R&D R&D SSpending in South pending in South Africa Africa

Neo Moikangoa and Adi PatersonCSIR

Context Context

R&D in South Africa

The Science Vote

The some industry research anecdotes

The way forward

R&D in South AfricaR&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)

R&D IntensityR&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

Comparing R&D Comparing R&D IntensityIntensity

Country R&D intensity

Spend (% greater than SA)

Per capita R&D spend ($)

South Africa

0.69% 0% $30

Sweden 3.1% 349% $592 (20x)

South Korea

2.8% 305% $346 (12x)

Canada 1.7% 146% $363 (12x)

Norway 1.3% 88% $316 (10x)

Civilian R&D Civilian R&D SSpending by pending by GovernmentGovernment 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%

Synergy in Synergy in SSpendingpending (policy analysis findings)(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

R&D in South Africa R&D in South Africa ((cont.)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

Implications of Our Implications of Our de de factofacto S&T Policy 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

The “Science Vote”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

Science VoteScience 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”

Change in the Science Change in the Science Vote?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)

The Science VoteThe 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

The Science VoteThe 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

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

Transfer from Science Vote to Department

1998/99 1999/00 2000/01 2001/02

Agriculture(ARC)

-17.3 -7.9 -9.6 -6.1

DACST(S&T Branch)

27.8 10.5 15.2 5.5

Health(MRC)

6.2 -2.4 29.3 11.7

Trade and Industry (CSIR, SABS)

-6.7 -5.1 -8.5 -3.6

Minerals and Energy(CGS, Mintek)

-7.1 -8.4 -9.6 -1.9

DACST S&T Branch – DACST S&T Branch – Application of the Science Application of the Science VoteVote

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)

Application of Science Application of Science VoteVote

Special projects: R20 million

Protection of Knowlegde infrastructure: National Laser Trust, AISA, IKS (R21 million)

Analysis: Application of Analysis: Application of the Science Vote Overallthe 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

Analysis: Application of Analysis: Application of the Science Vote Overallthe 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)

Government’s Government’s RRoleole “[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.

Practical Practical ProposalsProposals 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

Three Three AreasAreas for for IncreasedIncreased InvestmentInvestment in R&D 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

Practical Proposals Practical Proposals (cont(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