M Mangena: Announcement of 2004/05 survey on research and development
results

22 June 2006

Director-General, Dr Phil Mjwara
Ladies and gentlemen

The release of the key high-level results of the National Survey on Research
and Experimental Development, in this case for the period 2004/05, has now
become an important annual event.

The importance of measuring our system of innovation regularly and
consistently can not be sufficiently underlined. The survey focuses on the
sources of financing, the institutions doing the research, the focus of their
research, and the people who do the research. For this reason, it is often
called an input survey. But it is more than that; it is a relevant and
important measure of the current capacity of the system and its dynamics. Since
the first survey of 2001/02, we have now conducted three surveys, and have also
recalibrated earlier surveys with new employment and Gross Domestic Product
(GDP) data.

These surveys, therefore, provide opportunities to take stock of the
national system of innovation and where it is heading, and today we unveil the
high level key results of the 2004/05 fiscal period survey.

From July last year, the Statistician-General recognised the Research and
Development (R&D) Surveys as Official Statistics. This means that the
Surveys comply with the standards required by Statistics South Africa as laid
out in the relevant legislation. Moreover, the South African R&D Survey
data are regarded as robust enough to be included in the annual publication of
“Main Science and Technology (S&T) Indicators” of the Organisation for
Economic Cooperation and Development (the OECD), which is the most
comprehensive and authoritative measure of patterns of global R&D spending
and capacity.

South Africa is one of a very small number of non-OECD states that have
managed to comply with OECD requirements to qualify for inclusion in this set
of indicators. This provides a sound basis for benchmarking our national
competitiveness in relation to 40 other countries. We are delighted that we can
do this, as evidence-based policy is likely to be more sustainable and goal
oriented.

Consideration of the trend in the last three surveys reveals that we are on
track to achieve the goal of one percent of GDP by 2008, provided that both
government and business continue to invest in the development of human
resources, equipment and programmes that underpin our economic growth through
innovation.

Interestingly, from this year’s survey there are good indications that
business R&D is benefiting from strong new inflows of research-intensive
foreign direct investment.

The economy has shown robust growth, and we can track new flows into R&D
from local and foreign sources. More importantly, the surveys continue to draw
in a wider sample of business R&D performers, because now more than 500
firms are participating fully in the survey. With the application of more
precise measurement techniques, we are finally seeing a stronger buy-in.

The issues I am referring to sound much like tax collection where the size
of the fiscus depends on collection and compliance. And like the Commissioner
for Inland Revenue, we appreciate compliance. To all those that participated in
the 2004/05 R&D Survey, we thank you most sincerely.

Earlier I mentioned that the Surveys are now Official Statistics. What this
means is that completion of the questionnaire is a statutory requirement for
those who receive the questionnaire. We encourage compliance with this
requirement and have drawn on international good practice in working closely
with those who submit returns. This brings me to the next important issue:

This year, my colleague, the Minister of Finance, announced the introduction
of increased tax deductions, from 100 to 150%, for conducting R&D by the
business sector, and proposed a more favourable regime for depreciation of
R&D capital expenditure. This is an important development and an expression
of government’s confidence in the private sector and its role in R&D and
innovation. The regulations that will govern the way the allowance works will
be gazetted later this year and my Department will work closely with relevant
role players to ensure that we develop user-friendly and robust
regulations.

We know that some firms still do not routinely measure their R&D
expenditures. So the time is now ripe for this to happen in the interest of
both business and government. We want to ensure that smaller firms are able to
benefit from this tax incentive in return for further increases in R&D
activity. Now that there is an added incentive for business to track R&D,
we would hope to see further improvement in the survey coverage.

Now having recognised that the survey is an input measure let me talk to
initiatives that investigate the performance and outputs of the National System
of Innovation. As an agent of my department, the Centre for Science, Technology
and Innovation Indicators (CeSTII) of the HSRC performs the R&D Surveys.
Later this year, we shall release the results of the first official Innovation
Survey, also being conducted by CeSTII. Together, these surveys provide a
platform for deeper analysis of the effectiveness and efficiency of the
national system of innovation. The National Advisory Council on Innovation
(NACI) has commissioned a set of studies that seek to answer ‘value for money’
questions. Among these questions are the following:

* How efficiently, and why, do firms access state grants for
innovation?
* After graduation, how do PhDs contribute towards the improvement of our
economy and quality of life?
* What can we learn from the innovation policies of other countries?
* Where and how strong are our existing centres of research excellence?
* Are we patenting enough and do we see the benefits in our economy?

Following the presentation of the findings of the Innovation Survey and
National Advisory Council on Innovation (NACI) studies to Cabinet, we
anticipate reporting on these matters to you towards year-end.

Interestingly, the 2004/05 Survey shows that there is shortage of
researchers, and this in line with the Accelerated and Shared Growth Initiative
(AsgiSA) and the Joint Initiative on Priority Skills Acquisition (JIPSA), which
has identified the shortages of technical and engineering as key constraints to
economic growth.

However, we must recognise that improved R&D performance is possible
only with the participation of additional researchers, and researchers are in
short supply globally.

To put it in context, the European Union has set a target of GERD: GDP of
three percent by 2010, for which an additional 500,000 researchers are
required. As a country we are thus engaged in a fierce competition with the
rest of the world for knowledge workers. In the case of researchers, there are
no substitutes for providing attractive conditions and creating relevant
opportunities.

“From whence cometh this flock?” you may well ask. We must grow our own,
retain those that we have, and recruit others where we can, and the signs are
good. The graph slopes upward; we have confidence in the actors across our
system of innovation, but much hard work lies ahead.

We thank you. Re aleboga. Pula!

Issued by: Department of Science and Technology
22 June 2006