Boost Innovation for Economic Growth

Boost Innovation for Economic Growth


Creating a country in which new ideas and inventions can thrive has been touted by many, including the government, as a solution to much of South Africa’s unemployment problem, particularly as the world shifts its focus to more knowledge-based economies.

South Africa has slipped in the innovation rankings from 36 to 41 out of 133 nations, according to the World Economic Forum’s 2009-2010 Global Competitiveness Report. This puts South Africa slightly ahead of fellow developing nation Brazil, but behind China,Malaysia and India. Though much of our poor ranking can be blamed on apartheid’s legacy of Bantustan education, many entrepreneurs who could be leading the way, are simply not getting the support they need.

While banks and venture capital houses shy away from funding new ideas, government funds like the Innovation Fund, the Technology and Human Resources for Industry Programme (Thrip) and the Support Programme for Industrial Innovation (SPII) focus more on supporting research and development (R&D) and not enough on injecting funds into commercialising an idea. A review by the Department of Trade and Industry of the SPII earlier this year concluded that the fund’s impact had been minimal as few firms participated in the scheme. The department is now conducting a study looking at the business case for funding the commercialisation of SPII projects.

One problem is that government’s funds are not widely publicised, something which Science and Technology Minister Naledi Pandor has even admitted. The Innovation Fund is such an example.Last year the fund received only 20 applications from technology entrepreneurs for one of its funds, according to McLean Sibanda, a senior patent attorney at the Innovation Fund. Applications only picked up to some 10 a month after a publicity drive by the fund.

High Risk

Another problem is that developing new ideas is a high-risk affair. Michael Kahn, a researcher with the Centre for Research and Technology points out that for an idea to succeed an entrepreneur requires energy, money and some kind of assurance that the idea will be protected – such as intellectual property laws.

But he says that the Intellectual Property Rights from the Publicly Financed Research (IPR) Act, which was signed into law late last year, may discourage some innovators, as it strengthens government’s grip on publicly-funded research. The act was introduced by government in an effort to stem the low rate of patenting at universities and the problem that patents were often bought by foreign companies and commercialised offshore,with no benefits accruing to South Africans. More can also be done to encourage firms to innovate, particularly as much of the country’s technology is still shipped in or adapted from other countries, while half of all patents registered in the country are held by overseas companies. South Africa invests a mere 0,9% of gross domestic product (GDP) on R&D – way off what China (1,4%)and European countries (2,3%) spend.

Incentive a Failure

Three years ago the government introduced a research and development tax incentive, but this has been something of a failure. Since 2006 only about 80 companies have benefited from the incentive according to a top government official, who could not explain why so few businesses had benefited.

Many have noted that the country lacks a co-ordinated approach to innovation that would make it easier for entrepreneurs to benefit from incentives and grant funding. But there are signs that the government may finally be getting it right, with the launch earlier this year of itsR720-million Technology Innovation Agency which will essentially bring together a number of funds under one roof to finance new ideas. The government is also targeting key sectors such as the pharmaceutical industry, space, science and technology, the development of renewable energy and solutions around climate change through the Department of Science and Technology’s 10-year Innovation Plan for South Africa(2008-2018).

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Stephen Timm is a freelance writer at Entrepreneur Magazine.