TIA Strategic Corporate Business Plan Presentation S & T Portfolio Committee Cape Town

1. The Technology Innovation Agency (TIA): Mobilising resources for technology innovation led growth and development TIA Strategic Corporate Business Plan Presentation S & T Portfolio Committee Cape Town 24 March 2010 Presented by Dr Nhlanhla Msomi TIA Interim CEO

2. Contents • Introduction and Context • Strategic Vision and Intent • Strategic Architecture • SWOT and Risk Analyses • Stakeholder/Customer Perspective • Financial Perspective • Consolidated Financials • Innovation, Learning and Growth Perspective • Business Processes • Consolidated Business Plans • Biotechnology • Tshumisano – Technology Stations Program • Advanced Manufacturing Technology Strategy • Innovation Fund • Agency Management • Energy • Health Innovation • Strategic Investment Portfolio (SIP) • Operational Update

3. TIA Mandate & Vision The TIA Act [No 26 of 2008]: “The object of the Agency is to support the State in stimulating and intensifying technological innovation in order to improve economic growth and the quality of life of all South Africans by supporting the development and exploit ation of technological innovations” • The TIA Vision is to be: • “A world class innovation agency that supports and enables technological innovation to achieve socio-economic benefits for South Africa through leveraging strategic partnerships”

4. Introduction and Context • The TIA Act frames the mandate and its context (Mission and Strategic Objectives) • Mission provides the four strategic pillars • Appropriately structured financial and non-financial interventions • Human capital development for innovation • In partnership with the NRF and HEI’s • Developing a culture of innovation • Leveraging local and international partnerships • Strategic objectives – recurrent theme is competitiveness • Leverage – capital inflows for technological innovation/transfer • Support development of new products and services • Grow number of technology-based start-ups and SME’s • Support key industry sectors that are better able to utilize local and international technology innovation to enhance their global competitiveness • Immediate challenge is to build an organisation that can deliver on these strategic imperatives

5. Context II: Business Planning Process • Business Planning process framed by the Strategic context as provided by the Mission and Strategic Objectives • Three steps: • Risk and SWOT analyses • Determine the challenges and major risks, and how to mitigate them • Identify the range of opportunities and threats • Determining the Strategic Vision and Intent • Realistic timelines and achievable milestones • Moderate the expectations to fit the resources and capabilities • Adopt a measurable Strategic Framework • Balanced Scorecard approach (Stakeholder, Financial, Innovation, Learning & Growth, and Business Processes) • Consolidated Business Plan (‘business as usual’) – current portfolio • Addressing the challenge of the “innovation chasm” • Analysis and consolidation of the current portfolio (gap analysis) • Determining TIA’s positioning in the ecosystem (Investment Framework) • Market linkages (Strategic Investment Portfolio)

6. Strategic Vision & Intent Deliver the first products in the market from the National Innovation Strategies. Target one high impact product per Strategy Restructure and Consolidate the investment portfolio, focusing on new funding instruments and support modalities [Synergy and Leverage] Build the TIA organisation focusing on governance, HR, Finance, technology innovation management systems, tech SME dev, and branding FY 2010 - 2011 FY 2012 - 2013 TIA’s Strategic Intent: A world class innovation agency that supports and enables technological innovation to achieve socio-economic benefits for South Africa through leveraging strategic partnerships

7. RISK ANALYSIS • Based on the comprehensive identification of the major risks associated with merging ten (10) organisations and programs with different cultures and histories • Allows for a distinction between migration into a stable environment and merging into an undefined territory • Provides a set of mitigating strategies to be coalesced into a realistic Business Plan • Sets out key operational priorities • Identified nine (9) Risk categories • Strategic • Funding (Misalignment between Budget and Strategic Intent) • Governance • Human Capital • Financial • Legal and Regulatory • Stakeholder and Communication • Marketing (mainly Branding) • Political • Information Technology and Operational Platform • Activity Matrix derived from the interface between the priority risks and the Strategic framework (Balanced Scorecard)

