D Hanekom: National Innovation Survey

11 April 2007

Director General
President of the Human Sciences Research Council
Ladies and gentlemen,

As an engine of economic growth, technology is playing an increasingly
important role in the nation's ability to prosper and grow. Innovation is
widely recognised as one of the most important mechanisms through which
technology can be leveraged to create wealth, leap-frog developmental backlogs
and contribute towards a better quality of life. This is our conviction and the
2005 National Innovation Survey results that we unveil today back us.

The National System of Innovation (NSI) that my department champions,
recognises the importance of technological innovation for the competitiveness
of South African firms and consequently the growth of the economy. We are also
aware of the growing importance of non-technological innovation such as design,
implementation of new organisational strategies and changes in the concepts of
marketing. In line with international trends, the services sector of the
economy continues to show strong growth. The services show relatively high
levels of innovation in South Africa and encouragingly these innovation
activities include research and development (R&D).

In order for us to further promote the NSI and create an enabling regime
that supports and encourages innovation, it is absolutely essential to have a
clear understanding of the processes underlying innovation in South African
firms. Existing data sources, such as national R&D surveys, provide
valuable and necessary sources of data on the inputs to the NSI such as the
activities of the funders and performers of research and experimental
development R&D. Innovation surveys are designed to measure the factors
that affect the outputs from the NSI in the form of new and significantly
changed products that reach the market and new or significantly enhanced
processes used in production.

The Centre for Science, Technology and Innovation Indicators (CeSTII) of the
Human Sciences Research Council (HSRC) was commissioned by the department to
undertake South Africa's first official innovation survey. In order to provide
reliable international comparisons, this survey was conducted in accordance
with the latest European Union (EU) Community Innovation Survey (CIS4) that was
used in all EU and most Organisation for Economic Co-operation and Development
(OECD) countries in 2005/06 and also forms the basis of the latest innovation
survey conducted in China and that being planned in India.

Innovation Surveys are increasingly used around the world to understand the
dynamics of innovation and the effects of innovation on the economy. These
surveys collect specific information about firms such as the type of
innovation, partnerships for innovation, costs and objectives of innovation.
These questions produce an interesting and useful set of responses. Unlike the
R&D survey, the innovation survey is like most national economic surveys,
based on a random sample of enterprises from the official business register.
This sample was provided by Statistics South Africa as part of the partnership
outlined in the Memorandum of Agreement between Statistics South Africa and the
Department of Science and Technology.

Some of the key indicators emerging from innovation surveys are the
proportion of innovating firms, the costs of innovation and the percentage of
sales that accrue as a result of new product innovations. Not all innovative
firms rely on traditional R&D to produce innovations, although R&D
based innovation is a feature of the larger successful manufacturing firms.

There are three findings from the innovation survey that I would like to
dwell on briefly here:

Firstly the innovation survey reports that nearly 52% of enterprises
surveyed reported innovative activity in the form of the development of new
products and processes. This is against a background of a general increase in
economic activity in South Africa over the past few years. It shows that our
private enterprises are not being complacent and are responding to changes in
their environment by producing new or significantly changed goods, services and
processes. Our rate of innovation is well above that of the European average of
42% for 2004. This is a welcome finding indeed.

Secondly, South African enterprises spent about R27,8 billion on innovation
activities in 2004. This expenditure comprised intramural or in-house R&D
expenditure, outsourced R&D, acquisition of machinery, equipment, software
and the acquisition of other external knowledge such as copyrights.
Furthermore, in-house R&D expenditure accounted for about 20% of total
innovation expenditure. This is especially encouraging since the total R&D
expenditure recorded was basically the same as that recorded for the same
sectors in the 2004 national R&D survey. Bearing in mind that the
innovation survey is a random sample of business enterprises and is not focused
on R&D or technology orientated firms this result serves to confirm the
importance of R&D for the competitiveness of business in the country.

Ladies and gentlemen, it is particularly gratifying to note that apart from
the expected large R&D performers in South Africa there appear to be many
diverse businesses undertaking small amounts of R&D. It is therefore
important that government extends its support and encourages these enterprises
to persevere in, and grow, their R&D activities. Our earnest hope is that
some of these small R&D performers of today become the medium and large
R&D stalwarts of the future.

Related to this, the third aspect I would like to highlight is that of
government support for R&D performers in South Africa. As you know the
South African government has several support schemes for the development of
R&D and innovation in the country. These include the Technology for Human
Resources in Industry Programme (THRIP), the Innovation Fund, the agency grants
of the National Research Foundation, the Support Programme for Industrial
Innovation (SPII) and various other programmes.

The Innovation Survey indicates that about 10% of successful innovators in
industry (i.e. those enterprises that claimed innovations had been responsible
for part of their turnover) received public funding for innovation activities.
The majority of these support funds came from national funding agencies or
government departments. This again shows clearly that the funding programmes of
government are having a penetrating effect in the private sector and are
demonstrably contributing to the bottom line performance of South African
business.

While it is natural for any organisation to applaud the results of any
survey that paints a positive picture, I believe the 2005 National Innovation
Survey represents an important aspect of activities that are fundamental to our
economic growth and development and generally improving the quality of life of
all citizens.

Certainly policy makers like myself and other industry role players need
quantitative and qualitative data to understand the nature of innovation and
how it changes over time. We are thus most delighted to present the results of
the 2005 National Innovation Survey, convinced that they will inform our
interventions in the future.

I thank you for your attention.

Issued by: Department of Science and Technology
11 April 2007