Innovation is widely recognised as a key ingredient in the growth of economies. At firm level, it is equally vital as a capability for businesses to cooperate and compete. International collaboration occurs when enterprises work together across borders with partners on joint innovation projects and is one way that businesses can optimise the innovation process on a much wider level.
Drawing on the latest available national South African innovation and R&D data, this fact sheet shows that while some South African businesses already collaborate internationally on innovation, more collaborate through local innovation partnerships, which includes R&D partnerships. As such, potential opportunities exist for more South African firms to share skills, risk, and resources by expanding joint work with international partners. Where international collaboration is not taking place, the barriers preventing it need to be understood and addressed at policy level.
Data collected through the surveys, and their historic data series, inform decision-makers on investment planning, policy-making, advocacy, and research in South Africa. Data streams also add to benchmarking and performance comparisons with our international counterparts. Please note that some indicator totals may be subject to rounding errors.
The South African manufacturing and services sectors remain squarely in the crosshairs of economic and industrial policy makers and, equally, business leaders and sector analysts. Whether to stimulate much-needed growth, as in the case of the manufacturing sector, or to adapt to widespread technological change, as in the case of services firms, the argument for a reimagined industrial strategy could not be more compelling or urgent.
In this context, innovation is centrally positioned as both a key engine of development and a catalyst for growth. However, little is known about the impacts of innovation on productivity in manufacturing and services businesses in South Africa, with studies focussing mainly on the role of R&D.
Showcasing new econometric modelling, using data from the South African Business Innovation Survey, 2014-2016, the seminar will delve into relationships between different types of technological and non-technological innovation and business productivity. Policy issues and questions for discussion with national and sector stakeholders include: what factors or firm characteristics influence the decision to innovate? What support mechanisms incentivise innovation? Is the relationship between innovation and productivity always positive?
Date: 23 June 2021 | Time: 12h30 – 14h00 | Hosted on: Zoom
Moderator:Godfrey Mashamba, Deputy Director-General: Evaluation, Evidence and Knowledge Systems, Department of Performance Monitoring and Evaluation (DPME)
Discussant:Saul Levin, Director: Trade and Industrial Policy Strategies (TIPS)
Presenters:
Dr Amy Kahn project manages the Business Innovation Survey at CeSTII. Her research at CeSTII has focused primarily on R&D, innovation and productivity in South African firms. She graduated with a PhD in Economics at the University of Cape Town in 2020 and has several years of experience running large scale socio-economic surveys in South Africa and East Africa.
Dr Atoko Kasongo is a statistician in CeSTII providing statistical support to all Centre projects. She has a research interest in R&D and innovation, as well as financial sector economics. She graduated with a PhD in Economics at the University of the Western Cape Town in April 2020, and has many years of experience in the academic arena working as a lecturer.
This seminar is funded by the Department of Science and Innovation (DSI). The views and opinions expressed therein as well as findings and statements of the seminar series do not necessarily represent the views of the DSI. Please also note that this seminar may be recorded and published on the HSRC podcast channel.
“It is necessary to nurture innovation as a key objective within the economic development sphere,” the Plan states.
The objective will be to develop new types of approaches, solutions, processes and materials which will have the potential to clearly identify the region as one which is conducive to creativity, innovation and design. We seek to establish a regional culture that supports and evokes industry collaboration and to scale sustainability, innovations and technology. (p.16)
As the Plan’s strategic cycle draws to a close, the launch of the National Advisory Council on Innovation’s 2019 STI Indicators report, as part of its provincial roadshows, provides an excellent opportunity for critical reflection on progress toward these goals and an opportunity to highlight plans for the new 5-year strategic cycle.
Nested within a national systems of innovation perspective, but with a clear focus on the provincial lens, the programme is designed to catalyse a reflective and formative conversation, between and across sectors, with key business and government stakeholders sharing needs, programming and strategy lessons, and ideas for the future.
About the 2019 NACI Provincial Roadshow: The NACI report assesses STI performance in terms of quality of life and wealth creation, enabled by business performance through innovation, a framework informed by the National R&D Strategy of 2002. In 2019, we invite thought leaders and decision-makers from business principally, but also government and industry associations, to consider their experiences and challenges, to highlight critical issues for measurement and policy-making going forward.
Key questions
What does an innovative regional government look like and why is this important in the regional innovation system?
