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.
Join this policy forum to explore new sources of evidence to strengthen agricultural innovation in South Africa. Engage with speakers playing key roles in the sectoral system, including in industry associations, universities, businesses, government, and the media.
Why this policy forum, now
The South African White Paper on Science, Technology and Innovation (2019) places the modernisation and strengthening of agriculture firmly on South African’s innovation agenda. Vital to food and job security, skills enhancement, and increased competitiveness across local and global markets, the case for strengthening agricultural innovation is compelling and urgent. Agricultural actors—such as producers (smallholder to large-scale farmers, loggers, and fishers), formal agribusinesses (small, medium, and large), industry associations, financial institutions, and policy actors—face diverse challenges. These include: addressing climate change; improving production, processing and market efficiency; ensuring product and facility certification and compliance; and enhancing absorptive capacity for new and emerging technologies, including 4IR. How, then, can the innovation policy agenda be advanced to strategically enable actors to address these and future challenges, and to provide adequate and timely responses that build resilience in this sector?
The evidence provided by South Africa’s first national Agricultural Business Innovation Survey, alongside, for example, the Statistics South Africa Census of Commercial Agriculture, represent key recent empirical contributions to ongoing policy discussions. Using the available data as one of the tools, this policy forum aims to address questions in agricultural innovation from the perspectives of three sub-sectors—farming, forestry, and fisheries, including the actors impacted—and explore routes to address a series of key questions.
Key questions
Do existing science, technology and innovation (STI) policy instruments support innovation activity in South African agribusinesses as effectively as they could? Are there types of innovation that do not occur on a wide enough scale, or are ‘below the radar’, that we should promote systematically? What are the different strategies required to promote the distinctive patterns of innovation in different agricultural sub-sectors?
In different agricultural sub-sectors, do we need specific funding instruments for R&D-led innovation, technological upgrading, and organisation or non-technological innovation to transform the agricultural, food and nutrition system in a more targeted manner? How can DSI coordinate and align its policy, strategies and interventions with other stakeholders in the agricultural system of innovation, including related government departments, science councils and universities, financial institutions, and industry associations, to address the barriers and constraints?
Produced by the HSRC’s Centre for Science, Technology and Innovation Indicators (CeSTII) for the Department of Science and Innovation (DSI), the Survey delivers national data on the formal agricultural business sector’s innovation performance in the three-year reference period.
This high level, evidence-led virtual discussion on innovation and innovation measurement in South Africa on 28 August 2020 will feature key speakers from government, business, universities and civil society.
The eruption of the COVID-19 pandemic in early 2020 has resulted in rapid pivoting across government, business and civil society, as actors adapt to the plethora of new threats, risks, and opportunities. As the outbreak deepens in South Africa, the role of innovation cannot be overstated in evidence-led planning for the country’s economic recovery. South Africa’s White Paper on Science, Technology and Innovation, published in 2019, articulates a clear role of innovation in promoting sustainable and inclusive development in a changing world. It is therefore vital to interrogate the evidence we have on innovation, in order to inform the optimal policy mixes, which are fast-changing in relation to the urgencies presented by national and global, but also sectoral, COVID-19 responses.
This high-level policy forum will bring together high-level actors in a virtual setting to:
Launch the 2020 South African Science, Technology and Innovation Indicators report produced by the National Advisory Council on Innovation (NACI)
Present the latest reviews of the National Research and Development Strategy (NRDS) and the Ten Year Innovation Plan recently conducted by NACI
Share on new data sets produced by the Centre for Science, Technology and Innovation Indicators on behalf of the Department of Science and Innovation, including the Business Innovation Survey, 2014-2016, the Agricultural Business Innovation Survey, 2016-2018, and the Baseline Survey of Innovation in the Informal Economy 2018
Reflect on the role of indicators in monitoring the state of the National System of Innovation (NSI), by drawing in key perspectives from business, government, civil society and universities, and explore using evidence how South Africa’s NSI is geared towards inclusive and sustainable development
In 2020, we invite thought leaders and decision-makers from business, government, higher education, industry and civil society to consider their experiences and challenges, to highlight critical issues for measurement and policy-making going forward.
Key questions
What role can and should innovation play in South Africa’s recovery post-COVID?
What adaptations to current policy mixes should be explored, based on new evidence?
Do we have the right kinds of innovation measures appropriate to the South African context?
What have we learned about innovation from the experience of pivoting to the changes brought by COVID, across business, civil society, universities and government?
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.
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)
