Report is a blueprint for innovation to fire up economy
The publication of the latest World Bank Economic Update on Innovation for Productivity and Inclusiveness highlights an area where SA has fallen behind and that has the capacity, if fixed, to fire the engine for economic growth.
It focuses on the role of innovation in fostering economic growth, creating jobs and reducing poverty. The report states that “between 2008 and 2015, four out of five South Africans experienced poverty, some temporarily, some permanently”.
This should not be lost on the trade and industry minister, who should understand the effect on foreign investments of our downgrade to subinvestment level and the contraction of private expenditure in research and development.
Apart from a drop in global commodity prices, factors such as drought, logistical constraints and difficult labour relations have all contributed to SA’s poor growth performance.
A focus on innovation policy is, therefore, imperative to raise our competitiveness, facilitate access to new markets and create much-needed jobs.
The traditional focus on a commodity-based economic model has failed to deliver the required growth. On top of this, the new Mining Charter and uncertainty around its details continue to hamper investment.
The report highlights that SA is much less productive than it was before the financial crisis. “With the same amount of economic resources — natural resources, capital and labour — SA produced 6% less in 2016 than in 2007. A critical contributing factor to this deterioration is the insufficient innovation efforts of private firms, in absolute terms and in comparison with peers in the last decade.”
Clearly, there is an opportunity to up our game. If we were to leverage our particular strengths (academic excellence, entrepreneurial networks in our metros and a large array of operational public programmes to support research and development) and tackle weaknesses (a business environment that is not conducive to innovative start-ups, a low skills base, slow and expensive broadband and high trading costs).
As repeated with monotonous regularity by the DA, we would need to review market regulations that favour incumbents and cut red tape.
The report advises combining the nine largest metros’ best practices in obtaining construction permits, getting electricity connections and enforcing contracts. In particular, policy uncertainty is identified as an area that requires attention.
Delays and uncertainties surrounding the reform of the intellectual property rights regime have been of concern. It would be detrimental to innovation should the usefulness of patents be impaired.
Uncertainty regarding the future of power purchase agreements, the Copyright Amendment Bill and the information communication technology regulatory framework may also deter investment in innovation.
The report recommends bringing down cargo and inland-handling costs and improving port efficiency to support innovation. It points out that SA’s port tariffs continue to favour the transport of minerals over manufactured goods. Given that labour shortages in high-skill sectors such as technology severely limit innovation, the report suggests the encouragement of highly skilled professionals to work in SA.
Among other recommendations around research and development tax incentives, it highlights the need to build on the existing network of innovation programmes in our metros, clustering them in innovation districts.
REPORT POINTS OUT THAT SA’S PORT TARIFFS CONTINUE TO FAVOUR THE TRANSPORT OF MINERALS OVER MANUFACTURED GOODS
Fostering partnerships with the private sector, particularly between academic institutions and private firms to leverage research capacity, and urgent reforms to provide cheap and fast broadband, are seen as crucial.
The report acknowledges government support programmes as a formidable strength of SA’s innovation ecosystem but helpfully discerns scope to improve effectiveness by consolidating programme objectives, budgets and management arrangements.
This report, which is completely in line with DA policy, is more than bedtime reading for the minister; it’s a blueprint for action.