In his State of the Nation address, President Jacob Zuma hailed the “upward trend” in the matric pass rate and expressed his satisfaction that the government’s “intensive focus on education is paying off”. As regards higher education, the president noted that “we are exceeding targets” and that “close to 14 000 learners were placed in workplace learning opportunities over the past year”.

Unfortunately, the president failed to substantively address the very serious problems facing our schools and higher education sector. Despite the improved matric results, a closer look at the data reveals that the quality of schooling remains very poor. Only one in six school-leavers enter higher education institutions, a much lower proportion than in equivalent middle-income countries.

Of those that do, more than a third drop out because they lack the basic literacy and numeracy skills to cope with tertiary-level work. However, I do not want to dwell on the many shortcomings of the current national administration’s handling of education, or of its inability to equip the majority of young South Africans with marketable skills. These are well documented and well known. Instead, I would like to outline how, through smart reforms, we can build upon our existing intellectual capital and lay the foundation for strong and sustainable economic growth.

The greater Cape Town area boasts no fewer than four universities, and numerous other private and vocational training colleges. Many of its specialised research institutes and schools are world class. The budding young innovators, entrepreneurs and future corporate leaders who graduate each year from business and other professional programmes at these institutions have the ambition, skills and determination to grow our economy and create jobs.

Too often, however, they are constrained by unnecessary red tape, high corporate taxes, restrictive labour policies, high costs and an antagonistic national administration that appears determined to stifle private sector innovation in favour of state domination in the form of creeping “crony capitalism”. Entrepreneurial energy and innovation needs to be assisted, not constrained. We have the intellectual assets to become a leading global research and development (R&D) hub. What we need is the right policy environment.

Take, for instance, our medical schools. In the Western Cape three schools are dedicated to health care: two health sciences faculties at UCT and Stellenbosch, and a school of public health at the University of the Western Cape. Together, these institutions form a “golden triangle” of medical research and innovation, respected across Africa and the world for their cutting-edge work in areas as diverse as molecular medicine, drug discovery and development and the study of lung infection and immunity.

Turning research into economic opportunity, however, requires the right incentives, a facilitative policy framework and a supportive institutional environment that encourages entrepreneurial thinking.

Increasingly, as globalisation means that companies’ value chains become geographically fragmented and international investors seek to capitalise on the dynamism and competitiveness of emerging markets, developing countries such as India and China are becoming more important as international centres of science and technology R&D.

However, the current national policy architecture in South Africa prevents us from fully capitalising on these intellectual assets. According to a recent Organisation for Economic Co-operation and Development report on the attractiveness of different locations for R&D investment, factors that prospective investors take into account include: the size of the market; the availability of high-quality resources such as scientific infrastructure and the supply of skilled labour; agglomeration effects arising from proximity to other companies; and a stable policy environment. In high-value industries, such as pharmaceutical research, labour costs appear to be less important than the quality of these location factors.

While the Western Cape can boast two of these pull factors in abundance – namely, a solid scientific infrastructure and a relatively good supply of skilled labour – we fall down when it comes to a stable policy environment at a national level, and the relatively small size of our domestic market.

I am currently heading up a major policy review and development at the DA, codenamed the 8 percent Growth Project, which will seek to address these constraints, and propose a set of solutions that will unlock rapid economic growth where we govern and provide a promise to voters at a national level. In seeking to build on our intellectual assets, it is important to look at examples of international best practice to see what kinds of policy architecture best facilitate high value R&D growth.

The state of Georgia in the US has been particularly innovative in its approach to leveraging university-based science and technology innovation to spur economic growth, and we would do well to note some of its headline initiatives.

One of these involved establishing a state-wide research alliance between Georgia’s six research universities and the state to build a technology-driven economy in the region through public-private partnerships between the “triple helix” of universities, government and business.

A key component of this involved the creation of a Georgia Research Alliance Venture Fund that provides “commercialisation grants” that assist researchers to turn their work into marketable products.

This, combined with changes to legislation that incentivise co-operation between industries and university-based research units (by allowing the institution to retain titles to government-funded work, thus enabling them to benefit from their inventions and innovations) contributed to Georgia becoming a major centre for R&D investment in the US.

Another, perhaps less tangible, factor underpinning the success of the Georgia case involves the encouragement of an entrepreneurial culture in its university system. This is partly attributable to the historically strong relationship between universities such as Georgia Tech with industry bodies, but more significantly it has to do with specific policy choices that encourage the commercialisation of science and technology research.

In this regard, Georgia Tech boasts a designated and highly efficient Office of Technology Licensing, an intellectual property policy that guarantees commercial gain for the university and its researchers, and a highly effective spin-out policy that provides seed funding and a business incubator service for spin-off companies.

What is needed in South Africa is for legislation and policy to be changed at a national level in order to make it easier for us to capitalise on our intellectual assets.

Through the 8 percent Growth Project, the DA is working on coming up with solutions that draw on international best practice to develop a policy platform that promises to grow the economy at a sufficient rate to create jobs and expand the circle of opportunity, so that more of our talented young graduates can become active participants in a South African economy driven by innovation.

Wilmot James is an MP, the DA federal chairman and party spokesman on trade and industry.