Science and Technology - Nourishing Growth and Development in South Africa

1. Science and Technology - Nourishing Growth and Development in South Africa

2. HOME SLIDE NSTF/NACI Study on Growth & Innovation in the South African Economy DACST/NSTF Review of the National System of Innovation - key findings Key Findings and Recommendations Overview of the NSTF

3. Growth and Innovation in South Africa.The relationship between economic growth, employment, human development and science and technology

4. Scope of the Study • Examine the impact of science & technology on economic development in a variety of countries • Examination of international evidence • Examination of South African evidence • Identification of key science and technology drivers for the South African economy • Identification of policy options for South Africa Undertaken by:- Prof JW Fedderke Econometric Research Southern Africa (ERSA) Wits University Reviewed by:- M Molewa Ikemeleng Molewa Consolidated Investments (Pty) Ltd

5. Why does South Africa need growth? • Growth, Employment and Redistribution (GEAR) Macroeconomic strategy mandates growth for development • Competitive, fast growing economy which creates jobs • Redistribution of income and opportunities • Sound health, education and other services for all • Secure homes and places of work

6. Why does South Africa need growth? • Growth, Employment and Redistribution (GEAR) Macroeconomic strategy mandates growth for development • Competitive, fast growing economy which creates jobs • Redistribution of income and opportunities • Sound health, education and other services for all • Secure homes and places of work • African Renaissance

7. THE AFRICAN RENAISSANCE • Rediscovery and new understanding of our pre-colonial, colonial and postcolonial heritage and an appreciation of the value of age-old indigenous knowledge • The exercising of the right to define what it means to be African, and to find unique African solutions for African problems, whilst developing a pride of all things African For Africa to realise this potential and take our rightful role in the world economy, we must grow our economies and develop our societies

8. Why does South Africa need growth? • Growth, Employment and Redistribution (GEAR) Macroeconomic strategy mandates growth for development • Competitive, fast growing economy which creates jobs • Redistribution of income and opportunities • Sound health, education and other services for all • Secure homes and places of work • African Renaissance • There exists a long term structural decline in South Africa’s growth performance

9. SA Growth History

10. Why does South Africa need growth? • Growth, Employment and Redistribution (GEAR) Macroeconomic strategy mandates growth for development • Competitive, fast growing economy which creates jobs • Redistribution of income and opportunities • Sound health, education and other services for all • Secure homes and places of work • African Renaissance • There exists a long term structural decline in South Africa’s growth performance • There exists a long term structural decline in South Africa’s employment creating potential

11. Total Formal Sector Employment 8500000 8000000 7500000 Employment 7000000 6500000 6000000 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Year

12. Why does South Africa need growth? • Growth, Employment and Redistribution (GEAR) Macroeconomic strategy mandates growth for development • Competitive, fast growing economy which creates jobs • Redistribution of income and opportunities • Sound health, education and other services for all • Secure homes and places of work • African Renaissance • There exists a long term structural decline in South Africa’s growth performance • There exists a long term structural decline in South Africa’s employment creating potential • We have insufficient capacity to improve quality of life in South Africa

13. Quality of Life

14. RSA The Intimate Link between Real per Capita GDP & Quality of Life

15. The Intimate Link between Real per Capita GDP & Quality of Life RSA Growth in Real GDP is a precondition of improved quality of life

16. South Africa needs to grow : how do we achieve this? • Globally, economic growth is essentially due to three distinct sources: - • Growth in physical capital inputs into production - investment, whether local or foreign. • Growth in labour inputs to production - more workers producing more. • Improvements in technology - improved efficiency and new products into new markets - innovation

17. Has Technology Played a Role in the Economic Development of OECD Nations? THE ANSWER IS DEFINATELY "YES"!!

18. Relative contributions - developed countries versus developing countries

19. The South African Situation

20. Some conclusions on growth • Technological innovation is key to the achievement of economic growth - in South Africa and globally • In line with global developmental paths, South Africa has had an increasing proportion of growth explained by technological progress • South Africa is moving from an extraordinary to a standard pattern of development

21. The question is, “how does one leverage innovation so as to achieve this growth?”

22. The Relationship Between Innovation and Economic Growth • Direct influence through new business • Knowledge spill-overs - technology transfer • Intentional R & D investment • Creation of an enabling environment • Development of the right sort of human capital

23. Three Key Ingredients for leveraging Science, Engineering and Technology to Achieve Economic Growth

24. 1. R&D Investment

25. Evidence that R&D contributes to economic growth • Internationally well established that technology’s contribution to economic growth is strongly reliant on the extent and scope of national R&D programmes • Internationally there is a direct and positive correlation between R&D and output growth • Spill over effects can be even more than the growth benefits (social returns exceed private rates of return) • The USA case study • Mirrored in SA • Eskom results average 5:1 returns • Agricultural research results >1.2:1 returns

26. Case Study - Why the USA succeeded • Technological innovation through massive R&D investment • Natural resource base, and the scale of its markets • Encouraging immigration from technologically more advanced countries • Implementing a system of training institutions with a wide diversity of focus areas early on in its process of industrialisation • The development of a national technology ethic & national leadership in science-based fields • Technology is advanced through community, rather than individual isolated effort. • Developed the necessary R&D infrastructure:- • absorption of a vast stock of technology into existing production facilities able to take advantage of economies of scale • by the end of the 19th century the USA had a nation-wide university system, • US industry has set up independent research centres