8. SWOT Analysis • A SWOT analysis starts with a definition of the desired end state: “... stimulating and intensifying technological innovation in order to improve economic growth and the quality of life of all South Africans by developing and exploiting technological innovations.” • The elements of the SWOT analysis are: • Strengths: attributes of the organisation that are helpful to achieving the objective. • Weaknesses: attributes of the organisation that are harmful to achieving the objective. • Opportunities: external conditions that are helpful to achieving the objective. • Threats: external conditions which could do damage to the objective. • Likely to influence the Strategic Investment Portfolio design • Most weaknesses and threats being addressed as part of the Risk mitigation plans as they interface • Strengths and opportunities to be leveraged for building a performance focused organisation, able to provide a bridge over the ‘innovation chasm’ • Exploitation of the insights will evolve over the year

9. SWOT ANALYSIS

10. Strategic Perspective I: Stakeholder Perspective • Drives the two pillars of the TIA Mission • Building a culture of innovation • Leveraging local and strategic partnerships • Identification of key stakeholders in the TIA ecosystem: • Shareholder grouping (civil society, parliament and DST) • Beneficiaries of the TIA offerings (NSI, SME’s, industry, and provincial and local government entities like IPA’s, DFI’s) • Internal stakeholders (Board, Employees) • Strategic partners (local and international) • Funders • Technology (developers, in-source) • Skills development, Systems and Processes • Define an appropriate RoI framework for the key stakeholder (shareholder) • Visible products of the public investments on technology innovation • Alignment with national priorities (addressing the national challenges) • Appropriate positioning and instruments to bridge the ‘innovation chasm’ – market alignment • Critical Tools to leverage support and partnerships: • Communications • Strong positive branding

11. Strategic Architecture II: Financial Perspective • Drives all four strategic objectives and the Mission’s: • Appropriately structured financial and non-financial interventions • Strategic Investment Portfolio will require additional funding • A new Budgeting Model (alignment between Strategy and Budget) • Spending patterns will not reflect the re-positioning vis a vis the innovation chasm • Optimal allocation of resources between regions and programs • Appropriate Return on Investment framework based on new KPIs • Investment Policy and Management Framework • Understanding the funding, business support and market ecosystem • Assessing performance of the TIA portfolio • A Treasury management capability to optimise cash use • Increase leverage factor through appropriate financial instruments • Leveraged capital raising • Third party funds, co-funding and VC options • National Treasury • Exemptions (and Scheduling) issues • Revised Funding Model • Financial managements system (MSP, ERP, Audit)

12. BUDGET

13. Strategic Architecture III: Innovation, Learning and Growth • Based on the perspective that TIA is a knowledge organisation: • People and knowledge are its key assets • Provides template for organisational architecture including its design • Drives the key strategic pillars: • Appropriate financial and non-financial interventions • Human capital development for innovation • Addresses the challenge of building a new, performance focused TIA: • A Knowledge Management framework using a “shared language” for both strategic coherence and internal operational integrity • Human Capital development (both internally and externally) • Addressing the Innovation Chasm: • Business Advisory Servicesfor technology projects and start-ups • Centres of Competence • Appropriate in-bound technology modalities • Technology development infrastructure such as Platforms

14. Strategic Architecture IV: Business Processes • Drives the Strategic Intent of building a “world class innovation agency…” • Policy environment including procedures that are compliant with legislation • TIA Act • PFMA • Employment Equity Act • PAIA AND other relevant legislation • Performance Management framework, in line with the M&E • Risk Management function • Internal and financial; eliminate Audit failure risk • Master Systems Plan • Enterprise Resource Planning (ERP) system • Corporate Organogram (new paradigm defining portfolios) • Structured Investment management (corporate finance, fund management) • Economist portfolio, with market sector focus • New business processes • Business process mapping • Drives efficiencies and better performance • Change management driver

