1. Walking (Stumbling?) On Two Legs? Raphael Kaplinsky Development Policy and Practice, The Open University IEA Conference, Pretoria, July 20120

2. Summary Framing conditions for Industrialisation in SSA Forces of disruption: – Innovation – The Commodities Boom Policy Implications The Political Economy of Policy Design and Implementation

3. Framing Condition 1: Changing economic centre of gravity

4. ? V U

5. “Is this a V recovery or a W? I think it’s the latter… (CEO HSBC Bank, Financial Times, 5 th Oct 09) `

6. Perhaps its an L

7. OR, MAYBE

8. Back to Centre Stage

9. Framing Condition 2: Distributional outcomes of rapid growth in SSA

10. Global growth and global poverty GDP Growth p.a (%) Living below $1.25 pd (MDG1) (m) 1990- 2000 2000- 2008 1988- 1990 2007- 2008 World2.93.11,6681,329 China9.910.4724208 India5.57414456 SSA2.24.9224355

11. Framing Condition 3: Commodity super-cycle and changing terms of trade

12. United Nations Conference on Trade and Development (UNCTAD) monthly average price index, 2000=100 (1960 to October 2011)

13. The commodities-manufactures terms of trade (1949-2008)

14. Disruption in the innovation trajectory

15. Inducements to Innovation Demand Factor prices and character of infrastructure Path dependency and firm trajectories Regulatory environment

16. Forces of disruption to the innovation trajectory 1. The character of low income markets

17. Number of Chinese households, by disposable income, 2004 and 2009 Compiled from http://www.portal.euromonitor.comhttp://www.portal.euromonitor.com

18. Number of Indian households, by disposable income, 2004 and 2009 Compiled from http://www.portal.euromonitor.comhttp://www.portal.euromonitor.com

19. Forces of disruption to the innovation trajectory 1. The character of low income markets 2. The global diffusion of innovative capabilities

20. The global diffusion of innovative capabilities Learning in global value chains Global shares of R&D –(2%-1970, <10%-1990, 24%-2007) Education and training Growth of large emerging country firms

21. Forces of disruption to the innovation trajectory 1. The character of low income markets 2. The global spread of innovative capabilities 3. Radical new technologies allow for distributed production –Renewable energy, nanotechnology

22. Forces of disruption to the innovation trajectory 1. The character of low income markets 2. The global spread of innovative capabilities 3. Radical new technologies allow for distributed production –Renewable energy, nanotechnology 4. New innovators –Dynamic SMEs in rural areas –PPP

23. Capital and scale intensive Labour intensive, small scale High wages, low cost of capital Large market vibrant entrepreneurship Low wages, high cost of capital, Small market Weak entrepreneurship Inefficient Efficient A poverty-reducing growth path?

24. Capital and scale intensive Labour intensive, small scale High wages, low cost of capital Large market vibrant entrepreneurship Low wages, high cost of capital, Small market Weak entrepreneurship Low wages, high cost of capital, Large market vibrant entrepreneurship Inefficient Efficient A poverty-reducing growth path?

25. A perspective on linkages - Hirschman Financial linkages Consumption linkages Production linkages –Forward –Backward –Horizontal

26. Production linkages in the commodities sector Time Outside Mining Company core competences - win-win Value added Inside core Competences - win-lose

27. Policy Impact: Speeding and Deepening Linkages in commodities sector Time Outside Mining Company core competences - win-win Value added Inside core Competences - win-lose Speeding up Deepening Shallowing Slowing down

28. Determinants of linkages Intrinsic Contextual –Ownership –Infrastructure –Capabilities – skills and the National System of Innovation –Policy

29. Turning to Policy

30. The substance of effective policy design and implementation Strategy Policies Sanctions backing policy Policies which don’t contradict each other Policy capabilities Policy will Policy legitimacy Alignment of key stakeholders

31. The political economy of policy design and implementation Pro-poor “inclusive” innovation –TNCs – Fortune at the Bottom of the Pyramid? –Large indigenous firms –“Greedy” indigenous SMEs Making the Most of commodities –May have high entry barriers –But lost of opportunities for SMEs

32. So… Walking? Stumbling? Falling? Jogging? Sprinting?