THE BLOG
14/05/2018 09:57 SAST | Updated 14/05/2018 09:57 SAST

SA Needs Innovation And Tech-Savvy Workers To Attract Investment

The rise of China and India, in particular, has created a slipstream for many developing countries, some of whom have responded quite positively.

EtiAmmos/ Getty Images

South Africa has at long last re-entered the throes of optimism. The president has made the attraction of new investment, both foreign and local, a priority. While the economy sorely needs an injection of capital, this new investment cannot be agnostic. We need this investment to drive a very specific growth trajectory. First, some background.

We recently celebrated World Intellectual Property Day. It's a day of some controversy, and depending on whether you are a beneficiary or victim of the current global patterns of production and consumption, the day becomes one of hope or one of continued despair. This is based on an age-old discourse that had at its centre the notion of intellectual property rights as both a trade barrier as well as an obstacle to localisation and development.

This is an argument worth revisiting frequently, as we observe significant changes in the global economic power balances. The rise of China and India, in particular, has created a slipstream for many developing countries, some of which have responded quite positively.

There seems to be a close correlation between the creation of new intellectual property and innovation, and economic growth in these countries. An examination of the 2017 Global Innovation Index [GII 2017], compiled by the World Intellectual Property Organisation [WIPO] and its partners, indicates an increasing presence of African countries in the rankings.

South Africa tops the African list, coming in at 57th, followed by Mauritius at 64th and Kenya at 80th. But the top end of the list is dominated by high-income, developed countries, with 24 of the top 25 in this category. The exception is middle-income China, which came in 22nd. Can South Africa follow in China's footsteps into the top 25?

A closer examination of African development using innovation as a metric makes for interesting study. Many punters agree that developments in ICT and the Fourth Industrial Revolution will shape the competitiveness indices going into the future. The World Telecommunication Union's ICT Development Index [WTU IDI] paints an interesting picture, with Mauritius topping the African list followed by Seychelles. South Africa follows, only in third place and only one place ahead of Cape Verde, with our neighbour Botswana in fifth position on the continent.

While the country, through both the public and private sectors, is managing to keep the R&D investment and performance at a reasonable level, an uncoordinated national system of innovation is failing to translate this investment.

This begins to answer an important question. Why did South Africa come out at 61st out of 137 countries measured in the 2017-18 Global Competitiveness Report from the World Economic Forum? The ranking was a drop of 14 places from 47th in the previous round.

This while the country is the 30th-largest economy in the world based on the size of its GDP. It's an economy that appears to rely on old strengths, with mainstays in primary resources and agricultural production. The fast-upward movers are investing in innovation and infrastructure to enable a knowledge-based economy. While South Africa's general infrastructure ranks 46th in the GII 2017, its ICT infrastructure lags far behind in 78th position.

Even more worrying is that fact that while South Africa ranks highly in market sophistication at 21st on the list, its business sophistication at 57th fails to take advantage of this, which goes some way to explain why South Africa is a high-import economy. This is exacerbated by the fact that SA's knowledge and technology output ranking is a low 65th place.

An examination of the pipeline shows the following, in spite of a very high investment in education — ranked 20th on the basis of percentage GDP spend on education, the education performance places the country at 75th place in the rankings, with tertiary education even lower — South Africa is in the 89th spot. Thus, in spite of the fact that South Africa's R&D ranks at 39th, the resultant ranking in the knowledge-worker category for the country is the only 67th. The knowledge-worker capacity and capability remain the absolute key to innovation and global competitiveness.

Another part of the broken telephone reads as follows. South Africa's research and development ranking is a credible 39th position — not too far off the leading pack — but this R&D achievement is not optimally realising knowledge creation (ranked only 52nd), which translates quite poorly in the domain of knowledge diffusion (ranked 63rd), that then finds an even more difficult journey into knowledge impact, the latter ranked very low at 84th in the world.

This means that while the country, through both the public and private sectors, is managing to keep the R&D investment and performance at a reasonable level, an uncoordinated national system of innovation is failing to translate this investment through the creation of new knowledge and intellectual property into the knowledge-based impact that is required for higher levels of economic growth and social wellbeing.

South Africa has the highest potential to both offer high investment returns while ensuring local growth, provided that the vector we choose is that of economic inclusion characterised by innovation.

The remedies have been worked through. The National Advisory Council on Innovation [NACI] has submitted to the Minister of Science and Technology a candid review on the performance of the NSI and recommendations for major changes. The minister, in turn, is steering a process to develop a new white paper on science, technology and innovation to create a functional and productive innovation ecosystem in the country.

Individual institutions like the Water Research Commission [WRC] are busy putting more effort into building bridges with sister institutions like the Technology Innovation Agency [TIA] and other public and private partners to translate the R&D investment into the real dividend.

It does require higher levels of innovation investment and broader partnerships like the promising Creative Leadership Collective Africa [CLC Africa] — an expanding team of innovation leaders in public institutions and private companies developing a new innovation narrative for the country.

The bottom line is that an innovative and higher technologically capable South Africa, boasting a strong knowledge-worker base, will be a magnet for the $100-billion [~R1.3-billion] that is the first target for foreign direct investment in President Ramaphosa's plan.

But it has to be leveraged with an internal investment and an innovative institutional landscape to create the conditions necessary for the courting to be successful and productive. South Africa has the highest potential to both offer high investment returns while ensuring local growth, provided that the vector we choose is that of economic inclusion characterised by innovation.

Dhesigen Naidoo is CEO of the WRC and a member of NACI, but writes in his personal capacity.