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Fourth Industrial Revolution much in need of R&D

Business Report
SCIENCE, technology and innovation indicators enable a country to measure, monitor and evaluate its scientific and innovative capabilities. These capabilities will become increasingly important as the global community of nations confronts the reality of the Fourth Industrial Revolution and the digitisation of the economy.

To this end, trends the world over indicate that there is renewed interest in investing in research and development (R&D) after the 2008-2010 economic crisis. Economies such as China, South Korea, Singapore, India and Brazil have expanded their proportions of global R&D expenditure, while South Africa’s proportion of global R&D spending has remained at 0.4percent for the past decade

Our focus on innovation and R&D is increasingly important with the release of the Department of Trade and Industry’s 9th iteration of South Africa’s Industrial Policy Action Plan (IPAP) earlier this month. In launching this plan, I suggested that “the impact of the Fourth Industrial Revolution, based on digitisation, robotisation, the Internet of Things and big data capabilities, will have further disruptive impacts on both developed and middle-income countries, affecting not only how things are done” in the economy, but the whole future of manufacturing.

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Dr Rob Davies

“Moreover, since its effects are likely to be felt not only in the productive sectors of the economy but also across the interlinked service sectors - including e-commerce - we have no option but to prepare ourselves as quickly and creatively as possible.”

This could fill us with deep consternation particularly since we in South Africa continue to confront the legacies of apartheid and colonialism which continue to impact on the quality of our human resource capabilities as well as the performance of our economy.

Are we able to respond to the opportunities presented by the digital age in a way which supports our national priorities by providing better responses to challenges of poverty, underdevelopment and unemployment?

To be sure, the new technologies have the potential to deliver increasingly sophisticated products and services and to have a positive impact on socio-economic development.

But to ensure that this materialises to the benefit of society as a whole requires that we act to promote greater inclusivity and prepare our people for new technologies.

Changes

South Africans also need to become more aware that the changes of the Fourth Industrial Revolution will require that we look at innovation differently.

Solutions to some of our most pressing developmental challenges can come from our ability to integrate technology and innovation into our cohesive responses as government, business and civil society. We cannot respond to the challenges of the 21st century with 20th century responses!

How we innovate will be crucial to whether we are able to integrate the benefits of the digital economy into the transformation of our economy, manufacturing processes and global supply chains. Importantly, while innovation alone is not the answer to faster growth and inclusive development, it remains a significant, vital catalyst.

Our National Survey of R&D serves as an important source of evidence informing policy review and planning to enable government to track policy targets, and is used by a wide range of stakeholders as reference for statistics on the country’s performance on key indicators: the size, growth and composition of R&D expenditure, and the human capital devoted to R&D.

The most recently released survey results by the Department of Science and Technology and the HSRC’s Centre for Science, Technology and Innovation Indicators indicate that South Africa is increasingly prioritising R&D and innovation.

Gross expenditure on research and development (Gerd) has increased over four consecutive years with an 8.1percent increase from 2013/14 to 2014/15.

At R23.3billion in 2014/15, Gerd in constant 2010 rand terms has almost reached the peak of R24.1bn that was achieved in 2008/09. That Gerd has also increased for all sectors of the economy, including the business sector, bodes well for our journey towards industrialisation and beneficiation.

Largest spender

The private sector remains the largest spender on R&D in South Africa, with business expenditure on R&D (Berd) amounting to R13.291bn in 2014/15. Berd at constant rand prices amounted to R10.533bn, which is equivalent to 45.3percent of Gerd. Most significantly, the private sector has almost exclusively financed its own R&D.

The manufacturing industry in particular has been increasing R&D expenditure which augurs well for our journey towards greater industrialisation.

A further good sign is that R&D in science councils is growing and has increased from R4.305bn in 2013/14 to R5.005bn in 2014/15.

The country’s journey towards the Fourth Industrial Revolution is also on a strong trajectory with expenditure on applied research in the business sector increasing by 5percent, from 51.7percent in 2013/14 to 56.7percent in 2014/15.

This is the third consecutive year where the expenditure in applied research is higher than expenditure in experimental research. This speaks to our ability to innovate and grow the country’s competitive advantage.

Our improved levels of R&D must be matched by greater efforts towards the commercialisation of some of our innovations so that these can impact positively on the lives of our people and our national competitiveness.

Innovation should become deeply entrenched into the fibre of our character as a nation and the R&D study will help to inform how we should match resources and efforts nationally to achieve this.

Rob Davies is the Minister Trade and Industry.

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