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What Africa (and other Regions) Can Learn About Science, Technology and Innovation Capacity Building from the US Department of Defense

10/12/2014

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As the African Development Bank prepares to convene the Second Ministerial Forum on Science, Technology and Innovation in Africa, I am prompted to ask an unexpected question: “What can Africa learn about STI capacity building from the US Department of Defense (DOD)?” 

I think it is safe to say that most STI policy makers and delegates to the AfDB conference would not normally look to DOD for relevant examples of successful STI capacity building programs.  After all, when most of us think of the US military, we think of missiles, fighter jets, and tanks.  The concept of military R&D conjures up images of missile defense systems and star-wars lasers, neither of which would appear to be particularly relevant to Africa’s current social and economic development challenges.

However, over the past several years, I have discovered that the US DOD operates a number of programs that are directly relevant to Africa’s STI economic development challenges.  None of these programs can be copied as is and transferred directly from DOD to Africa.  But they can serve as useful models for programs that, with appropriate modifications, can strengthen Africa’s existing STI capacity building programs.  

Over the past several years, to my surprise, I have also discovered that DOD has sponsored the development of numerous technologies that can make a substantial dent in many of Africa’s pressing development challenges.  This is not entirely by design – in supporting the development of these technologies, DOD is thinking exclusively about its needs, not Africa’s -- but it is not entirely coincidental either.  For example, despite their obvious differences, a US Navy ship at sea, a US Army Forward Operating Base in a remote area, and a rural village or peri-urban settlement in Africa have more in common than first meets the eye.  Most notably, none are connected to a central power grid or water purification plant and, therefore, they all need to provide these essential services via off-grid, distributed mechanisms. 

The US military has made a concerted effort to develop technologies that can meet its military objectives, but it has no objection if someone – an African entrepreneur, an NGO, etc. – uses these technologies to address civilian economic development and humanitarian objectives.  Indeed, via the STAR-TIDES (Sharing To Accelerate Research - Transformative Innovation for Development and Emergency Support) program, DOD is actively encouraging the transfer of these technologies from military to civilian uses.

So what are some of the programs that DOD uses to develop these technologies and embed them into local businesses and how can they benefit Africa’s STI capacity building efforts? Three DOD programs or activities seem especially relevant for Africa (and other regions).

Technology Scanning.  The US Office of Naval Research has a global division, ONR Global, whose objectives are “to search the globe for promising, emerging scientific research and advanced technologies to enable the Office of Naval Research to effectively address current needs… and to investigate and assess revolutionary, high-payoff technologies for future missions and capabilities.”  (emphasis in original) 



To achieve these objectives, ONR Global maintains five offices around the world whose objectives are to “discover the best science,” “maintain technological awareness” and promote “science and technology partnerships and collaborations.” In other words, ONR Global recognizes that many good ideas and useful innovations are being developed outside the US.  ONR Global’s objective is to make sure that the US Navy in particular and US military in general are aware of these scientific and technological developments and prepared to utilize them to solve the military’s problems.  

If the US military with its much larger R&D budget feels it has no choice but to scour the world for interesting ideas related to its “current needs” and “future missions and capabilities,” it seems only reasonable that Africa, with its much smaller R&D budgets and more limited STI capacity, should emulate ONR Global and start developing its capacity to harvest global research and technological results related to Africa’s current and future development needs. 

Unfortunately, this technology scouting process doesn’t seem to figure prominently in Africa’s current STI capacity building agenda.  However, the Innovation and Technology Entrepreneurship Centers (ITECs) discussed in a previous blog could begin to address this issue.  ITECs do not need to be free standing, new institutions. They could be housed in the Nelson Mandela Institutes and other local universities and research institutes.  The key challenge, it seems to me, is to knit these institutions into a loose but coherent network or organizations and institutions that have the capacity to combine original research with global technology scouting in high priority sectors and maintain close links to local entrepreneurs as well as the African business, scientific and engineering diaspora. 

Competitions to Promote Enterprise Innovation.  All too often, innovation in Africa is something done by scientists in laboratories who then try, with mixed results, to transfer the results of their research to reluctant or disinterested entrepreneurs.  It is rare to find private entrepreneurs who are directly involved in conducting research and developing innovative solutions to pressing problems.  Research and innovation are done for entrepreneurs, not by entrepreneurs.  Not surprisingly, STI policy makers frequently bemoan the fact that there is a yawning chasm between the R&D sector and the enterprise sector.  At the same time, they declare that the solution to drinking water, energy access, health care, and food security problems lies in innovative public private partnerships that combine cutting edge technology with innovative private technology deployment and service delivery models. 