What does a regional culture of innovation that is conducive to the needs of diverse industries and the businesses within them look like and how can a region be positioned as an innovative region?
How is the Western Cape regional innovation system performing in terms of providing an enabling environment for innovation in order for Western Cape businesses to remain competitive and to create opportunities for job creation and economic growth?
How does the structure of industries nationally enhance or circumscribe provincial innovation, particularly in terms of human capabilities and networks?
Is the Western Cape geared to respond to new urgencies and global challenges, such as environmental change, and how can business innovation stakeholders play a more active role in this respect?
The Centre for Science, Technology and Innovation Indicators (CeSTII) and the National Advisory Council on Innovation (NACI) are pleased to invite participation in an innovation data hackathon taking place from 11-13 September 2018.
“By working in new and creative ways with user communities such as firms, policy makers, media houses, and researchers, this effort represents a significant opportunity for CeSTII to widen participation in and deepen knowledge of the country’s innovation data, which is vital to a more innovative South Africa,” says CeSTII director, Dr Glenda Kruss.
Join a hackathon team, or join the audience
There are limited spaces for individuals to join a multidisciplinary hackathon team of six people per team, and to take part in a facilitated process including a technical briefing, hands-on team mentorship by experts, and a final pitch and judge session.
“NACI will incorporate the inputs from the multidisciplinary teams that are participating at this hackathon event to improve the user experiences of the NSTIIP and also for its upscaling,” says Dr Petrus Letaba, the NSTIIP’s project manager.
But there is also an option for interested parties to join the hackathon audience as ‘critical friends’.
“We know that businesses, industry associations, government policymakers, research institutions and the media all have a stake in a strong national innovation dataset,” says hackathon lead facilitator, Dr Pieter Van Heyningen.
“So we are also looking for a strong cohort of people from these groups to help us guide the teams, either as active mentors or as part of our hackathon audience for the opening and closing sessions.”
Says Van Heyningen: “This hackathon is in fact a rare chance for researchers, innovation managers, journalists, creatives, and web developers from diverse sectoral backgrounds, working in a fully catered for space, to rapidly expand their networks and collaboration capacities, while making innovation data work better for the user groups that need it most.”
Hackathon contacts
For more information or if you have questions, write to:
Gerard Ralphs, Centre for Science, Technology and Innovation Indicators, Human Sciences Research Council gralphs[at]hsrc.ac.za, 021 466 8000
Dr Petrus Letaba, National Advisory Council on Innovation, petrus.letaba[at]dst.gov.za
Dr Pieter Van Heyningen, SustNet, pieter@sustnet.com
About two thirds of South Africa’s GDP now consists of contributions from the services sector, which ranges from banks and insurance companies to tourism, hospitality and personal services. This means that policymakers, industry leaders, lobbyists and small business owners should all be concerned about the sector’s potential to fix the biggest challenges facing the South African economy – poverty and inequality.
About two thirds of South Africa’s GDP now consists of contributions from the services sector, which ranges from banks and insurance companies to tourism, hospitality and personal services. This means that policymakers, industry leaders, lobbyists and small business owners should all be concerned about the sector’s potential to fix the biggest challenges facing the South African economy – poverty and inequality.
For a long time commentators believed that an economy can only diversify and grow through following a model of industrialisation. But there’s a growing consensus that the services sector can contribute to economic transformation in emerging economies.
The South African services sector has traditionally involved low-tech activities. Examples include food, personal or legal services. These are limited to domestic markets which means that, for the most part, they can’t be traded or exported.
But recent technology developments have led to a raft of a modern and tradable set of service industries that are delivered digitally. These have popped up in different areas, like finance, transport, hospitality and information, communication and technology.
On top of this, technology has disrupted traditionally non-tradable service industries. Examples include Takealot.com, GetSmarter, and of course, Uber and Airbnb. All of them are models that show how technology and big data can lead to sectors being completely disrupted and overhauled, creating new types of enterprises and jobs.
Unfortunately, debates about changing South Africa’s economy usually ignore these developments and the role that innovation and technology can play in transforming the services sector.
Innovation in South Africa
Innovation refers to the introduction of a new good or service (product), a process, or a new organisational or marketing method. It can be new to the firm, the market or the world. Innovation in services has a strong human dimension, selling, marketing and delivery are critical, as well as close customer integration.