15. …TIA Functional overview: Model Funding Assessment & Recommendations Corporate Services Strategic Partnerships & Enabling Services Fund Management Technology Development & Innovation Technology Commercialisation Finance Advocacy & Capacity Development Centres of Competence (CoCs) Technology Nursery Seed/Grant ------- Soft / Convertible Loans / Equity ------- Venture Capital (PPPS) Legal Expert Services Advisory & Support services International Resources IT Receive, Assign, Assess Biotech & Health Strategic Relationships Energy Commercial & Business Expertise Knowledge Management Minerals Processing Portfolio Management, Monitoring & Evaluation Special Purpose Vehicles (SPVs) Manufacturing HR ICT In-bound Tech Transfer Marketing & Communication Risk Management Other Infrastructure Management Innovation for Social Impact (ISI) Internal Audit

16. FUNCTIONAL STRUCTURE Core 1 Core 2 Support 1 Support 2 Support 3

17. Technology Business Support and Advisory Services (aka Nurseries) • ESSENTIAL INFRASTRUCTURE • Technology stations • Technology platforms • Office and laboratory space • High value equipment • PROCESS / PRODUCT CONFIGURATION • (test the market) • Prototypes / clinical candidates • Essential data / proven technologies / processes • ADVISORY SERVICES • Portfolio managers • Project management • Business warehouse • ExpertServices • IP management • Commercialisation • Technology Transfer • Capacity/Infrastructure • In-bound technologies TECHNOLOGY BASED OPPORTUNITIES TIA • BUSINESS DEVELOPMENT • (identify market opportunity) • markets (what, types, sizes, dynamics, barriers, competitors, etc) • economic viability • commercial and legal (incorporation, business plan) • intellectual property (freedom to operate, strategic licensing VIABLE TECHNOLOGY BASED ENTERPRISES Techno- entrepreneurs Higher Education Institutions Science Councils

18. In-bound Technology Transfer - Strengthening the R&D base and reducing the development risk - OFFSHORE TECHNOLOGY SOURCES Research Development Production In-bound Technology Transfer based on assessed needs STRATEGIC TECHNOLOGY / SECTOR FOCUSED NEEDS (Royalties) $ Mapping local assessed needs to: (i) technologies available offshore and (ii) local technology and manufacturing capabilities Increased R&D and IP base Fast-tracked product development Improved manufacturing capabilities Bridging the Innovation “Chasm” Value added local technology Products & services Local IP and R&D base Research Development Manufacturing

19. CONSOLIDATED BUSINESS PLAN(S) I:Biotechnology Biotechnology Portfolio • Consolidated into one National Business Plan from the four merging entities • Initial Portfolio analysis performed – underpins the consolidated Business Plan • Sector consolidation driven from a market definition e.g. health, agri, industrial • The investments/projects grouped into these definable market sectors • Each market sector strategy divided into sub-groups defining actual products, e.g. under health there are diagnostics, drugs and vaccines • The main market sector groupings have developed: • Strategies for accelerated market entry, with a high level analysis of the global and South African markets • A pathway for consolidating investments/start-ups into critical mass initiatives • Framework for identifying a number of ‘High impact projects’ for the Strategic Investment Portfolio • To be managed on a multi-dimensional basis – technological innovation vs. market/industry • Increased In-bound technology transfer and Technology Business Support and Advisory inputs • Increased funding/optimal capitalisation

20. CONSOLIDATED BUSINESS PLAN(S) II:Tshumisano Technology Stations Program • Focus is on SME’s, using the Universities of Technology as the base • Closest to the intentions of the Industrial Policy Action Plan • Provides engineering capabilities, required for industrialising the other high technology innovation portfolios • Key industrial clusters include: • Agro-processing and Chemicals • Primary and Secondary Manufacturing • Tooling and Metal Casting • Human capital development for engineering and technical skills a key focus • Will provide a critical platform for: • Strategic Investment portfolio, through the manufacturing capability • In-bound technology by increasing absorptive capacity of SME’s • Synergies with Biotechnology (starch and biofuels) and AMTS on production platforms • National coverage • Increase Technology Stations to underserved provinces and institutions • TIA’s entry points into new regions

