Lifting SA out of innovation doldrums

Unisa (Oupa Nkosi, M&G)

Unisa (Oupa Nkosi, M&G)

This message was driven home last week at the Unisa Graduate School of Business Leadership (SBL) Research & Innovation Day in Midrand, where the heads of the Council for Scientific and Industrial Research (CSIR) and The Innovation Hub both called for greater co-ordination and vigour in this regard. “Often when we talk about commercialising research and innovation we tend to think of patents and ideas, startups and entrepreneurs, but there is also a dimension here of forming industries that did not exist before,” said Dr Sibusiso Sibisi, president and chief executive of the CSIR.

“In many respects one feels something is missing that must enable us to make the jump to being far more effective. “It’s a multifaceted challenge that I think may require people such as business schools to think about not just business creation, but industry creation.

“We tend to not hear enough of such conversations and the challenges, particularly in industries that are research-based, to seek global competitiveness.”

In her opening remarks, SBL executive director and chief executive Dr Renosi Mokate said: “As South Africa celebrates 20 years of democracy, it continues to grapple with many development challenges and the need to increase its global competitiveness.

“Excellence and leadership in research and innovation are essential to the country’s ability to effectively address these challenges.” The hard truth is that South Africa is not globally competitive. A 2013 Goldman Sachs report titled “Two Decades of Freedom” shows that the country’s gross expenditure on research and development has not topped 1% of GDP in the past 20 years. Citing this report, The Innovation Hub’s chief executive, McLean Sibanda, said that investment had been static at 0.6% of GDP from 1994 to 1997, peaking in 2006 at around 0.95% when the science white paper was released, but that it has been tapering off since.

Probably one of the most surprising aspects of the country’s R&D landscape is that government is the main contributor to this spend, contributing almost 46% of R&D investment compared to the private sector’s roughly 43%.

This is in stark contrast to the 2007 figures provided in an Organisation for Economic Co-operation and Development (OECD) report, which shows that the private sector outspent government by a factor of two in OECD countries and the US, more than three times in China and more than four times in Japan. “When you look at the global competitiveness index, we seem to be getting worse,” said Sibanda. “Even though on the innovation side we are getting better, the question is what is the difference between [the ranking] of 42 and 39?In essence we are just cruising along.

“We need to start addressing these issues, and the value proposition is that there is a whole market waiting out there. Africa is a huge market: if you fast-forward to 20 years from now, if it is not going to be the biggest market in the world, it will be the second biggest. And how much of that market is South Africa going to command?” 

However, he acknowledged that innovation is risky business. This was a point also made by Sibisi, who related the many commercial successes to stem from work initiated by the CSIR. These include MWeb, the internet service provider, that has built its business around a platform initially developed by the institution. A major challenge associated with protection of intellectual property is the risk of infringement.

One example is the well-publicised case of the patent held by Australia’s CSIRO on Wi-Fi. After a lengthy legal battle against several technology giants that were using Wi-Fi without paying royalties, CSIRO was awarded a settlement of $250-million by a US court in 2009 and a further $220-million in 2012. But this windfall came after significant litigation costs. The CSIR faces similar challenges. “You learn how difficult it is to play in the world, because immediately what happens is the big players infringe [on your patents],” said Sibisi.

“People infringe because you are a small outfit sitting at the tip of Africa. What are the chances that you are going to sue?” He cautioned this was a reality that organisations had to face up to, and that they had to be prepared to pursue their rights in full knowledge that this is potentially a costly and time-consuming affair.

Sibanda said that rather than bemoaning the country’s geographic location, it should be used to best effect. “The profile of Africa is different from the rest of the world. We have a youthful population … and what that means is that we have to create opportunities for those youth.

“It is no longer a matter of focusing on jobs, we have to create businesses … and we have to change the way we are doing things,” he said. He suggested that mass urbanisation presented both challenges and opportunities and that it was an area ripe for innovation as resources such as water and electricity suffer growing pressure. 

Changing the innovation culture

“The challenge for business leaders is what they are doing to address this. “If you look at mobile, the question is how do we move from being users and consumers of this technology to utilising the information that is being transmitted to be able to enhance our productivity and our operations to remain ahead, not only locally but globally.”

He said that for South Africa to lift itself from the research and innovation doldrums it would need to make significant investments in education and make bold choices to change the innovation culture to foster entrepreneurship. In conjunction with these changes, private and public enterprises would need to boost investment in R&D beyond the 1% of GDP level, which may require greater oversight from government to push these boundaries. “But, you cannot do significant R&D without the skills,” he said.

“So we need to start to focus on boosting our maths and science. In terms of core development software, you need a certain level of maths and in its absence we are going to continue to import technologies from elsewhere.”

The findings of the recently launched 2014 African Transformation Report titled “Growth with Depth” corroborate the importance of research and innovation in the advancement of countries. It indicates that for African countries to transform their economies, they must, among other measures, diversify their economies and increase productivity.

This can be effectively achieved through the technological upgrading of their economies, providing more funding for research and enhancing country skills in science, technology, engineering and mathematics.

The report also highlights the central role of educational institutions and a strong partnership between the state and the private sector in the economic transformation process.

An opportunity lost?

Despite the challenges outlined by the speakers at the Unisa SBL Research and Innovation Day, South Africa has no shortage of brainpower, as demonstrated by its proud history of world-firsts. The challenge, as always, is to make a mark on the global market. The CSIR has been particularly successful in doing so, although the advantage has not always been exploited to the full benefit of the local economy.

Presenting an overview of this long history of research and innovation, the organisation’s president and chief executive Dr Sibusiso Sibisi singled out one such opportunity that could have played out very differently. A CSIR scientist Trevor Wadley is central to this story. Not only was he instrumental for a breakthrough in crystal-controlled communications in 1951, but he went on to pioneer the basis for microwave signal transmission that is still widely used today.

The machine he conceived, initially as a means to accurately measure distances for use in cartography, was named the Tellurometer. This technology was spun out of the CSIR with the establishment of Tellumat, before the company and its licences went through various stage of buyouts and acquisitions including by British firm Plessey. “[The] big opportunity for the Tellurometer came much later with the introduction of cellular communications,” Sibisi said.

“That was largely lost to the country and these are some of the things we need to learn from.”

The major lesson, he suggests, is to form a more cohesive strategy and supporting policies to retain and grow the country’s intellectual property to the benefit of the economy as a whole. “We need to look at case studies such as these to see what elements we need to put in place to ensure South Africa goes beyond the odds to become a major player in some selected industries.

“We are not doing so because we have not sufficiently thought of all the aspects to drive the interface between research and business success,” he said.

The economic benefits of such a concerted effort are tangible. Sibisi reported that the CSIR had earned about R500-million in royalties between 1955 and 2013, which at an average royalty of 3# translated into R16.7-billion of direct economic activity.

This article was paid for and signed off by Unisa SBL