Consumers, governments and environmental demands are making research and development a stronger imperative for companies every year.
Industry growth, fierce competition and mergers are compelling companies to significantly increase their research and development (R&D) investment. R&D is the driver of new products, improved manufacturing processes and innovation.
Companies that conduct R&D can innovate and have a higher global market share, as well as higher growth rates and profitability.
As indicated by most R&D performers, investment in R&D is limited by factors such as the appropriateness of R&D results, uncertainty of the outcome of R&D and the risky nature of R&D.
These factors contribute to R&D departments in companies being apportioned less funds for R&D projects.
Even where R&D is the lifeblood of a company, investment is limited to projects that can produce results in the short term, generally from six to 12 months.
This type of decision is based on operational needs, cost of investment and level of risk, as well as the payback period impacting on the bottom line.
Governments are encouraging companies to conduct R&D to be able to compete globally and observe higher safety standards, while protecting the environment.
It then becomes important for governments- to provide some form of compensating mechanism for companies to conduct R&D.
The motive for government support for private sector R&D revolves around improving conditions under which companies decide to invest in R&D.
Incentives are provided as part of policy instruments that address market failures that constrain increased R&D performance.
South Africa has also entered the battle to increase R&D capacity by offering a R&D tax incentive, aimed at building innovative companies that contribute to competence-building and commercialisation of “new to the world” technologies.
In the foreseeable future, the R&D tax incentive programme will influence a better understanding of the benefits of R&D, higher commitment to R&D, improved management of R&D, improved business strategy at company level, and increased collaboration with other companies and public research institutions.
The prime objective of the R&D tax incentive programme is to provide an incentive (in a form of a deduction) to encourage scientific and technological R&D and make companies internationally competitive by encouraging the development of innovative products, processes and services; increasing investment in defined R&D activities; promoting the technological advancement of companies focusing on innovation or higher technical risk in defined R&D activities; encouraging strategic R&D planning; and creating an environment that is conducive to increased commercialisation of new processes and product technologies.
Supporting R&D in SA
The research and development (R&D) tax incentive programme is the largest single source of -government support for R&D in South Africa. Since 2006 the programme has provided over R1-billion in tax reductions to over 300 claimants. Of these, about 49% are small and medium enterprises.
What are the benefits of the programme?
The programme can provide -financial incentives by helping to • fund scientific and -technological advancements, keeping your company competitive; and
• keep your company focused on innovation-based R&D.
Who is eligible?
The programme is available to any company operating and conducting R&D in South Africa. Any company involved in basic or applied research, or in -developing new or improved materials, devices, products or processes, may be eligible.
How can you get assistance?
The department of science and technology offers the following free services at its offices:
• Information about the -programme to new and -potential claimants.
• A preliminary opinion on the -eligibility of the project.
• Advice is provided and -questions are answered on the R&D tax incentive programme.
How to get more informatio-n on the programme
The department of science and technology offers the following free workshops:
• Industry associations.
• Individual companies.
• Sector or industry-specific businesses.
Alternatively you can visit www.dst.gov.za/r-d