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.
“Current policy instruments to promote innovation do not consider all of the drivers of innovation investment and success, and there is a need for a mix of tools – known as policy levers – that explicitly consider the differential impact of these drivers on product versus process innovation,” argues Kahn (2022) in a new HSRC Policy Brief.
Thursday, 24 February 2022 – On 14 March 2022 South Africa’s official Business Innovation Survey gets underway with fieldworkers reaching out to 5 500 businesses over the next six months.
This will be the seventh time the survey takes place in South Africa, which is performed by the HSRC’s Centre for Science, Technology and Innovation Indicators for the Department of Science and Innovation.
Innovation is internationally recognised as a key driver of economic growth. It takes place in many businesses – big, small, micro and informal. Countries are best placed to solve wide-ranging social and economic challenges when innovative products and processes are adopted, and technological capacity is built.
Covering a three-year period, 2019 – 2021, the business innovation survey method uses international measurement tools to compare South Africa with other countries.
The survey collects information about a business’s innovations. This may include new products, new processes, as well as improvements to existing products or ways of working.
“South Africa faces considerable economic challenges, worsened by COVID-19. Measuring our capacity to innovate and thus grow our economy and increase employment is now especially relevant” says Dr Glenda Kruss, head of the CeSTII.
Business leaders will be contacted by fieldworkers from GeoScope, the HSRC’s fieldwork partner for the survey. The survey can be self-completed online or via telephonic interview.
Covering the period 2019 to 2021 the survey will collect data from the sample of enterprises drawn from the business register held by Statistics South Africa. It will include enterprises in: • mining • manufacturing • electricity, gas and water supply • services, including wholesale and retail trade • transport, storage and communication • financial intermediation • computer and related activities. • research and development • architectural and engineering activities • technical testing and analysis
“Societies that innovate, and create the conditions to nurture innovative practices, prosper and grow. South Africa has long recognised the importance of innovation and several public programmes support innovation,” says Senior Policy Analyst of the Department of Science Innovation, Kgomotso Matjila-Matlapeng.
“We thank the business sector for supporting this important research by contributing their time and insight when approached to participate. We will be guided by the results of the survey and look forward to sharing the findings.”
HSRC and partners would like to send their gratitude to the business sector for supporting this important research by contributing their time and insight when approached to participate.
The survey results will be analysed in 2022/23 and published in 2023.
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.
The ‘one good thing’ caused by COVID-19, according to a recent Harvard Business School publication by Hong Luo and Alberto Galasso, is that it has catalysed innovation. This is apparent in South Africa too, where businesses are introducing changes to mitigate the risks of the pandemic. They are adjusting their practices and strategies, introducing new technologies, products and designs, and determining how they can use digital and automated technologies.
But will they last?
The country’s Centre for Science, Technology and Innovation Indicators, with the Department of Science and Technology and Statistics South Africa, has released the latest national business innovation survey. The survey helps to answer critical questions facing business leaders, industry groups and government policy-makers. The data can help the country’s understanding of the innovation taking place in businesses, so that more firms can be encouraged to innovate. The survey covered the period 2014 -2016.
How innovative are South African firms and what types of innovation have they implemented?
The survey found that innovation was pervasive across all sectors, but particularly in engineering and technology, manufacturing and trade. A high percentage – nearly 70% – of South African businesses were innovation-active. This meant that they had taken some scientific, technological, organisational, financial or commercial steps towards implementing an innovation. The proportion of innovation-active businesses compares favourably with trends in OECD countries.
But, to respond to current challenges, it is critical to understand what kinds of innovation firms are able to implement, and whether the kinds of benefits that result from them can contribute to business strategies and to inclusive and sustainable growth.
What types of innovation have firms implemented?
Innovation surveys typically measure four types of innovation. These are product, process, organisational and marketing.
The survey found that there were distinct patterns of these types of innovation in different economic sectors.
For example, mining and utilities businesses reflected low levels of innovation. For its part, manufacturing had the largest proportion of businesses with product innovation (59.8%) and marketing innovation (43.4%).
Process innovation was most prominent in logistics businesses (61.7%). More finance (52.0%) and manufacturing (49.1%) businesses reported organisational innovations than businesses in any other sector.
Each type of innovation requires specific forms of support.
