Date: 11/04/2007

Source: Department of Science and Technology

Title: Hanekom: National Innovation Survey

Speech by the Deputy Minister of Science and Technology, Honourable Derek Hanekom, on the occasion of the declaration of the of the results of the 2005 National Innovation Survey, Johannesburg Stock Exchange, Sandton

Director General
President of the Human Sciences Research Council
Ladies and gentlemen,

As an engine of economic growth, technology is playing an increasingly important role in the nation's ability to prosper and grow. Innovation is widely recognised as one of the most important mechanisms through which technology can be leveraged to create wealth, leap-frog developmental backlogs and contribute towards a better quality of life. This is our conviction and the 2005 National Innovation Survey results that we unveil today back us.

The National System of Innovation (NSI) that my department champions, recognises the importance of technological innovation for the competitiveness of South African firms and consequently the growth of the economy. We are also aware of the growing importance of non-technological innovation such as design, implementation of new organisational strategies and changes in the concepts of marketing. In line with international trends, the services sector of the economy continues to show strong growth. The services show relatively high levels of innovation in South Africa and encouragingly these innovation activities include research and development (R&D).

In order for us to further promote the NSI and create an enabling regime that supports and encourages innovation, it is absolutely essential to have a clear understanding of the processes underlying innovation in South African firms. Existing data sources, such as national R&D surveys, provide valuable and necessary sources of data on the inputs to the NSI such as the activities of the funders and performers of research and experimental development R&D. Innovation surveys are designed to measure the factors that affect the outputs from the NSI in the form of new and significantly changed products that reach the market and new or significantly enhanced processes used in production.

The Centre for Science, Technology and Innovation Indicators (CeSTII) of the Human Sciences Research Council (HSRC) was commissioned by the department to undertake South Africa's first official innovation survey. In order to provide reliable international comparisons, this survey was conducted in accordance with the latest European Union (EU) Community Innovation Survey (CIS4) that was used in all EU and most Organisation for Economic Co-operation and Development (OECD) countries in 2005/06 and also forms the basis of the latest innovation survey conducted in China and that being planned in India.

Innovation Surveys are increasingly used around the world to understand the dynamics of innovation and the effects of innovation on the economy. These surveys collect specific information about firms such as the type of innovation, partnerships for innovation, costs and objectives of innovation. These questions produce an interesting and useful set of responses. Unlike the R&D survey, the innovation survey is like most national economic surveys, based on a random sample of enterprises from the official business register. This sample was provided by Statistics South Africa as part of the partnership outlined in the Memorandum of Agreement between Statistics South Africa and the Department of Science and Technology.

Some of the key indicators emerging from innovation surveys are the proportion of innovating firms, the costs of innovation and the percentage of sales that accrue as a result of new product innovations. Not all innovative firms rely on traditional R&D to produce innovations, although R&D based innovation is a feature of the larger successful manufacturing firms.

There are three findings from the innovation survey that I would like to dwell on briefly here:

Firstly the innovation survey reports that nearly 52% of enterprises surveyed reported innovative activity in the form of the development of new products and processes. This is against a background of a general increase in economic activity in South Africa over the past few years. It shows that our private enterprises are not being complacent and are responding to changes in their environment by producing new or significantly changed goods, services and processes. Our rate of innovation is well above that of the European average of 42% for 2004. This is a welcome finding indeed.

Secondly, South African enterprises spent about R27,8 billion on innovation activities in 2004. This expenditure comprised intramural or in-house R&D expenditure, outsourced R&D, acquisition of machinery, equipment, software and the acquisition of other external knowledge such as copyrights. Furthermore, in-house R&D expenditure accounted for about 20% of total innovation expenditure. This is especially encouraging since the total R&D expenditure recorded was basically the same as that recorded for the same sectors in the 2004 national R&D survey. Bearing in mind that the innovation survey is a random sample of business enterprises and is not focused on R&D or technology orientated firms this result serves to confirm the importance of R&D for the competitiveness of business in the country.

Ladies and gentlemen, it is particularly gratifying to note that apart from the expected large R&D performers in South Africa there appear to be many diverse businesses undertaking small amounts of R&D. It is therefore important that government extends its support and encourages these enterprises to persevere in, and grow, their R&D activities. Our earnest hope is that some of these small R&D performers of today become the medium and large R&D stalwarts of the future.

Related to this, the third aspect I would like to highlight is that of government support for R&D performers in South Africa. As you know the South African government has several support schemes for the development of R&D and innovation in the country. These include the Technology for Human Resources in Industry Programme (THRIP), the Innovation Fund, the agency grants of the National Research Foundation, the Support Programme for Industrial Innovation (SPII) and various other programmes.

The Innovation Survey indicates that about 10% of successful innovators in industry (i.e. those enterprises that claimed innovations had been responsible for part of their turnover) received public funding for innovation activities. The majority of these support funds came from national funding agencies or government departments. This again shows clearly that the funding programmes of government are having a penetrating effect in the private sector and are demonstrably contributing to the bottom line performance of South African business.

While it is natural for any organisation to applaud the results of any survey that paints a positive picture, I believe the 2005 National Innovation Survey represents an important aspect of activities that are fundamental to our economic growth and development and generally improving the quality of life of all citizens.

Certainly policy makers like myself and other industry role players need quantitative and qualitative data to understand the nature of innovation and how it changes over time. We are thus most delighted to present the results of the 2005 National Innovation Survey, convinced that they will inform our interventions in the future.

I thank you for your attention.

Issued by: Department of Science and Technology
11 April 2007