Research and development recovering
OUR aim in government is to double the investment in R&D from the 2014/15 figure of 0.77 percent to 1.5 percent of GDP. That means doubling the 2014/2015 investment of R29 billion to roughly R60 billion a year by 2020.
The latest R&D Survey (2014/2015) shows an improving outlook for R&D investment. It was R29.3-billion, an 8.1 percent increase over the previous year in constant 2010 rands.
This improvement took place against a slowing rate of GDP growth that was 2.2 percent in 2013 and 1.5 percent in 2014. There are a number of trends to observe.
First, business enterprise expenditure on R&D (BERD) contributed most to the increase and the bulk of the increase came from the manufacturing industry.
The financial and business services industry, which includes software development, continues to be the largest contributor to BERD, having surpassed the manufacturing industry in 2011/12.
Furthermore, the electricity, gas and water supply industries and the transport, storage and communication industries that have reported declines over the past three surveys have increased their R&D expenditure.
R&D spending in mining and quarrying has declined by 20 percent and this is an area of concern given the current interventions under the Operation Phakisa initiative to help revitalise the economy.
Second, the government was the largest funder of R&D, funding 43.9 percent of gross domestic expenditure on R&D (GERD). The second largest R&D funding source was the business sector with 40.8 percent, foreign sources with 12.2 percent and other local sources with 3.1 percent.
The continued year-on-year increases in government funding for R&D is particularly important in sustaining the R&D spending and performance of science councils and higher education institutions. These two sectors are dependent on government R&D funding and have consistently increased their R&D spending since the start of the global economic crisis in 2008.
However, aside from the number of publications, we have been unable to track the outputs, outcomes and socio-economic impacts of this investment in public research institutions.
It's in this context that I welcome the publication of the first South African National Survey of Intellectual Property and Technology Transfer at Publicly Funded Research Institutions. The survey reveals many trends that we did not know before, but I want to highlight four in particular.
First, the management of technologies, patent families, trade mark families, registered design families and new patent applications filed increased more rapidly than the increase in research expenditure.
This is THE South African National Survey of Intellectual Property and Technology Transfer at Publicly Funded Research Institutions (2008-2 014), which was released together with the latest R & D Survey (2014/2015) last week, is an initial baseline study to establish a number of indicators that are required to track overall activity in Intellectual Property (IP) management and Technology Transfer (TT).
The survey was sent to all ‘institutions’ as defined in the Intellectual Property Rights from Publicly Financed Research and Development Act (IPR Act).
These are the 23 Higher Education Institutions (HEIs) and the 10 Schedule 1 institutions or Science Councils (SCs). Valid responses were obtained from 24 tween 2011 and 2014, on average 100 new technologies were added annually to the portfolio managed by universities and science councils.
Second, there has been a quadrupling in the actual number of licences executed per year in the period. More than 88 percent of this revenue accrued consistently each year to the same four institutions that have well-established technology transfer funds (TTFs). The majority of intellectual property (IP) transactions yielded less than R100 000 per year.
Third, 45 start-up companies were formed to commercialise the institutions’ technology, 73 percent of which were based on publicly funded IP.
Fourth, the majority (53.5 percent) of all staff in the offices of technology transfer (OTTs) had four years or less technology transfer (TT) experience; females comprised 56.4 percent of TTF staff in higher education institutions (HEIs), and 65.2 percent in Science Councils (SCs). Viewed in the context of over- institutions. Of these, 23 indicated that they have either established a dedicated office of technology transfer (OTT), have dedicated TT individuals or are members of a regional office.
One of the key findings of the survey is that management of technologies, patent families, trade mark families, registered design families and new patent applications filed increased more rapidly than the increase in research expenditure, which indicates acceleration of these activities relative to research expenditure. On average, 100 new technologies were added annually between 2011 and 2014 to the portfolio managed by respondent institutions.
The survey shows there has been a all trends in the racial and skills composition of the labour force in the country, these statistics show that there is clear room for improvement.
Overall we are beginning to see enhanced socio-economic impact from public investment in R&D.
What the current report does not reveal is detailed information on the IP portfolio and outputs of commercialisation activities. Nonetheless, this survey constitutes a critical baseline study. I hope that future editions will be able to track other indicators that are not reported on here as well as make a number of international comparisons.
Returning to the R&D Survey, the third trend to note is the increase in the number of scientists and researchers. The number of researchers increased to 48,479 in 2014/15. About 84 percent of the increase in R&D personnel was postgraduate students.