Using data collected by the Centre for Science, Technology and Innovation Indicators, which does surveys on behalf of the Department of Science and Technology, we pieced together an understanding of the innovation dynamics in the finance and the wholesale and retail sectors. These are the service sectors that contribute most to GDP.
We discovered trends that show there’s huge potential for innovation across the services sector.
Data from 2010-2012 suggests a healthy scale of innovation in South African services sector firms. This is particularly true, but isn’t confined to, financial services where one of the most prevalent innovations was in marketing.
We also found significant innovation trends in wholesale and retail, where a higher proportion of firms produced products that were new to the market.
The finance firms spent almost seven times more on innovation activities. Their innovation expenditure as a proportion of their turnover was likewise seven times greater.
Both sub-sectors received almost the same turnover from sales of new to the market products– around 17%. This suggests that there may be a greater return on innovation investment for the wholesale and retail firms, which spend less.
Comparing the two services sub-sectors also suggests that there are a variety of ways that innovations can be implemented.
Incremental innovation, through small improvements that build on one another, was more prevalent in the wholesale and retail firms. This took the form of training and investment in new machinery. Finance firms also spent on incremental innovation. But they were more likely to conduct R&D in-house.
All of these firms experience barriers to innovating on a large scale. The main ones were market uncertainty, competition and lack of qualified people. Firms that innovate in the two sub-sectors experience these barriers in different combinations and scales.
Potential impact
There is significant potential for globally competitive and local job-creating services firms that could help South Africa’s economy grow in different ways.
Haroon Bhorat, director of the Development Policy Unit at the University of Cape Town, and other academics argue that South Africa’s services sector needs to become more export orientated so that it can access larger global markets. This in turn, they argue, will drive structural transformation so that our economy does not over-rely on the traditional mining or agriculture sectors, and will grow local employment.
Currently, South Africa lags behind other emerging economies when it comes to expenditure on R&D and innovation. But a shift will require businesses to get involved in more innovation and knowledge intensive activities. These, in turn, need support from public funds.
The Department of Science and Technology is developing a new policy framework on science, technology and innovation. Current policy tends mostly to support R&D driven innovation, for example, through a tax incentive for expenditure on R&D. But there’s room for more interventions through incentives to support improvements in production systems, branding and marketing activities, as well as export promotion.
*Cheryl Moses, Hlamulo Makelane, Precious Mudavanhu and Gerard Ralphs contributed research and writing.
On 25 May 2018, about 60 industry association leaders, government officials, researchers and entrepreneurs gathered at Gauteng’s Riversands Incubation Hub. On the agenda? Innovation, government and Industry 4.0. This post shares the final programme and speaker list, presentations and Tweets from @HSRC_CeSTII.
Image credit: Department of Science and Technology
Ok, we’re on… Joanne Yawitch from National Business Initiative underscores the importance of as a country, region and continent, where disruption happens on a daily basis and the issues it throws up are big.
Yawitch: We need as SA to be looking in a focused way at the future of skills and future of work. We need to build the momentum for a more focused and dynamic partnership between government and the future of work. #IAID2018# @BusinessUnitySA@dstgovza@the_dti
Patel: SA has not yet crafted a policy vision for Industry 4.0. We are working on this! President Ramaphosa has established an advisory council. #IAID2018@ResearchAfrica
Patel: SA is going through process of re-looking the 1996 White Paper. We need to strengthen the national system of innovation. We need a greater level of inclusion in the fruits of the innovation process. #IAD2018
Patel: Are we including people in rural areas in the fruits of the innovation process. Transformative change is key to our discussions of Industry 4.0 in SA. We need indicators of *positive* change. #IAID2018
Patel: Japan doesn’t talk about Industry 4.0 but Society 5.0. The issues at stake are not just about disruption, but also how the rewards are shared. #IAID2018@ifrafrica
Patel: We need inclusion, transformative change, and transformation. But how do we set plans + priorities? This needs to be done in an inclusive way. The Decadal Plan is one way. We need understand private sector needs. #IAID2018
Patel: In addition to engagement, we also need partnerships! We are complementing existing initiatives, e.g. THRIP, with need partnerships. E.g. Sector innovation funds. #IAID2018
Patel: Our Sector Innovation Funds we want to expand… Also: We are working on the Next Generation Mining initiative – partnership Minerals Council SA and manufacturing sector, to reach reserves that are difficult to get to. #IAID2018
Mike Colley: We have challenges in terms of anticipating crises in SA. We need to change our thinking – and this has to change at all levels. #IAID2018
Nonkululeko Shinga @the_dti: Both businesses and government need to get smart about working with data and interoperability between systems/machines. #IAID2018
Shinga: We have brilliant innovators in South Africa. We have the ability to innovate. But the challenges are at the level of absorption of #innovation + the uptake of research. We have world class research + science councils. #IAID2018
Shinga: We need to build a culture of collaboration and of information sharing. We often say there is a gap between government and business, and there are trust issues. But seminars like this help us to identify + share our needs. Industry needs to input into policy. #IAID2018
From the floor… We have lots of conceptual speak from government, but we need a action mindset, particularly where the ‘rubber meets the road’. Entrepreneurs are avoiding regulation! We need more pragmatism & culture of inclusivity #IAID2018
From the floor… Businesses are investing heavily in training, b/c people are coming to businesses with the wrong skill sets. We need government to work with us to get the right skilling. #IAID2018
#InnovationDay, Too many big businesses still go beyond SA’s borders to get research done, it’s not going to work. We need to use our own universities.
