South Africa should actively engage local venture capital companies to encourage and facilitate joint investments in commercial science, technology and public-benefit projects, says Science and Technology Minister Naledi Pandor.

Speaking at the National Advisory Council on Innovation's Business Symposium on Science, Technology and Innovation Investment, in Pretoria, on Thursday, she stated that South Africa should further assist with developing a new generation of venture capital companies through mechanisms such as the National Treasury’s Venture Capital Company Tax Incentive scheme.

“Similarly, we should make special effort to offer Technology Innovation Fund opportunities to international venture capital companies that command large resources. Such a move would improve South Africa’s access to second-stage financing and local innovation would benefit from these companies’ experience and expertise,” the Minister stressed.

Another option for attracting greater research and development (R&D) investment to South Africa included the Chilean option based on a “centres of excellence model”, Pandor said.

“The World Bank uses [the centres of excellence model] to support science and technology in Africa. The Bill and Melinda Gates Foundation uses it to fund health research in Africa. The African Union uses it to further science and technology in Africa,” she said.

The model encouraged international laboratories and units of universities to locate to Chile. However, critics of the Chilean programme said the right approach was to pour money into Chilean universities, adding that international centres of excellence encouraged “technocolonialism,” and that foreign centres focused on commercialising, in Chile, technologies they had already developed in their home countries, according to Pandor.

“I'm sure there is some truth to these criticisms. But it's worth exploring if we are to see a step-change in global R&D [investment] in South Africa,” she suggested.

Fifteen years ago, China hosted 200 foreign-run R&D centres. Today, that number has grown to more than 1 500 international innovation facilities throughout the country, while South Africa recently celebrated the launch of three innovation centres.

INVESTING IN R&D
Pandor noted that government’s real investment (adjusted for inflation) in R&D was R14.7-billion in 2013, similar to the sum invested in 2004 with only a slight increase in the years in between.

In higher education, the real investment in R&D had continued to grow from R2.6-billion in 2004 to R4.5-billion in 2013.

However, real investment in business R&D was R6.5-billion in 2013, falling back to levels invested in 2004.

Pandor pointed out that innovation expenditure and activities undertaken by the business sector had a more direct and immediate impact on gross domestic product growth, exports and employment than innovation expenditures and activities in other sectors.

“Accordingly, from a developmental and growth perspective, declines in the share of business expenditure in R&D (BERD) are a major concern,” Pandor said, noting, however, that the latest survey from 2014 showed an improvement in business R&D.

Consequently, the Department of Science and Technology (DST) focused on policies in areas in which government had direct control, meaning the DST would maintain and hopefully increase the levels of R&D investment in the government, higher education and science council sectors.

“Science councils depend on additional revenue from contract R&D and they are affected by a reduction in BERD. We are in discussions over how their funding levels can be supplemented during the current period of low business confidence,” Pandor said.

The DST would also maintain policy stability on government assistance for R&D for the business sector.

“There will be continuity and certainty on the R&D tax incentives and other direct R&D incentives to encourage both local and foreign investment in R&D performed by business,” she noted.

Other focus areas included funding innovation for small, medium-sized and microenterprises, particularly in biomanufacturing and nanotechnology at the Council for Scientific and Industrial Research, as well as furthering the Department of Trade and Industry’s Technology for Human Resources in Industry Programme (Thrip), which would continue to support hundreds of research projects at universities and science councils.

The Thrip model was based on the principle of a public–private partnership, with funding for each project being provided by the industry partner and the DTI, the latter to the amount of about R180-million a year.

In the 2014/15 financial year, it supported 296 projects and 1 548 researchers, and produced 45 patents, 294 products and prototypes and 1 311 publications, Pandor said.