Businesses most typically invested in innovation activities that helped them to prepare for technological and organisational change. They did this by training their workforces and investing in new information technology capabilities (Figure 1).
For both the industrial and services sectors, the biggest-ticket item of innovation spend was the acquisition of machinery and equipment.
Figure 1.
A substantial number of innovation-active businesses reported the use or development of advanced new technologies. These included computerised design and engineering, material handling, supply chain and logistics technologies, business intelligence technologies, and green technologies (Figure 2).
Figure 2.
These innovation capabilities suggest that there is a foundation for promoting more innovation that can lead to more positive economic outcomes.
The benefits
Innovation was less likely to have an immediate impact on turnover, and was far more likely to be incremental than radical.
Innovations with high degrees of novelty, such as new to the market or to the world products, did not have a strong effect on the turnover of the businesses that reported product innovations. So, just over 80% of their turnover was generated by goods and services that were unchanged or marginally modified. This was in contrast to a product that was new to the market (10.8%), new to the business (7.0%), or new to the world (1.8%).
Quality improvement was the top-rated innovation outcome for innovation-active businesses. Improved quality of goods and services was considered by 38.0% of product and process innovators as a highly successful outcome of innovation. This was followed by increased revenue (31.8%) and improved profit margins (30.9%).
Similarly, for nearly 50% of organisational innovators, improved quality was the main innovation outcome.
Entering new export markets – or increased export market share – as a highly successful innovation outcome was reported by only 7.5% of product and process innovators.
Innovation-active businesses also accessed national and global markets more than their counterparts with no activity. This included markets in the rest of Africa, Europe and Asia. Businesses with innovation activity were more likely to have sold their goods and services on national markets (58.1%), when compared to non-innovation-active businesses (37.7%).
Firms that were not innovation active were more restricted in their reach. They accessed selected provincial markets (57.4%) more than any other market.
The challenge is to grow the scale and range of types of innovation, to ensure that such outcomes and benefits are more widespread across more sectors and businesses.
Solutions
Businesses’ perceptions of the barriers to innovation were grouped into four sets of factors. (See Figure 3.) These provide critical insights into potential spaces for intervention.
The most significant barriers relate to market factors. These include market dominance of established firms, too much competition, and uncertain demand. For non-innovation-active businesses, the most widely reported barrier was a lack of demand for innovation.
To address these barriers requires stimulation of new and expanded markets. In the South African case this requires structural economic reforms. There are a number of steps government can take. It can, for example, ensure that regulatory conditions are more conducive for creating new businesses. It can also improve the transport and communication infrastructure.
Government also has an important role in stimulating demand in the context of the economic, social and health challenges of COVID 19.
Cost factors were also significant. These ranged from the costs of innovation being too high, to lack of funds for innovation within the business or from external sources such as government or private equity.
The vast majority of innovation-active businesses relied on their own funds to innovate (77.0%). Only 1.7% relied on government as a source of funds.
This points to the fact that public sector funding can be targeted more effectively to stimulate innovation. Examples include the new Sovereign Innovation Fund proposed in the 2020 budget or the R&D tax incentive.
But it’s equally important to create conditions that make private equity funding more attractive.
Knowledge factors were not as significant. Nevertheless, strengthening the link between innovation and skills development strategies would be valuable.
Institutional factors, such as legislation, regulatory and intellectual property rights frameworks, and infrastructure were not perceived as significant barriers.
Figure 3.
Way forward
In local, national and global contexts, rapidly advancing digital technologies and their applications have opened up the space for innovations as yet unimagined in products, processes, marketing and organisation.
The evidence from the business innovation survey is an invaluable opportunity to reflect on where South Africa’s innovation strengths and challenges lie. It also opens the door to interrogate how existing policies and funding mechanisms can be used more effectively to facilitate business innovation in the country.
Nigeria and South Africa are Africa’s largest economies, with a combined GDP that rivals those of all other African nations together. However, GDP growth rates in both countries have stalled in recent years, and major societal ills persist. As middle-income economies that have made a transition from primary industry to services-based growth, Nigeria and South Africa’s innovation performance should concern policy-makers.
As the manufacturing sector comparison illustrates, while firms in both countries use technology acquisition as the key innovation strategy to improve the quantity and quality of their value propositions, Nigerian and South African firms face critical financial and other barriers to innovation.