Imraan Patel Deputy-Director General Socio-economic Partnerships @dstgovza We cannot solve our problems alone. Upcoming investment + jobs summit reflect the need to align. #IAID2018
Dr Glenda Kruss & Dr Moses Sithole on the spot now talking about why SA collects STI statistics. “Governing without data is like driving without a dashboard.” @BizInnovationSA#IAID2018@dstgovza
Kruss: Industry associations + firms can use SA’s R&D and innovation datasets to inform their strategies + performance plans. @BusinessUnitySA#IAID2018
Sithole: More firms innovate than do R&D – in SA, in Africa, all over the world. This poses a very interesting set of policy questions in terms of how firms + governments support innovation. #IAID2018
Practice Leadership Panel, moderated by @henramayer of Innocentrix. We have manufacturing, renewables, and information technology on the panel. #IAID2018
Mayer: We need to have more conversations like these about innovation in South Africa. We have the capability in South Africa to innovate for Africa and the world. #IAID2018
Brenda Martin CEO of the South African Wind Energy Association SAWEA says lots of innovation in wind sector – blades/turbines/etc. The bottlenecks for a long time have been political. But now new power agreements signed. Market re-structuring is key. Regulations are restrictive!
Martin: R100bn industry. We need to create a more conducive environment for wind companies to invest in SA. We need to transform the demographic of the sector. We need to reduce procurement blockages – but also spread the benefits. #IAID2018
Martin: SAWEA needs to show leadership in the SA energy transition. But we can’t do this in a vacuum. We need policy certainty in SA. It is essential that citizen access to rooftop power is enhanced. Current regulations are stifling. @_sawea#IAID
Philippa Rodseth Executive Director Manufacturing Circle is up. Lack of coordination, alignment and policy certainty are absolutely key to innovation in the manufacturing sector! #IAID2018
#InnovationDay discussing what industry can do to support an innovation agenda. Another panel discussion representing agriculture, manufacturing, wind energy and ICT. pic.twitter.com/DNySZ0hrGV
Rodseth: Manufacturing Circle is an apex body. We are interested in unpacking the real threat + opportunity of Industry 4.0 for manufacturing. Jobs will be lost, but jobs will be gained (in different skills areas). We call this ‘shift’. #IAID2018
Sunil Geness President + Director Information + Technology Association of SA. ITA set up an inaugural ‘Future of Technology Forum’ to share knowledge/flow. @GENESSSA#IAID2018
Geness: Data is gold. In our industry – we need to ensure that individuals ‘at the bottom level’ in a society how important this is… Industries need to set governance frameworks to work with this. #IAID2018
Geness: Where is SA getting left behind? We are getting caught in consumerism. We need to lift our heads. We need skilled people. We need to be very cautious / take care of humanity. #IAID2018
From the floor… We need to think very innovatively about the education and training landscape. Industry associations have an opportunity to play a key leadership role to address skills shortcomings establish systems + processes where occupational skillset recognition. #IAID2018
Martin: South African Wind Energy Association has adapted skills programmes to equip SA for the energy transition. E.g. the Wind Turbines Technicians Training Programme. In US this is a fast-growing employment area. But we need policy certainty – for career paths, too. #IAID2018
Rodseth: Manufacturing Circle supporting National Business Initiative on a study of skills in the manufacturing sector. We need to be training for skills of the future – and we’re needing to connect better to the training sector on this. #IAID2018
Geness/Rodseth: The start-up environment has not been working in SA, and so is the venture capital space. Access to market + access to finance are the key blockages. #IAID2018
From the floor… Is it possible for big firms to set up ‘wings’ in the premises for small players to work on their machinery? Small entrepreneurs are blocked and need small enabling opportunities… #IAID2018
Roux: The role of an R&D organisation like the SA CSIR is to lower the risk for industry on its journey to commercialisation. CSIR has many platforms for industry to access its infrastructures, programmes + networks #IAID2018
