008 research & development expenditure in Zambia was 0.278% of the GPD, [11] this makes Zambia 85th of 113 investigated countries. [12] Besides research in Zambia there is a lot of knowledge transfer from abroad. Investors and entrepreneurs come with new ideas from abroad and mainly do some additional research in Zambia to be able to implement their new ideas. For implementation of project and such project leading to development, it is important that there is local knowledge available. Otherwise Zambia will keep being dependent on external knowledge.

Networks of infrastructure & Frameworks

The country has 40.454 km of roads of which 9.403 km paved, 8 airports of which 4 are international airports, railways and maritime waterways. [13] Infrastructure is one of the more important priority areas for the Zambian government. The government in particular believes that infrastructure is an essential driver for economic prosperity due to competitiveness. Besides infrastructure also the less physical means of transport are important. Information and Communications Technology (ICT), energy, housing and estate are also accounted a priority by the Zambian government. Furthermore framework conditions are of importance, like taxes, trust and subsidies. Tax for imported goods depend on their value. Raw materials and capital equipment have a rate of  0-5%, intermediate goods have a rate of 15% and finished goods a rate of 25%. [14] For our project solar panels need to be imported, with a relatively high tax rate. The World Bank is subsidising solar energy projects in Zambia, which can bring affordable electricity to the rural areas. [15] This is a very positive development for our project. Trust is another key aspect for our project to succeed. As described in the ‘Cultural Analysis’ the villagers are likely to act according to uncertainty avoidance. If we can create trust, they are more likely to step out of their comfort zone and take a risk.

Conclusion

In general, it could be stated that Zambia, FuturaSun and Necor are trying to catch up within the renewable energy market. When looked at the seven functions on the project basis, Necor is lacking the right R&D but doing well with the entrepreneurial mindset they bare with them. The seven functions of the framework are connected and influence each other, therefore for a strong growth, they have to improve on their weak points. For Zambia as country, noticeable things are how the education system exclude the poorest to go to higher education (no good education service / fees for schools) and the lack of good competition within business markets. These issues also need rigorous changes for a better development in Zambia.

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[1] ‘Functions of innovation systems: A new approach for analysing technological change’, Edited by Hekkert et al., (2007), http://www.transitiepraktijk.nl/files/Hekkert_et_al_2007_%20functions_of_%20innovation_systems.pdf

[2] All information concerning the project is from research conducted by the project team of Necor and FuturaSun.

[3] Zambia invest, ‘Zambia Energy’, (11-10-2016), http://www.zambiainvest.com/energy

[4] Google Paterns, ‘Zambia Renewable energy’, (11-10-2016), https://www.google.com/?tbm=pts#tbm=pts&q=zambia+renewable+energy

[5] Lusakatimes, ‘Is renewable energy a solution to Zambia’s energy deficit?’, (11-10-2016), https://www.lusakatimes.com/2016/04/27/renewable-energy-solution-zambias-energy-deficit/

[6] ZESCO, 'Generation projects', (20-9-2016), http://www.zesco.co.zm/projects/generation

[7] ‘Zambia: Building Prosperity from Resource Wealth’, Edited by Christopher Adam, Paul Collier, and Michael Gondwe, (2014), https://books.google.nl/books?id=8PRwBAAAQBAJ&pg=PA43&lpg=PA43&dq=level+playing+field+zambia+economic&source=bl&ots=-QryfvF8rP&sig=TsF57Nd_Fc4SBaU6SDAOBVZ3_Fc&hl=nl&sa=X&ved=0ahUKEwjGjvLypKvPAhVLWxoKHe9HBl4Q6AEIQTAE#v=onepage&q=level%20playing%20field%20zambia%20economic&f=false

[8] UNESCO Institute for Statistics, ‘Zambia Education’, (9-10-2016), http://www.uis.unesco.org/DataCentre/Pages/country-profile.aspx?code=ZMB

[9] Wikipedia, ‘Education in Zambia, (9-10-2016), https://en.wikipedia.org/wiki/Education_in_Zambia

[10] E.rails, ‘Organisations and projects in Zambia’, (11-10-2016), http://www.erails.net/ZM/organisation/

[11] Indexmundi, ‘Zambia - Research and development expenditure’, (11-10-2016), http://www.indexmundi.com/facts/zambia/indicator/GB.XPD.RSDV.GD.ZS

[12]Indexmundi, ‘Research and development expenditure – Country Raking’, (11-10-2016), http://www.indexmundi.com/facts/indicators/GB.XPD.RSDV.GD.ZS/rankings

[13] CIA the World Factbook, 'Zambia', (16-9-2016), https://www.cia.gov/library/publications/the-world-factbook/geos/za.html

[14] Zambia Revenue Authority, ‘Custom Duty’, (11-10-2016), https://www.zra.org.zm/commonHomePage.htm?viewName=CustomsTaxes

[15] Lusaka Times, ‘Solar projects in Zambia will deliver affordable electricity in rural areas-World bank’, October 11, 2016, (12-10-2016), https://www.lusakatimes.com/2016/10/11/solar-projects-in-zambia-will-deliver-affordable-electricity-in-rural-areas-world-bank/

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