R&D efforts in South Africa must be accelerated



Research and development (R&D) spend in South Africa is not at the level it should be, which is hindering the country’s development, as R&D is a fundamental factor in driving economies in the long term, Cova Advisory and Associates joint MD Duane Newman said at the company’s R&D breakfast, in Johannesburg, on Friday.

He indicated that, globally, spending on R&D had been on the rise since 2000; however, there were bubbles where spending was considerably higher, such as in the US and China.

He noted that this showed that there was a direct correlation between the gross domestic product growth of a country and what was spent on R&D, with successfully growing economies spending well on R&D.

Newman emphasised the need for R&D spending to be accelerated in developing countries, postulating that one of the reasons for developing countries not developing fast enough was because they were not investing enough in R&D to stimulate the long-term growth of the economy.

He indicated that the multiplier effect from R&D investments was significantly more than on any other kind of capital investment and, therefore, had to be pursued sufficiently in developing countries.

In South Africa, and other developing countries, R&D spending was completely underscale, Newman said. He highlighted that South Africa’s R&D spend was stagnating at about 0.82% to 0.83% of GDP, which was considerably below its target of 1.5%.

Further, this showcased that the country was lagging behind global leaders in innovation.

Newman emphasised the need for greater efforts from government institutions to fund businesses carrying out R&D.

In terms of R&D funding in the country, he noted that the country was also way behind the curve with regard to using different sources of funding. Globally, 49% of R&D was funded internally, while in South Africa, this was much higher, at about 80%, meaning that the country was not capitalising on other sources.

Newman stated that tax credits and grants in the country were both underused, estimating this at about 20%. He noted that while government did provide good options for both of these, they were not being capitalised on.

He highlighted that the funding and incentive landscape in the country, therefore, needed to become more transparent and agile. While there were R&D incentives, these were not being fully utilised, and the processes and scale needed to be enhanced, Newman noted.

In this vein, government had undertaken two measures, mainly, to consolidate funding institutions and to consolidate the number of incentives.

Newman noted that tough economic times had shown that businesses were more open to approaching government for funding, because their own budgets were constrained. Therefore, with this being the current state in the country, he noted that this presents an opportunity to capitalise on R&D funding and incentives.

From an African perspective, Newman indicated that there were insufficient resources available on the continent for innovation and, further, that countries were not getting enough out of their available resources, because these were so fragmented.

Funding in Africa for R&D was low – only 1.3% of the money spent globally on R&D was spent in Africa. Newman noted that this shortage of investment was both a cause and an effect of other resource constraints.