Distinguished Guests,
Ladies and Gentlemen
I would like to extend a warm welcome particularly to our international guests who have travelled from as far afield as the UK, Europe and India in order to join us at this international workshop on Measuring Systems of Innovation.
I would also like to commend our National Advisory Council on Innovation (NACI) on taking the initiative to convene this workshop as part of its broader research programme on tracking public expenditure on research and development (R&D) and, ultimately, the impact this has on the country’s knowledge economy and innovative capacity.
The workshop comes at an opportune time when the South African Government is particularly interested in the influence of publicly funded research and development on innovation, and ultimately on the achievement of our national growth and development goals.
In an intensely competitive global environment, our country’s future international competitiveness is determined increasingly by our ability to find better and smarter ways of doing things. And our ability to innovate will be the outcome of the quality and depth of our human and knowledge resources.
A number of short to medium term challenges to the attainment of our growth targets are set out in the recently released Accelerated and Shared Growth Initiative of South Africa (ASGISA). This initiative consists of a set of cross-sectoral interventions that will result in faster growth, while at the same time tackling the challenges of poverty, unemployment and inequality. The targets that have been set include:
- The reduction of poverty and unemployment by fifty percent by the year 2014; and
- The achievement of average economic growth rates of 4.5% between 2005 and 2009, and 6% between 2010 and 2014.
A number of sectors that are seen to be competitive with growth potential have been identified. Among the priority sectors currently under consideration are: bio-fuels; chemicals; metals and metallurgy; agriculture and agro-processing; creative industries; wood pulp and paper; as well as, clothing, textiles and durable consumer goods.
For South Africa to achieve and maintain higher levels of economic growth and job creation, we must become more proactive in the development and commercialisation of innovative technologies. Incremental improvements, imitation and adaptation, on their own, will not be a sufficient foundation for long-term competitive advantage and economic growth.
The 1996 White Paper on Science & Technology introduced the National System of Innovation as the basis of our science and technology interventions in the South African economy. Aligned with our national developmental priorities and programmes, such as the ASGISA and the National Spatial Development Programme (NSDP), amongst others, substantial progress has already been made in this regard.
This is reflected in the establishment of the Department of Science and Technology (DST) as a stand alone Ministry in 2004. The Department has the distinct mandate for governance of the cross cutting aspects of science and technology in the National System of Innovation. We have set ourselves the target of spending a minimum of 1% of GDP [of public and private] expenditure on research and development by 2008.
The Department’s ongoing efforts towards achieving further economic growth by stimulating research and development in the private sector have been given added impetus with the Minister of Finance’s February 2006 announcement of the 150% tax credit for R&D.
This new tax incentive means that, with a corporate tax rate of 36%, Government will forego 18 cents of tax revenue for each rand spent on R&D. What this effectively means is that the private sector has real incentives to spend more on research in support of their own business objectives. Given that the private sector expenditure on R&D currently amounts to about 0.45% of GDP, this tax credit could translate to a further R1 billion allocated to R&D.
Tax credits for private sector R&D investment has been tried and tested in a number of countries, including Singapore, Canada and Australia. In sectors such as biotech and agroprocessing, the estimated annual rate of return on R&D is over 40%.
As part of its coordinating role in the National System of Innovation, the Department of Science and Technology is responsible for compliance by publicly funded institutions with good corporate governance practices and alignment with the strategic focus of the NSI. In line with this, the DST is responsible for the monitoring and performance of science councils and has successfully introduced and implemented a key performance indicator reporting programme.
Among the key development and growth constraints identified in ASGISA is the shortage of suitably skilled human resources. These are particularly felt in science and technology based jobs. The development approach of the Department of Science and Technology is underpinned by efforts to realise the full potential of science and technology through the development of human resources. In particular, these efforts are aimed at increasing the number of young people that enter and remain in science related studies and careers. Centres of excellence and the renewal of academic research and innovation require a generation of young South Africans that are committed to the task of research and innovation based on knowledge advantages that we secure for ourselves.
Related to this, the Research Chairs Programme, which aims at producing 210 Research Chairs by the year 2010, has the potential to reverse the systemic decline in research outputs, focus and capacity at publicly funded higher education and research institutions as well as at science councils throughout the country.
