R&D S pending in South Africa

1. R&D Spending in South Africa Neo Moikangoa and Adi Paterson CSIR

2. Context • R&D in South Africa • The Science Vote • The some industry research anecdotes • The way forward

3. R&D in South Africa • Benchmarking with the rest of the world • R&D intensity • Civilian R&D • Synergy with government spending • Government incentives • What does R&D spending “buy” • Personpower (50c in the Rand) • Facilities and Equipment (30c in the Rand) • Information provision, management and networking (20c in the Rand)

4. R&D Intensity • The primary measure of the knowledge and innovation capacity of a nation • Total R&D spending as a proportion of GDP • South Africa: 0.69% of GDP (R4.01billion) • Measure of the size of the “research base” • Pays for all South Africa’s active scientists and technological innovators • A key metric of the extent to which we participate in or can respond to the global knowledge economy

5. Comparing R&D Intensity

6. Civilian R&D Spending by Government • A measure of spending related to quality of life and economic growth • A measure of national commitment to S&T • South Africa: 0.29% of GDP • 0.44% in the US, 0.48% in the UK, • Around 0.6%: New Zealand, Portugal, Japan, Austria and Denmark • Countries at around 0.75%: Sweden, Norway, France, Germany, Netherlands • Iceland and Finland are close to 1%

7. Synergy in Spending(policy analysis findings) • Business spending on R&D does not “displace” government spending • When governments increase spending industry follows • Most “competitor” Governments now provide fiscal and tax incentives for R&D: South Africa does not – increases cost of R&D in SA relative to other countries

8. R&D in South Africa (cont.) • Private sector “participation” trends • Downsizing (e.g. Anglo, DeBeers, AECI) • Outsourcing (e.g. COMRO, AECI, Iscor) • Inflexible resources and shortages (IT, Communications) • Coherence with stated policy positions of Government • IT strategy, biotechnology strategy • New Higher Education policy • Inability of fiscal measures (alone) to leverage growth

9. Implications of Our de facto S&T Policy • Not attractive for the private sector to spend or invest in R&D • Government’s stated policy positions not supported by funding (more on this later) • South Africa is falling into the “Malaysia trap” • Investment and infrastucture without knowledge workers • Project and programmatic rather than substantive interventions • An unpopular cause – but you get what you pay for

10. The “Science Vote” • Most holistic perspective of Government R&D spending • Research Councils, National Facilities and SABS • NRF (agency) and International Programmes • The Innovation Fund • TechTransfer, and Special projects

11. Science Vote • Does not include • Special government research funds (e.g. Defence, WRC, SIMRAC) • Targeted programmes: THRIP (DTI) • DoE spending in univerities • DoC initiatives (for instance) • Intellectual property costs/returns to the nation • We do not yet have the “Science Budget” proposed in the White Paper on S&T (section 5.4.1): “It is the intention of government that a document setting out the Science Budget will be available for the 1998-99 fiscal year”

12. Change in the Science Vote? • The Science Vote • 1997/8: R1.183 billion • 2001/2: R1.508 billion, but • Adjusted for Inflation • 1997/8: R1.516 billion • 2001/2: R1.508 billion The de facto fiscal S&T policy of the government is to maintain R&D spending at identical real levels (but a greater number of programmes and activities are funded every year)

13. The Science Vote • The Science Vote is a partial “Composite Budget” funding different Departments • Department of Agriculture • S&T Branch of DACST • Department of Health • Department of Trade and Industry • Department of Minerals and Energy

14. The Science Vote • Real changes in distribution (given that the “total” is the same): • DACST is increasing its “share” of the Vote • DACST has significantly increased the number of funding instruments - in line with policy • MRC has received increased funding based on agreements reached through NACI • All other Departments (and consequently the Science Councils) have received reduced transfer payments

15. Real Changes in Funding – Science Vote (% of previous year)

16. DACST S&T Branch – Application of the Science Vote • Funding Changes in the S&T Branch • National Reasearch Foundation (post-graduate reasearch and education) has had real growth • Innovation Fund and LEAD (introduced after a pilot in 1997/8) are now at R152 million • New Initiatives: Regional S&T, Equipment Placement, GODISA, Technology Stations, etc (R32 million)

17. Application of Science Vote • Special projects: R20 million • Protection of Knowlegde infrastructure: National Laser Trust, AISA, IKS (R21 million)

18. Analysis: Application of the Science Vote Overall • Positives • A wider and more robust range of policy instruments and initiatives available • More focus on “linking up” a potentially fragmented system • Better funding of health and innovation • Much stronger emphasis on technology transfer • More stakeholders involved

19. Analysis: Application of the Science Vote Overall • Challenges/ Weaknesses • Funding level will not increase the “knowledge intensity” of South African industry • Too many small programmes run from DACST • The “standard measurement” of the R&D and S&T system is in disarray (must meet international minimum standards) • National risk (resulting from reduced funding) to the research institutions • No credible “policy voice” regarding S&T has emerged and its national importance is severely underestimated (Malaysia vs Korea)

20. Government’s Role • “[The] difference between private and social rates of return is the primary reason why governments must support R&D spending…If governments don’t support R&D spending, much too little R&D will be done…The economic payoff from more social investment [government funding] in basic research is as clear as anything is ever going to be in economics.” Lester Thurow, in Creating Wealth, pg 113, Nicolas Breasley Publishing, London, 2000.

21. Practical Proposals • Government civilian R&D spending should be doubled over 3 years with the increases going into 3 themes: • Centres of Excellence • Mission-driven research • Bilateral (science council – governemtn department) research capacity in the national interest {slide} • Fiscal incentives for companies doing R&D (based on international best practice) • Increase scope and comprehensiveness of Government’s “Science Budget” to improve overall strategy and management

22. Three Areas for IncreasedInvestment in R&D • Creation of “Centres of excellence” in identified fields via the NRF at universites (in partnership with science councils where appropriate) • 2 or 3 “mission-driven” research initiatives in key areas (e.g. Open source software, telemedicine, logistics for trade and investment, PBR) • Increased funding to science councils based on bilateral agreements with identified Government departments

23. Practical Proposals (cont.) • Engage the Department of Finance on the “Science Budget” and its implications • Create capacity to have annual R&D and Innovation surveys (based on Canadian Model) • Introduce the concept of “national risk” into S&T policy (loss of capacity, research migration overseas, health and disease risks, defence and national security, the digital divide, bio-divide) • Provide clear signals to private sector about government commitment to S&Tdebate