One obvious way to close this gap is to give entrepreneurs, especially young entrepreneurs who are recent graduates of African engineering, science and business programs, an incentive to devise innovative solutions to high priority challenges.  Solve For X for example, challenges participants to define a problem (X) and then devise an audacious but practical solution.  Winners are selected on the basis of the relevance of the problem as well as the quality of the proposed solution. 

US DOD, on the other hand, employs a slightly different approach.  Via the Broad Agency Announcements (BAA) program, DOD challenges participants to find solutions to problems that DOD has defined. An example of a recent BAA is the following:

Requirement Number:  56 HQ0034-14-BAA-RIF-0001 DoD FY2014 Rapid Innovation Fund DEFENSE-WIDE Annexes NAVFAC , Requirement #: FY14-DoN-RIF-NAVFAC-01, Requirement Title: NAVFAC: Improved Expeditionary Warfighter Self Sufficiency  Military System or Acquisition Program Customer: NAVFAC 

Description: Joint and coalition expeditionary forces are dependent on water and energy. There is a need for advanced technologies to allow individual, squad and platoon-sized units to efficiently scavenge water (fresh, brackish, salt) and energy from resources in the expeditionary environment. Topics of interest include disinfection, filtration, desalination, maintenance reduction, waste-to-energy conversion, and reduced weight and cube.  (p. 56)

In other words, via BAAs, the military defines a problem and then crowd sources proposals for innovative solutions from entrepreneurs.  Although only a relatively small number of entrepreneurs actually win an award, the competition process encourages a much larger number of entrepreneurs to participate in the competition and to begin thinking about devising innovative solutions.  

Pursuant to the BAA program (detailed descriptions are available here and here), any individual or organization that has a potentially solution is eligible to respond to the call for proposals.  However, special consideration is given to proposals from SMEs. 

“All responsible sources capable of satisfying the Government's needs may submit a
White Paper under this BAA (small businesses, non-profits, institutions, etc). However, selection preference will be given to small business proposals addressing the evaluation criteria. Awards to other than small business Offerors are allowed but ONLY after the award selection approval authority determines the award is superior to proposals received from a small business….

In submitting a response or White Paper, the applicant must describe:

 (1) How the technology meets and addresses one of the topics specified in this Annex of the BAA.

(2) How and to what degree the technical approach is relevant to an Army acquisition program including how the approach enhances the military capability; accelerates the development of military capability; reduces the development costs; and/or reduces the sustainment costs of fielding systems.

(3) The current Technology Readiness Level (TRL) of the technology and/or product and how will it transition to military systems or programs. “


Needless to say, DOD’s BAA program and evaluation criteria are tailored to the US military’s needs.  But there is no reason why African policy makers cannot develop a similar program which combines the best features of Solve For X and the BAA program and is tailored to Africa’s pressing challenges.  The program could be administered on either a country-by- country basis, a regional basis, or a pan-African basis.  Combining a BAA program with start-up weekends, access to technology scouting expertise in ITECs, links to the diaspora and international experts might be an especially powerful tool for motivating African entrepreneurs to begin developing innovative solutions to Africa’s challenges.

Science Fairs and Technology Demonstration Expos.

Finally, DOD, along with a wide range of partners organizes and sponsors a variety of science fairs and business expos.  These events give innovative businesses an opportunity to display their products alongside other innovative companies.  The opportunities to see what others are doing, establish potential alliances, and network with potential customers and financiers are invaluable. For examples of one very recent and one forthcoming event see here and here. 

In addition to these events, ONR is sponsoring the Chaing Mai World Green City which was featured at the April GSS. For details of this expo, see here  and here.  

If Africa wants to use science, technology and innovation to promote green growth, one small step in that direction might be the development of several science fairs and technology demonstration expo centers along the lines of the Chaing Mai World Green City where entrepreneurs can deploy their technology in real world, model green villages. 