In line with South Africa’s spatial development priorities, which are aimed at ensuring an equitable development spread among the country’s nine provinces, the DST is working cooperatively with specific provinces in order to harness and enhance a range of world class R&D capacities and positions of relative advantage.
The development of astronomy as a geographical advantage is a case in point. South Africa’s bid for the largest radio-telescope in the world (the Square Kilometer Array) – a $1.5 billion project - has been prepared with the full cooperation of the Northern Cape Government. This is just one example of exciting growth in our investment in science infrastructure. DST has secured new and additional resources to the level of R1.2 billion over the next 3 years to develop and renew science and technology infrastructure.
Cumulatively, these interventions and achievements are indicative of the growing robustness of South Africa’s National System of Innovation. Ongoing, coordinated and effective measurement of progress is critical to the Department of Science and Technology’s policies and the confidence the public has in our investments.
However, measuring our progress cannot be simply anecdotal. Reporting our achievements and identifying constraints needs a focus on outputs and impact not presently easily available.
We are confident that our understanding and measurement of the country’s R&D activity has significantly improved. This is to a large part attributable to the regular National Research and Experimental Development Survey undertaken by the Human Sciences Research Council (HSRC).
The 2003/4 Survey revealed that our national R&D expenditure of R10.1 billion amounts to 0.81% of GDP, which puts us firmly on track towards the envisaged 1% of GDP in 2008.
The National Advisory Council on Innovation (NACI) has now commissioned a project to supplement the R&D survey’s input measures with output measures. This follows a Cabinet request that output measures be provided which complement the R&D survey in order to improve understanding of the effectiveness of the national system of innovation. The Tracking Public R&D Expenditure project will yield further empirical evidence of the contribution that R&D makes in addressing the national imperatives of the country.
NACI has convened this workshop in the recognition that the discussions over the next two days can further guide the development of metrics for our national system of innovation with the aim of reinforcing the foundation for competitive advantage and growth as set out in ASGISA.
Such metrics should recognise the importance of:
- Both technology push and demand pull as factors influencing the rate of innovation;
- Attributes of the public policy environment and linkages to the innovation infrastructure as important determinants of national innovation potential
- site2016s in innovation management practices, types of innovation, innovation in the service sector and customer value; and
- National outcomes such as employment, economic growth, competitiveness and trade balance.
Werner Von Braun (who was literally a rocket scientist) once said *"Research is what I’m doing when I don’t know what I’m doing."*The question is: how does one measure or indeed value such an apparently purposeless activity?
During the last four decades OECD governments have used analytic tools to measure the input of resources to national R&D programs in the firm belief that R&D has a positive effect on economic growth, even though this relationship was not precisely described.
The first approach to measuring the benefits of S&T knowledge focused on the “linear” model of innovation where an investment in R&D would eventually lead to wealth creation or a social benefit. Current models take a much wider view of the innovative process, and recognise that R&D is only one of several inputs to wealth generation and social progress within a complex socio-economic system
Your work here today and tomorrow is of critical importance in shedding light on the current state of knowledge in respect of the measurement of R&D and innovation, and their relationship to other economic variables. Your discussions will hopefully also provide answers to a variety of questions relating to: How R&D can further contribute to economic growth and reduce poverty? How S&T spending produces high-level skills? How will public expenditure, as well as public and private knowledge development and application achieve sustainable development?
Developing robust metrics that clearly describe the dynamics of innovation is much needed in South Africa, and indeed, in other parts of the developing world. Having said that, I recognise that the work of improving such measurements is very much work in progress at this stage.
Innovation is inherently dynamic and constantly evolving. As such, no set of measurements can be complete, definitive and immutable. In keeping with this message, remember the KISS principle: Keep Innovation Systems Simple! That is - simple enough to describe them adequately, but not in a trivial way.
Enrico Fermi, talking of experimental science, said: "There are two possible outcomes: If the result confirms the hypothesis, then you’ve made a measurement. If the result is contrary to the hypothesis, then you’ve made a discovery." I hope you have a bit of both in the next two days.
It is now my singular pleasure to formally open the NACI International Workshop on "Measuring Systems of Innovation: Inputs, Flows and Outputs" and wish you well in your deliberations.
Thank you.
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