21. Expanding National Footprint Forthcoming Initiatives (building on work done by the migrating entities): • Mpumalanga (Technology Station in Agro-processing) • Northern Cape (Integrated Manufacturing Sector for Agro-food and Mining Industry) • North West – negotiations with Royal Bafokeng Holdings will continue to establish a manufacturing advisory Center for SME’s supplying the mining industry and other sectors

22. CONSOLIDATED BUSINESS PLAN III:AMTS • Advanced Manufacturing Technology Strategy • Development of technology platforms that increase SA’s competitive advantages in the following sectors: • Advanced Light Materials and Electronics • Advanced production Technologies • Predominant focus is applied research at Science Councils and HEI’s • Funding modality is mainly research grants • Strong focus on human capital development • Partnership with industry (students for industry readiness) • Technology Transfer Vehicles • Technology diffusion vehicles such as FAB labs (‘culture of innovation’) • Opportunity to link with the former Tshumisano programs for an integrated TIA Manufacturing Strategy (with both upstream and downstream capabilities) • Innovation Fund capabilities will assist in providing strategic leadership

23. CONSOLIDATED BUSINESS PLAN IV:Innovation Fund • Oldest funding instrument in the TIA family • Predominantly seed funding – a funder of last resort for technology start-ups • Provides a bridge to the Venture Capital industry by reducing the investment risk • No definite technology innovation sector focus, but recent focus on: • Metals and Materials • Manufacturing • Renewable Energy technologies • Funding programs • Technology Advancement Program (TAP), developing prototypes • Missions in Technology (MiTech), generating new technology ideas • Patent Support Fund (PST) • Seed Fund, taking prototypes into the market • NIC, NICLE and SA Bio Plan, catalysing a culture of innovation • Strong IP and Commercialisation capabilities • Will provide an anchor for the TIA in these key operational requirements • Some highly visible investments (e.g. Joule) • Anchor for future TIA brand development

24. CONSOLIDATED BUSINESS PLAN V:AGENCY MANAGEMENT • Programs defined in the TIA business case and migrating into TIA but: • No clear mandate for the TIA around its future strategic inputs into these progams • Separate governance structures, possibly reporting directly to the DST principals • TIA to provide only operational function, with no control over performance issues from a ‘value for money’ perspective: • Fund management • HR management • Temporary arrangement until the Migration issues are resolved with the Shareholder (DST) • Health Innovation • Opportunity to integrate some elements into the Biotechnology Portfolio • Projects could migrate over time into either TIA or other Science Councils depending on development stage • Energy • Hydrogen SA, the business opportunity could be managed from the Innovation Fund • TIA needs to build internal capacity to understand the portfolio for optimal future management • Grand Challenge, several components lend themselves to some TIA competencies • Planning for full migration should commence in FY2010/11 • Market ready opportunities could be transferred sooner (Altergy)

25. Sector-driven strategies • Limited socio-economic impact of technology driven focus • For optimal socio-economic impact, TIA’s interventions will be sector driven • Technology as a tool to impact on the sector and societal needs

26. Sector-driven strategiese.g. Health • 3 critical Sub-Saharan Africa heath-care issues – HIV/AIDS, Tuberculosis and Malaria • TIA inheriting small, under-resourced health related technology projects • Consolidate and align activities into two operational companies (diagnostics and pharmaceutical) • Strategic relationships with pharmaceutical majors – stimulate local pharmaceutical and diagnostics capabilities