One final note:  The strength of many of these DOD programs comes from the fact that DOD not only administers these programs but is a large-scale, well-paying customer for many of the technologies and solutions generated by the programs. This is not the case in Africa, where public procurement is not as well integrated with innovation and entrepreneurship programs as it may need to be.  This issue will also have to be addressed if Africa hopes to develop a well function science, technology and innovation system.


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The Catalytic Role of African Pension and Sovereign Wealth Funds

10/2/2014

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The allure of strengthening the financial ties between African investment opportunities and global pension and sovereign wealth funds is understandable.

Sovereign wealth funds currently have more than $6.7 trillion dollars of assets under management, up from slightly more than $3.2 trillion as recently as December 2007. US pension funds had $18.9 trillion of assets under management in 2013, a rise of more than 12% over the previous year and pension fund assets in the 13 largest markets totaled $32 trillion, up 9.5% over 2012.  

The African Development Bank estimates that Africa must invest $95 billion per year to finance both the large scale, transformative infrastructure projects such as ports, roads, and utility-scale power generation and distribution systems that will facilitate the continent’s economic modernization and green growth and also the numerous smaller-scale projects that will provide energy, water, and health services to the hundreds of millions of people on the continent who currently lack access to some or all of these critical services.  

Infrastructure investment on the African continent is currently running at a $45 billion annual pace, leaving an investment shortfall of $50 billion.  As a simple arithmetic matter, that investment gap could be closed rather quickly if the managers of these global pension and sovereign wealth funds could be induced to invest even a small fraction of 1% of their assets under management in Africa’s commercially viable infrastructure projects.

That impeccable logic motivated HRH Prince Charles in 2006 to convene a meeting with the leaders of eight global pension and sovereign wealth funds (the P8) which morphed in subsequent meetings into a larger group of participants known as the P80.  The objective was to develop new financial vehicles and instruments – what we have termed a new financial plumbing system -- that would facilitate pension and sovereign wealth fund investments in these commercially viable and socially beneficial projects. 

Several financial innovations emerged, directly or indirectly, from these meetings.  For example, pension and sovereign wealth funds explained that they were hesitant to take the risk of investing directly in unfamiliar emerging market infrastructure projects.  Therefore, the World Bank, followed shortly afterwards by other financial institutions, began to issue so-called “green bonds,” generally backed by the full faith and credit of the World Bank or other issuing institution.  Pension and sovereign wealth funds would buy the green bonds and the World Bank and other issuers would invest the proceeds in climate-smart investments which they had identified, prepared and supervised.  The net effect was that pension and sovereign wealth funds would gain indirect exposure to, and familiarity with, this new asset class without taking the direct credit risk of unfamiliar projects in unfamiliar emerging and pioneer markets.  To date, the World Bank has issued $6.7 billion of green bonds in 17 different currencies and financed 49 projects in 17 middle income countries.   Meanwhile, green bonds from all issuers, including the World Bank, are expected to total close to $40 billion in 2014, on top of the $11 billion issued in 2013. 

Similarly, during the P8/P80 meetings, pension and sovereign wealth funds explained that they did not have the capacity to assess country risk in a wide range of emerging and frontier markets, perform due diligence on local infrastructure projects in far flung places around the world, or make a relatively large number of smaller investments in smaller scale, local infrastructure projects.  They much preferred to operate on the wholesale level, placing large chunks of money with well-known institutions that would invest the funds individual companies or projects.  To address this issue, the IFC, the Asian Development Bank, and the European Investment Bank, among others were established a series of funds of funds, including IFC Catalyst Fund, Asian Climate Partners, and the Global Energy Efficiency and Renewable Energy Fund (GEEREF).   Pension and sovereign wealth funds, along with other institutional investors could place their money in one of these funds.  These funds, in turn, would invest the proceeds directly in smaller scale projects or they would place the proceeds with local private equity funds which have the first-hand, on-the-ground knowledge required to handle due diligence and supervise local investments. 

When the initial P8/P80 meetings first convened, most participants assumed (and hoped) that Africa would be a major destination for these global pension and sovereign wealth fund investments.  Virtually nobody expected African pension and sovereign wealth funds to be an important potential conduit or catalyst for financing these African projects.  This assumption was quite understandable at the time.  With the exception of sovereign wealth funds in Algeria ($77 billion of assets under management as of 2014) and Botswana ($6.9 billion of assets under management),  the African sovereign wealth fund sector simply didn’t exist and the African pension system was at a similarly embryonic stage. 

