Innovation, digital economy engine to drive SA’s growth

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Johannesburg, 05 Oct 2020

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South Africa’s post-COVID-19 economy must be centred on stimulating innovation and the digital economy, says Nomalungelo Gina, deputy minister in the Department of Trade, Industry and Competition (DTIC).

Gina made the comments during one of the sessions at last week’s annual South African Innovation Summit, which took place online this year.

The deputy minister said the coronavirus has been aggressive in its disruption of the social economy and normal life, further deepening the country’s unemployment and poverty levels.

She pointed out that old economic methods are now dying a natural death, and the digital economy, whose bedrock is innovation, is taking over. “Innovation and digitisation will be a necessary condition for building this economy, and will help build various SMMEs of the economy.

“It is not an exaggeration that the symbiosis of innovation and digital economy is now a pervasive juggernaut that is globally tearing down any inhibitive firewalls.”

Gina explains that countries that have long embraced and cultivated innovations are now leading the world in terms of breaking new ground and innovation.

Prior to the COVID-19 pandemic, the South African government was already under immense pressure and this has now been exacerbated.

Data from Statistics SA shows gross domestic product (GDP) fell by 16% in the second quarter when compared to the first quarter of 2020, as the COVID-19 lockdown continued to take its toll on the economy. Jobs lost in the second quarter of this year hit the 2.2 million mark, reveals recent data.

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Unlocking potential value

The importance of the digital economy and innovation as economic drivers have long been emphasised.

At last month’s Huawei Connect 2020 conference, rotating chairman Guo Ping stated the digital economy plays a key role in economic growth. Ping noted the digital economy accounted for a third of China’s total GDP last year, a contribution of two-thirds to total economic growth.

In SA, the growth of the digital economy is said to be approximately R59 billion, or 2% of the country’s GDP, according to a document on the Department of Communications and Digital Technologies’ Web site.

In terms of innovation, the 2020 South African Science, Technology and Innovation (STI) Indicators report shows the state of STI in SA has been less than ideal over the past few years, with both private and public sector organisations urged to make an "extraordinary effort” in investing in innovation projects.

Business consultancy Cova Advisory has also urged government to boost its support for research and development (R&D) in the country, to help the economy weather the economic storm of the COVID-19 pandemic.

This follows the advisory firm’s webinar, which was hosted in partnership with the South African Council for Automation and Control.

Cova Advisory director Tumelo Chipfupa says R&D plays a key role in industrial development and job creation. “We need to promote faster and more sustained growth, and investment in innovation plays a key role in this.”

Chipfupa warns that at times of economic hardship, the erosion of business confidence means companies often tend to cut their spending on R&D and skills development. “Governments can play a big role in the promotion of R&D.

“Some countries have increased the generosity of R&D incentives − Germany and Ireland, for instance, have introduced new tax incentives.”

According to Chipfupa, in South Africa, 80% of innovation funding comes from within firms themselves, whereas the global trend is for less than half of all funding to be found through external injections.

“It is clear we are underusing incentives, or we have insufficient incentives for R&D,” he suggests.

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Providing assistance

To support innovation at grassroots level, the DTIC has introduced the Khoebo Innovation Promotion Programme (KIPP).

The grassroots innovators programme has two sub-schemes, according to the department. The first, the “Small Medium Enterprise Growth Scheme”, looks at enterprises already in existence that are looking to upscale and penetrate new markets. The second, the “Grassroots Innovation Funding Scheme”, focuses on grassroots innovators that are at start-up phase or trading on a small scale.

The DTIC has partnered with the Industrial Development Corporation on KIPP. The implementation of the programme throughout the country will happen in line with government’s rural and township economic revitalisation focus.

Gina says it is encouraging that SA has the Fourth Industrial Revolution Commission, whose work centres on giving the country a competitive-edge in the digital era.