The DST attributes this to, among others, the Research Chairs Initiative and postgraduate bursar- quadrupling in the actual number of licences executed per year in the period. Of significance is that more than 88 percent of this revenue accrued consistently each year to the same four institutions that have well established TTFs. The majority of IP transactions yielded less than R100 000 per year.
In total, 45 start-up companies were formed over the period to commercialise the institutions’ technology, 73 percent of which were based on publicly funded IP.
The study reports that as at 2014: the majority (53.5 percent) of all staff in the ies which are helping to expand the pipeline of researcher workforce. The ratio of full-time equivalent researchers per 1 000 employed was 1,5 in 2014/15 and has remained around this level for the previous decade. This is mainly because the researcher workforce has only been expanding at an equivalent rate to that of total employment.
All in all, the most important trend to observe from the R&D Survey 2014/2015 is that the business sector has replaced the higher education sector as the lead contributor to the increase in R&D spending.
The growth of BERD has a direct and immediate impact on economic growth because the private sector is more likely to embrace related commercial opportunities by creating new and improving existing products, services and production technologies. These activities can impact directly on the creation of new enterprises, new industries, and new jobs.
To encourage the private sector to invest in R&D, government OTTs had four years or less TT experience; females comprised 62,5 percent of the staff in HEIs and 61,9 percent in SCs; black, coloured and Indian/Asian groups together represented 56.4 percent of TTF staff in HEIs, and 65.2 percent in SCs. Viewed in the context of overall trends in the racial and skills composition of the labour force in the country, these statistics show that there is clear room for improvement.
Most institutions are performing a range of activities within the categories of IP management, commercialisation introduced the R&D tax incentives in 2006. The initial uptake was less than government had hoped. So the incentive was modified by the Taxation Laws Amendment Act in October 2012. The subsequent increase in applications caught government by surprise and additional resources have had to be secured to deal with the increase and the backlog that has resulted.
Private sector innovation activities are dominated by activities that are not necessarily new. The bulk of the private sector innovation-related expenditure is spent on the acquisition of new machinery, equipment and software, as opposed to introduction of new products and processes. A limited portion of turnover of innovative companies is generated from products that are new to the firm or new to the market.
Business enterprise expenditure on R&D is concentrated within larger-sized enterprises, with about 80 percent performed by 20 percent of enterprises. State-owned enterprises (SOEs) are counted in the business category for R&D purposes and they are a key driver of major public-procurement programmes. They form the core of the network industries, which play a central role in addressing developmental objectives (economic infrastructure for energy, ICT, transport, water, mining, defence technology).
State owned enterprises (SOEs) have the necessary bargaining position to mobilise international R&D. Major international procurement and administration. Noticeably, according to the Intellectual Property and Technology Transfer survey, enforcement is less active.
Institutions indicated that they required 19 percent and 50 percent additional funding in 2014 for TT operations and IP expenditure, respectively.
The survey did not report on a significant number of indicators due to the paucity of data reported and, in some instances, the activities not being undertaken by one or more institutions.
Most noticeably, what is lacking from the report is detailed information on the IP portfolio and outputs of commercialisation activities.
Such indicators include: the jurisdic- supply contracts that are provided by these entities hold good opportunities for technology transfer, strengthening the local research and technology infrastructure and developing local expertise.
Government is working to attract international R&D and to take better advantage of our integration into global R&D value chains.
One mechanism that is popular is an “equity-equivalent arrangement” whereby multinational companies that do business with government are required to earn BEE points through a once-off equity equivalent funding contribution. A company can earn points for making investments towards skills and training support, enterprise development, and R&D. I think of the recent substantial ten-year investments made by GE and IBM.
There are many-more smaller enterprises than larger enterprises. Innovation activity occurs in a much wider community than just R&D intensive, larger enterprises. We are encouraging the level of activity of SMEs in R&D. In fact our Technology Innovation Agency has now been repositioned as an agency whose funding instruments will better enable innovators, entrepreneurs and small and medium enterprises to commercialise their technology innovations.
However, there is a need for a venture capital fund for high-technology SMMEs as well as startups.
Statement by the Minister of Science and Technology, Naledi Pandor, on the latest R&D survey tions in which IP protection was filed for, and granted; the number of licences granted to foreign registered organisations; the number of IP transactions concluded with broad-based black economic empowerment (B-BBEE) entities; the number of start-up companies that became non-operational in a specific year, and the number of FTEs employed by those companies; and the estimated revenue from licensed products.
However, while there are still gaps in the information sources, availability of data, and validation records at institutions. The intention is to use the lessons learnt to date and regularise a biennial survey to monitor the progress in IP and TT management at public institutions.