27. Strategic Investment Portfolio:High Impact Projects • Clearly defined domestic market, pref. with a strong public sector pull (AMC): • Particularly national priorities such as health, education, rural development • Technology must be mature and IP possibly out of patent • Manufacturing bias • Ability of the in-house TIA • Commercialisation & IP unit to negotiate technology transfer • Technology project managers to source, evaluate utility, and facilitate transfer from technology sources to SME’s • Availability of an appropriate local private sector company (preferably SME) • Focus will be on current investment/projects portfolio, with the In-Bound strategy filling the gaps in the IP to move through the chasm: • Engineering capabilities required for product manufacturing provided by internal platforms such as Tshumisano and AMTS • Intensive mining of the inherited investment portfolio • TIA will develop and execute an Implementation Plan by Q4, FY2010/11 • Will require additional funding

28. High Impact Projects I • Biotechnology Portfolio • Human Health (anti-infectives) • Opportunity to consolidate investments into IP families with a higher probability of market entry • Have identified iThemba Pharmaceuticals as an ideal vehicle to develop HIV and TB drugs • Recently concluded an agreement with GSK to license TB library • Discussion to license, at no upfront cost, several HIV drugs in late stage clinical development • Developing a strategy to license several, already approved compounds with an intention to develop, long acting combination therapy • Very short lead times because the drugs are already approved • Leverage the medicinal chemistry capabilities of Emory University (Prof Denis Liotta) • The final piece of the Strategy is to utilise in-house TIA capabilities or in-bound technology to rapidly upscale manufacturing capability • Opportunity to utilise R & D Tax incentives • Will require an industry partner with already existing marketing /sales channels and logistics infratsructure (main target is State business)

29. High Impact Projects II • Biotechnology • Human Health (Diagnostics) • Opportunity to consolidate existing projects/start ups into one company with critical mass • Existence of some manufacturing capacity within one of the investments • Leverage partnership with Foundation for Innovative New Diagnostics (FIND) to rapidly build a product portfolio of cost effective, modern diagnostics for infectious diseases • Address the most burdensome diseases like TB and HIV • Improved outcomes • Cost effective • Better models and access • Expected lead time is less than 18 months • Requires DTi and DoH partnerships

30. High Impact Projects III • Biotechnology (Agri) • Production of industrial starch from cassava. • Location: Makhathini Flats (Northen KZN) • Components of the project: • Farming cassava • Factory for production of industrial starch (production of higher value modified starch could be considered at a later stage) • R&D activities and partners involved: • Plant breeding of improved cassava varieties for the production of industrial starch (ARC and UKZN) • Plant material multiplication of selected varieties to generate enough material for approximately 10,000 ha. • One important aspect is the production of disease free initiation material using tissue culture) (PGBI consultants and PlantBio tissue culture investments) • Business development • Feasibility study finalized (PGBI consultants). Shows financial viability under quite conservative assumptions with modest RoI (12%) • Factory technology and expertise provided by NIVOBA (Netherlands) • Funding: • R&D funded 50% by PlantBio-TIA and IDC • Commercial project funded by IDC (equity and financing), • NIVOBA as technical partner and option available for TIA to invest in any form. • Toongat-Hewlett has expressed interest in participating in the project (funding R&D and investing in factory)

31. High Impact Projects IV • Biotechnology (Agri) • Bioethanol production from sugar cane • Location: Makhathini Flats (Northern KZN) • Components of the project: • Farming sugar cane commercially with contribution of small scale farming component • Factory for production of ethanol as biofuel • R&D activities and partners involved: • Plant breeding of improved sugar cane varieties for the production of ethanol (SASRI) • Plant breeding of sweet stem sorghum varieties (UKZN, ARC) • Plant material multiplication of selected varieties to generate enough material for several thousand ha. • Business development • Tongaat Hulett • Funding: • Some R&D aspects funded by PlantBio, SASRI, IDC, Toongat-Hewlett • Commercial project funded by IDC and Tongaat-Hulett • Rural development component: • More than 10,000 ha of small scale farming • Direct industrial jobs in the order hundreds • Indirect job and business opportunities creation not defined but significant