Roux: CSIR is working on the ‘Bollywood of SA’… we want to see more TV stations online via mobile phones in an affordable way. CSIR is developing an industrial strategy. #IAID2018
Roux: One key priority for the CSIR 18/19 – establish a 4th Industrial Revolution centre, in collaboration with industry players i.e. a lab where disruption can be tested. #IAID2018
Contrary to the view that diversification and structural change only result from industrialisation, there is growing consensus that the services sector can contribute to economic transformation in emerging economies. This is potentially good news for South Africa given the growth of the services sector to 65% of GDP by 2014, and the proliferation of Industry 4.0. This Research Brief uses data from the Business Innovation Survey 2010-2012 to illuminate the character of innovation activities* in two key services sub-sectors: wholesale and retail trade (WRT), and finance, real estate and business services (FI). These sub-sectors are now central to the South African economy in terms of their contribution to GDP growth, and their advancement is therefore a key consideration for economists, lobbyists, business leaders, and policy makers alike.
CeSTII performs national surveys that underpin benchmarking, planning and reporting on R&D, innovation and technology transfer in South Africa, including the South African Business Innovation Survey 2014-2016.
Our Research Briefs are concise papers based our ongoing work. Their goal? To provide empirical evidence and informed opinion that policy- and decision-makers can use to strengthen the quality of their thinking and action.
*Data presented in this paper is drawn from the South African Business Innovation Survey 2010-2012. Research Brief No. 3 was first published in May 2018.
There is growing consensus that the services sector can contribute to economic transformation in emerging economies, contrary to the long-held orthodoxy that diversification and structural change only result from industrialisation. This is potentially good news for South Africa, given the growth of the services sector to 65% of GDP by 2014—growth that has occurred at the expense of the manufacturing and mining sectors. The risk is that growth in services may reflect new ways of increasing asset values through new types of speculative financial products that have a high GDP effect, but little effect on positive structural economic change. Bhorat et al (2016) therefore ask the core developmental question: Can South African exploit this shift to build globally competitive, employment-creating firms that can drive structural economic transformation? – Kruss, et al (2018)
Large-scale disruption and fast-changing competitive patterns are a norm in today’s economic landscape. Innovation is a bedrock of successful firms and economies. In this context, firms not only draw from their internal resources but also draw from actors in their external environments, including industry associations, universities, consultants, and governments. Industry associations, in particular, already play a pivotal role in supporting firms to adapt to new trends through the support they offer to their members. How can this support be enhanced?
A collaboration of the Department of Science and Technology, and the Centre for Science, Technology and Innovation Indicators of the Human Sciences Research Council and Business Unity South Africa, the Industry Associations Innovation Day 2018 will take place at The Canvas Riversands, Fourways, on 25 May 2018.
TheIndustry Associations Innovation Day 2018 is envisaged to facilitate a dialogue between industry association leaders across the range of sectors, thought leaders, researchers, and government, as well as encounter case studies, on how some industry associations are tackling the innovation question with and for their membership.
*Note: The agenda has been updated to include speakers from the National Business Initiative, Council for Scientific and Industrial Research and Information Technology Association of South Africa
KEYNOTE: Innovation, government and Industry 4.0: South Africa’s policy vision, Imraan Patel, Deputy-Director General, Department of Science and Technology
This blog has been designed as a resource for interested parties to learn more about the South African business innovation surveys and their data. It’s also a practical resource to support and encourage firms responding to surveys.
Content pillars
We’re blogging in four key areas, which you’ll see across our posts. These are:
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