27. Gross Expenditure on R&D/GDP

28. SA’s Research & Technology Competitiveness

29. 2. Investment in Human Capital

30. Average Growth Rate in Real Per Capita GDP vs Primary School Enrolment Rate

31. Output vs Mathematics, Engineering and Science degrees - SA Data

32. Proportion of SA degrees in Mathematics and Natural Sciences

33. Proportion of Matriculants with Mathematics

34. The Answer is not money;but efficiency

35. Opportunities for SA to catch up • Declining transport costs and falling trade barriers - increased flow of world trade, therefore domestic markets are less important • Technology has become increasingly accessible to those with the correct skills and training • Development of multinational firms - production tends to be globally rather than nationally located • Technologies have begun to resemble pure science - increased citation of scientific literature in patents, especially in chemical products, electronics, and bio technology. Anybody with the skills to interpret the scientific literature, is in a position to gain access to the technology. • Proven impact of a workforce trained in science and engineering, and an increased proportion of GDP allocated to R&D, • Proven impact of governments support for technological innovation

36. “a well-educated labour force, with a strong cadre of university trained engineers and scientists at the top, is now a requirement for membership in the “convergence club”. This is not to denigrate the continued importance of hands-on learning by doing and using, but in modern technologies this is not sufficient. It is no accident that countries like Korea and Taiwan, which have been gaining so rapidly on the world leaders, now have populations where secondary education is close to universal for new entrants to the work force, and where a significant fraction of the secondary school graduates go on to university training” (Nelson and Wright).

37. 2. Investment in Physical Capital Stock

38. Investment in Physical Capital Stock is still important... • Investment in physical capital stock - whether from local or foreign sources, is essential to ensure the transformation of innovative R&D outputs into final products as well as to provide the opportunities for human capital to deliver • This requires a well defined and stable policy environment and should focus in efficient and innovative production technologies

39. The Role of Small Business in this equation

40. The International Picture

41. Employment Creation

42. Income Improvement

43. Key conclusions • South Africa’s economy needs an injection of innovation • Technology plays a substantial role in successful economies • Technology has come to underpin growth in South Africa • Investment in R&D boosts economic growth • Investment in human capital boosts economic growth • Investment in physical capital stock is still essential • Small business can be a key enabler in maximising the contribution of SET to the South African economy

44. Key Findings and Recommendations

45. Key Issues for technological advancement in SA 1. Technology and innovation matter for long-term growth internationally and have become increasingly important for the SA economy 2. Technological advancement and innovation depend on the existence of appropriate enabling environments and policies 3. The appropriate enabling environment for technological advancement and innovation depends on sufficient resources being devoted to R&D 4. A crucial resource for research and development is human capital 5. Maths and science are core to developing human capital for technological innovation and economic growth

46. Key Issues for technological advancement in SA 6. Given the declining trends in both school and university training in maths and science in South Africa, identifying the means of attracting and retaining good teachers to these subjects is vital. Attracting good students to them follows as a close second. 7. The answers do not lie with more expenditure on education - but with better allocation of expenditure on education. 8. Public-private partnerships should be explored as a means of generating the sort of investment in innovation and human capital that South Africa needs. 9. Mechanisms to promote increased levels of investment in innovation, human capital and physical capital stock are essential for economic growth in South Africa - especially those mechanisms involving SMMEs. (See NSTF/DACST review of the NSI)

47. NSTF/DACST Review of the National System of Innovation (NSI)

48. DACST/NSTF Review of the NSI • White Paper was a major step forward • Major progress in implementation - PUSET, Foresight, Audit, Public Science System reviews, Innovation fund • NSTF discussion with Minister of Arts, Culture, Science and Technology - mid 2000 “We have achieved enormous progress in delivering on the White Paper, but what do we need to do now to move intoa new era of innovation for South Africa” • NSTF Plenary - Sept 2000 • Input from various Government Departments • Caucus discussions • Plenary debate - major actions identified • Synthesis document compiled and submitted to DACST • Debated and actions developed with DACST

49. Actions to Progress the National System of Innovation • PUSH FOR THE NSI AS A NATIONAL IMPERATIVE • Develop a strategy to ensure adoption of the NSI as a key national imperative in all sectors • Ensure all relevant government departments are involved • Establish government body to co-ordinate and rationalise • Consider establishing a cabinet committee to enhance the profile of SET at the highest levels (A Cabinet memo should be submitted in this regard) • Use of relevant web sites to facilitate awareness • Establish consolidated picture of the total SET investment in order to focus attention on the issue and to optimise expenditure and returns • Use NSTF/NACI study on Growth and Innovation(amongst others) to sell the concept to key government and business stakeholders • Showcase South African Technology at the World Summit on Sustainable Development (WSSD) scheduled for September 2002

50. Actions to Progress the National System of Innovation • PUSH FOR THE NSI AS A NATIONAL IMPERATIVE • Improve information availability and flow across sectors • Enhance SET related communications through the use of the programme for Public Understanding of Science Engineering and Technology (PUSET) plus the DACST project to develop science journalists • Establish a low number of specific Key Performance Indicators for the South African NSI to set targets and monitor performance (NSTF study currently underway to define indicators) • Review the effectiveness of the NSI annually against these defined Key Performance Indicators (KPIs) • Declared the statistical data required to develop and monitor these indicators to be official data to be accessed via Statistics SA