The services sector comparison illustrates that while services firms in both countries use training and technology acquisition as key innovation strategies to improve the quantity and quality of their value propositions, Nigerian and South African firms face critical financial and other barriers to innovation.
Behind the numbers
These fact sheets represent a joint product of the Centre for Science, Technology and Innovation Indicators (CeSTII) at South Africa’s Human Sciences Research Council and Nigeria’s National Centre for Technology Management (NACETEM).
They were produced during a research visit to South Africa by NACETEM’s Dr Abiodun Egbetokun in May 2019, which was sponsored by the InterAcademy Partnership.
Both CeSTII and NACETEM are responsible for the production of science, technology and innovation indicators. Data is drawn from the South African Business Innovation Survey (2008) and from the Nigerian Business Innovation Survey (2010).
Both surveys were conducted using the OECD’s Oslo Manual, allowing for international comparability of data. GDP data was sourced from Statistics South Africa and Nigeria’s National Bureau of Statistics.
About CeSTII and NACETEM
CeSTII is a policy research institute of the Human Sciences Research Council, which performs national studies on R&D and innovation on behalf of the Department of Higher Education, Science and Technology. Learn more
Contact Dr Glenda Kruss | gkruss[at]hsrc.ac.za
NACETEM is an agency of Nigeria’s Federal Ministry of Science and Technology that provides critical knowledge support in the area of STI management for sustainable development. Learn more
Contact Prof. Okechukwu Ukwuoma | dg.ceo[at]nacetem.gov.ng
“Studies on barriers to innovation typically focus on the impact of obstacles on the propensity to innovate as well as the factors affecting perceptions of the importance of these barriers,” Moses et al (2018) argue in a new HSRC Policy Brief. Drawing from the South African Business Innovation Survey 2010–2012 dataset, the brief documents factors affecting how companies perceive the importance of a range of barriers to innovation.
The results presented in this brief do not represent the population of all the business enterprises in South Africa, but only a sample of 128 manufacturing enterprises.
C Moses (BSc, BSc Honours, MSc), Chief Researcher, Centre for Science, Technology and Innovation Indicators, Human Sciences Research Council | cmoses@hsrc.ac.za
Dr MM Sithole (BSc, CDE, PGD, MSc, PhD), Chief Research Specialist; Centre for Science, Technology and Innovation Indicators, Human Sciences Research Council | msithole@hsrc.ac.za
P Mudavanhu (BSc, BCom Honours, MCom), Senior Researcher, Centre for Science, Technology and Innovation Indicators, Human Sciences Research Council
N Nkobole-Mhlongo (BSc, BSc Honours, MSc), Junior Lecturer, University of South Africa
T Kupamupindi (BSc, BSc Honours, MPhil), Senior Demographer, International Centre for Aids Care and Treatment Programs, Columbia University
In two brand new briefing papers, researchers from the Centre for Science, Technology and Innovation Indicators at the Human Sciences Research Council investigate firm-level awareness of public funding for innovation in the manufacturing and services sectors.
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.
‘CAN GOVERNMENT STIMULATE INNOVATION THROUGH PUBLIC FUNDING AND PROCUREMENT? WHAT SOUTH AFRICAN SERVICES FIRMS SAY’
Authors: Glenda Kruss, Moses Sithole and Cheryl Moses
*Data presented in these papers is drawn from the South African Business Innovation Survey 2010-2012. Research Briefs No. 1 and No. 2 were first published in April 2018.
The South African government invests a significant amount of effort into supporting innovation in the South African business sector. This support can either be financial in nature or through support programmes that make access to other resources easier. Given the right support from government, we should expect business to be better positioned to take their innovations further. We report on the extent to which firms access this funding, if they benefit in other ways, and detail the reasons why they do not access public funding. – Kruss, et al (2018)
The briefing will take place on 5 September 2017 (10h30-12h00), and participants can attend in Cape Town, Durban or Pretoria, in the videoconference facilities of the Human Sciences Research Council.
The event will include short statements by the Survey’s technical team concerning the aims and expected outcomes of the research, as well as a statement from the Department of Science and Technology about the significance of the research for national policy.
Participants at the Cape Town venue will also have an opportunity to visit the ‘Innovation Survey Hub’, a dedicated research centre at the HSRC where all fieldwork will take place.
For more information, please contact Gerard Ralphs (gralphs[at]hsrc.ac.za) or 0214668000.
