Intellectual Property as an economic tool for African small and medium enterprises (SMEs)
24 Jun 2021
“World Intellectual Property Day” is celebrated every year on 26 April – the day on which the World Intellectual Property Organization (WIPO) Convention came into force in 1970. This year, the central theme highlighted the importance of small and medium enterprises (SMEs) as engines of technological innovation and economic development and, in particular, the role of the intellectual property (IP) system in enhancing their competitiveness, market share, export opportunities and overall market value in the knowledge driven economic environment. Proper management of IP in SMEs is an important factor in leveraging and exploiting the inherent value so as to allow for a competitive advantage in the context of the global market.
It is widely known that the role of SMEs in rejuvenating and sustaining a nation’s economy in low-income countries is critical and cannot be over-emphasised. As the driving force for innovation and despite the monumental challenges faced, SMEs on the African continent contribute disproportionately to employment creation, economic development and exports. SMEs contribute up to 50% of countries’ GDP and in more than a few countries employ as much as 80% of the national workforce.
Across the African continent, the contribution of SMEs to the overall economic growth and the GDP is high. Specific examples include:
- South Africa, where SMEs account for 99% of the total number of establishments, 29% of employment and 52% share of GDP.
- Nigeria, where SMEs account for 99.8% of the total number of establishments, 84% of employment and 49% share of GDP.
- Kenya, where SMEs account for more than 98% of the total number of establishments, more than 80% of employment and 34% share of GDP.
As a consequence of global market disruptions related to the COVID pandemic, everyone experienced a significant slowdown in economic growth and employment. However, the World Bank released a “Doing Business” report last year which demonstrates a steadily improving business climate in sub-Saharan Africa. The report also highlighted an overall ease of starting and maintaining a business on the subcontinent – they claim it has improved by one percentage.
From the report, Mauritius and Rwanda ranked among the top 20 countries globally, while the region’s largest economy, Nigeria, was among the top global improvers alongside Togo. As the third largest economy in the African continent, South Africa is ranked 5 of the top 9 African countries in the top 100 countries. It should be highlighted in the report that economies of the region implemented 73 regulatory reforms that addresses red tape and obstacles faced by SMEs.
By virtue of the number of jobs they create and their impact on society, SMEs in developing countries play a central role in alleviation of poverty. Looking beyond the immediate issues relating to poverty, the ability of SMEs to create, access and commercialise new knowledge or a new method, idea, product, etc. places them at the heart of technological innovation and as a catalyst of generating higher productivity. This means that the same input generates a greater output which is paralleled by the growth of the economy and ultimately, the concomitant reduction in poverty.
However, innovation immediately brings about IP and associated rights, traditionally referred to as intellectual property rights (IPRs) which comprises, amongst others, patents, trade secrets, trademarks and copyrights. The importance of the protection these IPRs can provide for SMEs inventions, brands and designs are becoming more relevant now more than ever as the pace of globalisation juggernauts into the global, knowledge-based economy of the 21st century.
Traditionally, physical assets that have real material presence (e.g. property, equipment, raw materials, etc.) represented the bulk of a company’s value and largely responsible for sustaining competitive advantage in the market.
Accordingly, IP turns intangible assets into exclusive property rights and enables SMEs to claim ownership over their intangible assets which then can be traded in the marketplace. If left unprotected (i.e., no legally IPR), these innovative ideas, creative designs and powerful brands can be freely and legally exploited by competitors without limitation.
Hence, adequate protection of a SME’s IP means that it can be used as a tool to deter potential infringement and to have exclusivity to the economic value when exploiting its innovation. This will, in turn, not only enable the generation of income for a business through licensing, sale or commercialisation of protected products or services, but ultimately raise the standard of living in their respective countries.