However, if those original assumptions were still prevalent today, the September 22 Africa Investor (Ai) CEO Institutional Investment Summit should have dispelled any lingering doubts about the potential vitality of the African pension and sovereign wealth fund sector. African pension and sovereign wealth funds have burst onto the global stage and are poised to play a major role in financing Africa’s development.  In the past few years, sovereign wealth funds have been established in Angola, Equatorial Guinea, Gabon, Ghana, Kenya, Libya, Mauritania, Mauritius, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Sudan, Tanzania, Uganda, and Zimbabwe.  As a recent publication from EMPEA, our GSS partner noted, a similar expansion of African pension funds is also underway.

The combined total assets under management of African pension and sovereign wealth funds are still rather small by global standards or relative to Africa’s investment needs.  But African pension and sovereign wealth funds have grown rapidly over the past few years and are poised for continued rapid growth in the coming decades.  Morgan Stanley, for example, projects that African pension fund assets, which currently total a not-insignificant $379 billion, will exceed $7 trillion by 2050.   

However, perhaps even more important than their current size or future growth is the quiet work taking place to create an African financial plumbing system that can facilitate investments by Africa’s pension funds, sovereign wealth funds, and other institutional investors.  The African Development Bank, for example, recently established the Africa50 Fund, headquartered in Casablanca, Morocco.  The fund hopes to have an initial capital of $3 billion which will eventually be scaled up to $10 billion.   The AfDB hasn’t published much financial and operational information about the Africa50 Fund on its website, except to say that there will be a pot of grant money to finance project preparation costs and a much larger pot of money to finance investments.  However, AfDB President Donald Kaberuka has made it clear that the primary role of the Africa50 Fund will be to serve as a conduit or catalyst for channeling Africa’s financial resources into commercially viable African infrastructure projects. “For a long time,” he explained, “we have relied on external financing to fund our infrastructure. Now is the time for the African Development Bank to mobilise sovereign African savings – currently estimated at $1,000 billion – to build the Africa of tomorrow," Echoing those sentiments, the implicit theme of the recent Ai Summit was “Formalising Domestic African Capital as a Tool to Leverage Global Institutional Capital.”

African pension and sovereign wealth funds, in collaboration with the Africa50 Fund and other partners, are uniquely qualified to channel African and international capital to African infrastructure projects.  By standing poised to invest in African projects, African pension and sovereign wealth funds may be able to serve as more effective advocates for necessary policy reforms than their international counterparts.  They have greater credibility along with unparalleled access to top decision makers.   Coinvesting alongside the AfDB and African pension and sovereign wealth funds may also provide a powerful form of political risk insurance.  After all, if a government interferes with a project that its pension or sovereign wealth fund has supported, it will, in effect be confiscating the retirement savings of its own citizens.  This should provide a strong deterrent to capricious behavior. 

African pension and sovereign wealth funds still have to convince skeptics that their governance will be transparent and their capital allocation decisions will be free from undue political meddling. Perhaps not all of them will pass this test.  Only time will tell.  But judging from the high quality and impressive credentials of the pension and sovereign wealth fund participants and speakers at the Ai Forum, the future looks exceedingly bright.

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World Bank Global Infrastructure Facility

10/2/2014

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The World Bank is expected to launch its Global Infrastructure Facility (GIF) at the October 10-12 IMF-World Bank Annual meetings in Washington, DC.  The GIF has been on the drawing boards for close to two years.  Despite that long lead time, detailed operational guidelines have yet to be released.  However, a September 2014 Update for the G20, gives some glimpse into what the GIF will do and how it is expected to operate. 

Some of the most salient details are as follows:

  • The GIF will have two windows – (i) an “upstream” window to support “project-specific” regulatory reform, feasibility studies and related project preparation activities and (ii) a “downstream” window to “provide “gap-fill” co-financing or credit-enhancement support—to complement products already available from internal and external technical partner institutions.” 
  •  During the three year pilot phase, the GIF expects to support approximately “four significant interventions ($10 to $20 million per project) and 3 to 6 more smaller-scale interventions ($2 to $5 million)” with a combination of upstream and downstream support.  
  • “During its $80 million pilot phase, the GIF will to focus on infrastructure investments that have global public good characteristics; climate friendly projects that are low emitting or encourage efficiency in the provision of infrastructure services; and trade enabling projects that facilitate or enhance interconnectivity and trade, with particular attention to projects that could realistically provide measurable impacts within three to four years.”
  • The GIF expects to recover its outlays through fees and reimbursement “upon successful project close.” 
  • The target date for the start of GIF operations is December 2014.   The assessment and selection of the initial round of pilot projects is expected to be well underway by December 2014.  
  • The GIF will be administered by a GIF Management Unit administered by the World Bank Group. Additional details about the GIF’s governance arrangements are available in the Summary document prepared for the G20.  


