Companies urged to compete for global markets in technology
The Minister of Science and Technology, Naledi Pandor, has urged local companies and entrepreneurs to compete for global markets in important technology sectors.
She was speaking at a business breakfast meeting in Pretoria this morning, as part of a series of activities aimed at enhancing communication between the government and the private sector about the scientific and technological Research and Development (R&D) Tax Incentive under section 11D of the Income Tax Act.
The Minister said that technology companies should strive to ensure that international markets looked to South Africa for advanced technologies, the aim being "to improve the technology balance of payments." The Minister cited the world-class scanner technology produced locally, which was originally developed for the mining industry.
For South Africa's economy to remain globally competitive, government is aiming to double investment in R&D from the current level of 0,76% of GDP, or R24 billion (as measured in the latest national R&D survey), to 1,5% of GDP by 2019.
By 28 February 2015, a total of 876 companies had applied for the incentive. The deduction of 150% that is allowed on R&D expenditure represents revenue forgone for the government, but the Minister said that the country would benefit from the research of companies that receive this incentive. Over the period 2005 to 2012, about R5 billion in estimated tax revenue was forgone due to the tax allowances under section 11D of the Income Tax Act, according to National Treasury's Budget Review.
The Minister further said, "The R&D Tax Incentive is available to businesses of all sizes and in all sectors of the economy, as long as they are registered in South Africa and are involved in scientific and technological R&D. At a company level, the incentive helps to reduce the after-tax price of R&D, creating an incentive for the company to increase its investment in R&D. Through undertaking R&D, domestic companies can enhance their competitiveness by developing new products, processes and services."
The Minister raised a concern about the decline of business investment in R&D over the past decade, saying that this would affect efforts to create new enterprises, industries and jobs.
The Minister also challenged technology companies to get involved in the Department of Science and Technology-sponsored internship programme as part of its human capital development initiative.
Representatives of companies present raised a concern about the turnaround time for the processing of applications. The Minister said that the Department was working on streamlining the process to ensure that the backlog was cleared and the targeted turnaround time of 90 days could be met.
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