By Dr. Jeroen P.J. de Jong
Pushing Boundaries: Exploring Informal Innovation and Entrepreneurship in South Africa
November 23, 2022
This is a guest blog written by Dr. Jeroen P.J. de Jong, Professor, Utrecht University School of Economics, who is leading a groundbreaking research project to explore household innovation and informal entrepreneurship in South Africa. This is a collaborative effort and the result of a partnership between Utrecht University (Netherlands), the University of Johannesburg (South Africa), MIT Sloan School of Management (USA) and the UNDP Accelerator Labs. For the last year, the Accelerator Lab Network has explored the intersection between informality and digitalization: mapping the Labs’ work in the area, identifying what drives digitalization in informal businesses and what effect it has on them, and engaging with how digitalization is shifting the formalization process. This research builds on this journey to understand the relationship between informal businesses, digitalization and innovation, and brings Dr. de Jong and colleagues’ existing work on household innovation to Africa for the first time. The project launched in January 2022, with preliminary findings expected towards the end of 2022.
Innovation and entrepreneurship are paramount for achieving the Sustainable Development Goals (SDGs). However, a major challenge for the African continent is that innovation and entrepreneurship often happen in the informal sector. In a new research project, the project team is developing a first-of-a-kind survey on informal innovation and entrepreneurship in Africa, mapping its ecosystem and identifying policy implications.
Informality creates a wellspring of innovation in Africa
In the household sector innovations are abundant. An afternoon’s walk through the Orange Farm township in Johannesburg, South Africa, reveals many home-built innovations. These enable people to complete new tasks, save costs and recycle leftover materials, for example, a device to remove feathers from (slaughtered) chickens, and cooking bags which save electricity. But informal innovations are found in affluent areas too. A lively maker community is thriving in the Johannesburg region, where a South African citizen developed a glove that translates sign language into speech – a great innovation enabling deaf people to increase their integration into society.
With this in mind, informal innovation in the household sector is defined as the ideation and development of functionally novel products, processes, or other applications, by consumers in their spare time without payment. As previously illustrated, household sector innovations are abundant. And although this activity is undetected in official statistics, national surveys have shown that many consumers innovate. In developed countries (e.g., United Kingdom, Finland, USA), four to six percent of all consumers are home innovators – mostly for personal uses, but also for fun, to learn or to help others.
There is huge potential to explore household innovation in Africa, but a survey of this kind on the African continent has not previously been done -- one of the primary reasons to launch this research, with South Africa as a starting point. The survey has the following objectives:
- Map informal innovation and entrepreneurship in the household sector
- Investigate the circumstances (including the “ecosystem”) in which informal innovation and entrepreneurship reach full potential, and how value is created from household innovation
- Identify policy implications for engaging with household innovation.
The study’s results will be relevant to many, such as UNDP’s Regional Bureau for Africa, the African Continental Free Trade Area (AfCFTA) Secretariat, and the UNDP Accelerator Labs Network. Knowing about the prevalence of informal innovation and entrepreneurship, how they’re related to the ecosystems that enable them, and what policy considerations might arise, will help to strengthen the informal sector and its role in accomplishing the Sustainable Development Goals.
Finding the link between informal entrepreneurship and household innovation
Like innovation, entrepreneurship on the African continent also happens mainly in the informal sector. It’s common to encounter unregistered businesses that aren’t paying taxes, don’t officially contract employees, and don’t have business bank accounts or financial records. This isn’t surprising given that 50-80 percent of employment is informal. Some of these are even full-fledged businesses engaging dozens of people, such as companies producing machines for home-based agriculture.
That’s why we're exploring how informal innovation and entrepreneurship relate, anticipating that this sector is essential for many types of informal innovations to become widely available. Because western countries have small informal sectors, this relationship can only be studied in an emerging economy context. We also suspect that societal benefits can be obtained only if informal innovations become broadly available. As a result, we expect informal entrepreneurship to be instrumental to spreading innovations.
Finally, this research engages with “ecosystem” conditions. Ecosystems are loosely connected systems of interdependent actors and factors that are governed in such a way that they enable productive entrepreneurship within a particular territory. Knowledge about ecosystems is still mostly confined to the developed world. In those contexts, venture capital, knowledge appropriation and public-private partnerships are noted as key conditions. In the informal sector, other factors such as basic innovation tools, informal finance and consumers embedded in communities are expected to be important.
This research will yield unique insights on household innovation in South Africa; stay tuned for the initial findings.