To access a recording of the webinar on funding innovation, click here.

News Release. 2nd October 2020.

The government must arrest the decline in Innovation Funding

The government has been urged to boost its support for research and development (R&D) in South Africa, to help the economy to weather the economic storms of the Covid-19 pandemic.

The call came from Cova Advisory Director, Tumelo Chipfupa, following a webinar which he hosted on 01 October, on the impact of the pandemic on the R&D landscape in South Africa.

Government officials who took part in the discussion noted that the Department of Science and Innovation’s (DSI) main R&D funding incentive, the new Innovation Fund (formerly the Sovereign Innovation Fund), has been scaled back due to the overall squeeze on government finances.

“R&D plays a key role in industrial development and job creation,” said Chipfupa.

“We need to promote faster and more sustained growth, and investment in innovation plays a key role in this.”

He warned that at times of economic hardship, the erosion of business confidence means that companies often tend to cut their spending on R&D and skills development.

“Governments can play a big role in the promotion of R&D,” he suggested.

“Some countries have increased the generosity of R&D incentives - Germany and Ireland, for instance, have introduced new tax incentives.”

Chipfupa noted that in South Africa, 80% of innovation funding comes from within firms themselves, whereas the global trend is for less than half of all funding to be found through external injections.

“It is clear we are underusing incentives, or we have insufficient incentives for R&D,” he suggested.
However, he also argued that there are several programmes which support science and innovation, and firms undertaking research should look more widely for support.

“There is a broad range of government funding opportunities,” he said.

He praised the DSI for its responsiveness to the private sector and its effective communication with grant applicants.

Government participants in the webinar confirmed that private sector R&D has gone down as a proportion of overall innovation investment.

The government’s main R&D tax incentive has a sunset clause and is due to end in October 2022. Work is underway to assess its effectiveness and to see what support should be continued after the expiry date, with a decision expected early next year.

“Some form of support must continue as the economy will remain frail for a long time, and R&D is one area which will help to trigger and sustain recovery,” said Chipfupa.

“It is not in dispute that state incentives do lead to an increase in R&D by firms.”

For more information, please contact: Grant Whittaker, GWhittaker@cova-advisory.co.za.