32. High Impact Projects V • Biotechnology (Agri) • Bioethanol production from sugarbeet and another rotational crop • Location: Cradock (Eastern Cape) • Components of the project: • Commercial farming of sugar beet and complementary crop for rotation (candidates sweet stem sorghum, triticale grain) with contribution of small scale farming component • Factory for production of ethanol as biofuel from sweet crop biomass and grain • R&D activities and partners involved: • Plant breeding of improved triticale varieties adapted to SA conditions (U Stellenbosch) • Plant breeding of sweet stem sorghum varieties (UKZN, ARC) • PGBI, IDC, Sugarbeet SA. Prefeasibility study and bankable business plan finalized. Funding: • Some R&D aspects funded by PlantBio, IDC, Sugarbeet SA • Commercial project funded by IDC, CEF and Sugarbeet SA. PlantBio-TIA could negotiate option to invest • Rural development component: • More than 10,000 ha of farming including small scale farmers • Direct industrial jobs in the order hundreds

33. High Impact Projects VI • Education (ICT) • Partner with KZN DoE and Ethekwini Municipality for pilot • Based on Ethekwini’s connectivity (broadband network available in the townships) • Umlazi chosen as a location to connect the primary schools • Data Warehouse at the SmartExchange ICT Incubator • Robust, Netbooks ($150) for educational content – built for purpose • Content provided by DoE • Opportunity to develop other media like animation • Technology licensed from ITRI (Taiwan) • Local assembly opportunity (private sector partners identified) • Expected lead times: 6-12 months

35. High Impact Projects: Conclusions • Ring fenced budget • Ownership by the Board as a Strategic Programme • Managed by a Senior Manager • Continue to evaluate Portfolio for other opportunities • e.g. Fab Labs (for massification of technology and building culture of innovation) • Clear Board mandate on the target sectors • Formalised partnerships with relevant delivery departments like education • Provides entry point for setting up programs in the Regions (e.g. Free State • A Business Plan for this portfolio to be presented to the Board at its next meeting • Provides inputs for TIA’s contribution to the mid-year Lekgotla

36. Operationalising TIA Integration of 7 existing institutions: Board inaugurated in July 2009 CEO position advertised in August/September 2009 Interim CEO appointed October 2009 Comprehensive suite of operational policies (HR and Finance) finalisedand approved in December 2009 TIA Corporate Organogram approved by the Board December 2009 Migration Plans for three entities approved December 2009 Innovation Fund and Tshumisano Trust migrate to TIA in Jan 2010 NRF management contract for HR and Finance AMTS migrates into TIA February 2010 Biotechnology Instruments (BRICs) to migrate 01 April 2010

37. Recruitment Update • Search Partners International appointed to head hunt for the CEO • Process to be concluded by 1st Quarter FY2010 • CFO and Enterprise Risk Manager appointed • Chief Economist, Chief Technology Innovation Officer, Chief People and Culture Officer, and Group Executives • Short-listed (interviews 23-25 March 2010) • Finance and People & Culture portfolios posted internal recruitment commenced in February 2010 • All placement to be concluded by 31 March 2010 • Technology Innovation, Investment and Economist portfolios to be posted on Monday/Tuesday • All placements to be concluded by 30 April 2010 • All appointments for the Central and three Provincial nodes will be concluded by 30 April 2010

38. Operational Update • National office • Innovation Hub, Pretoria (consolidated space of BioPAD, Tshumisano) • Occupation 01 May 2010 • Provincial offices • Gauteng, Centurion (IF) • KwaZulu-Natal, Durban (LIFElab) • Western Cape (CBT) • Negotiations underway with partners in: • Free State (MoU) • Limpopo • Eastern Cape • Plans for NW, NC and Mpumalanga will be developed in FY2010/11 • Other Issues: • Finalise Operational Model (Q1) • Monitoring and Evaluation (ongoing) • Enterprise Performance Management (Q2)

39. Thank You!