A Diagnostic of Business Environment, Industrial Policies, and Innovation in Africa

Abstract

Business environment and industrial policies are some externalities that explain the extent to which firms are competitive. However, competitiveness entails advanced skills, innovation, and technological progress, to mention a few. Following the awakening of African government to the importance of improving business environment and providing incentives to ensure the attraction and sustenance of foreign investors within their countries, there is the need to provide a diagnostics of this effort. In this paper, we do not review independent policies and public administration procedures that are prevalent within African countries, as this keeps evolving. However, in this study we provide a broad diagnostic of the prevailing issues and then proffer implications for policy attention for country and regional policy makers. We explore the extent to which business environment and industrial policies foster innovation in Africa. Using both conceptual descriptions, macro trends and firm-level analysis, we highlight the need for the adoption of industrial policies that considers sustainable development in Africa. For instance, innovation thrives in favorable business environment. Actions such as the reduction or outright tax exemptions for firms to engage in the development of infrastructural facility that can spur innovation should be encouraged. Also, subsidies can be applied by the government to reduce the burden on firms to finance subscriptions for ICT infrastructures. This study also highlights the need for the implementation of policies that ensure maximum protection of the environment, ecosystem, and other natural resources that sustains life should be encouraged.