Readers who hope to mobilize GIF support for their proposed projects should pay special attention to the partnership arrangements and project selection process.  I will try to circulate more information as it become available. 

Although publicly available operational details are still sparse, I see nothing in the current proposal that would preclude support for the sort of technology deployment activities discussed at the GSS.  On the other hand, I would not be surprised if the GIF team were unfamiliar with the potential benefits of many of these technology deployment activities. 

Filling any information gap should be an immediate, high priority.   


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Guest Post:  Disaster Preparation through Sustainability                                       By: Dianne Foletto, Marketing Director, Stealth Power

10/2/2014

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Disasters, such as hurricanes, floods, earthquakes, tornados, wildfires, mudslides, chemical explosions, even terrorist attacks affect our access to conveniences and necessary life sustaining resources.  The burdens of disasters include but are not limited to; food and fuel shortages, limited access to health care, property destruction, rescue missions, and homelessness.  Long after the disaster the impact on local and federal budgets remain.

One of the most publicized results of “Super Storm Sandy” was the fuel shortage that affected mostly New York and New Jersey. The storm caused damage to both refineries and pipelines, leaving gas stations without a way to receive supplies of fuel. Other gas stations were without power and unable to pump the fuel they had on hand. East Coasters waited in lines for hours on end.

When the fuel shortage occurred, Governor Chris Christie temporarily lifted restrictions on bringing in fuel from other states and the EPA waived requirements on clean fuel for 17 states along the east coast. Both these actions eventually helped resolve the fuel shortage.  But it begs to ask, what if our first responders had limited access to fuel?  Preparation for the aftermath of these storms will be critical to the survivability for both the victims and the first responders. When vehicles are equipped with mobile electric power, our first responders can worry less about the availability of fuel resources and concentrate more on life saving mission capabilities. 

State, county and municipal governments are facing mounting financial issues including planning for economic uncertainties.  It’s a constant challenge for them to maintain basic services while also being forced to look for ways to reduce operating costs. Disruption in fuel supply exacerbates government’s vulnerabilities to unforeseen events, potentially putting them in a position where they are unable to support emergency management, law enforcement, first responders and the community. 

Basic supply and demand economic principles apply in regard to fuel pricing. Although fuel may be available the price will significantly impact the budget, compromising a municipality’s ability to provide services or reconcile the costs post event.

 During the 2011/2012 12-month period, gas prices increased 41.0%.  This graph clearly shows the correlation between weather related events, the availability of fuel and the impact it has on pricing. 

Emergency vehicles that aren’t retrofitted with mobile power idle reduction equipment have to idle their vehicles to power the equipment they need to perform lifesaving tasks. Vehicle exhaust has been determined to be one of the leading causes of climate change and climate change has been directly blamed for the severe weather.  When disaster recovery teams harness the power of mobile electric power their access to fuel will be less critical and their life saving abilities will extend in capability. Preparation will be a key contributor to our survivability and sustainability.

Stealth Power develops and manufactures smart mobile electric technology.  Originally developed for the military, the system is a proven technology, ranked as a “force multiplier” by the Army Test and Evaluation Center (ATEC). Military field testing revealed significant civilian uses by reducing up to 80% of generator fuel consumption and associated emissions.  Stealth Power easily integrates with other alternative energy sources including solar and wind, it’s scalable and modular with power options from 2 KW hrs. to up to a Megawatt hr.  The system is non-combustible and completely silent when in use making it an ideal technology solution for emerging civilian power applications in developing countries, such as off-grid electricity, irrigation, drinking water and cell towers.

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    Author

    Alfred Watkins is Chairman of the Global Solutions Summit.  He worked for more than 23 years at the World Bank, specializing in technology transfer to emerging markets.  He worked extensively in Europe and Central Asia, Southeast Asia, Africa, and the Middle East.

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