Innovation and socio-economic development challenges in South Africa: An overview of indicators and trends

 

 Innovation as a driver of socio-economic development

Through its capacity to disrupt markets by rendering old technologies obsolete and continuously creating new ones, innovation is at the heart of the industrial mutation that defines long-term growt trajectories. While the role of innovation in the dynamics of economic growth seems firmly established, much less attention has been paid to its role in economic development (Fagerberg et al.2010). In contrast to growth, which focuses on the expansion of production irrespective of who benefits from it, development is concerned more with its effects on human freedoms and the removal of constraints and deprivations that prevent people from leading the dignified lives that they have reason to live (Sen 1999). For developing countries to benefit from the advantage of innovation and new technological knowledge, it is commonly understood that they have to develop appropriate
‘capabilities’ that enable them to overcome their technological disadvantage (Fagerberg and Srholec 2009). Those capabilities have been presented under different concepts, such as ‘technological capability’ (Kim 1980), ‘technological mastery’ (Dahlman and Westphal 1982), ‘absorptive capacity’(Cohen and Levinthal 1990), or ‘social capabilities’ (Abramovitz 1986), as fundamental to the process of development and technological catch-up (Fagerberg and Srholec 2009, p.2). According to Khan (2004), the nexus between capability-based innovation and development runs through ‘positive feedback loops’ that lead to a virtuous circle by which innovations lead to higher productivity, which leads to growth and prosperity, which in turn form the basis for more innovations What people can achieve with their capabilities is influenced by “economic opportunities, political
liberties, social powers, and the enabling condition of good health, basic education, and the
encouragement and cultivation of initiatives” (Sen 1999, p.5). In South Africa, the National
Development Plan (NDP30) presents aspirational development goals that reflect the capabilities expected to be achieved by the South African society by the year 2030 (National Planning Commission, 2012). Those capabilities are categorised according to nine core domains that underpin the decent standards of living targeted for 2030:

1. Nutrition
2. Housing, water, sanitation and electricity supply
3. Transport
4. Education and skills
5. Safety and security
6. Health care
7. Employment
8. Recreation and leisure, and
9. Clean environment.

According to the National Planning Commission, education and skills training, as well as access to good employment opportunities, are the capability areas in which South Africa needs to make the most progress. These two domains are key to achieving the development objectives, as they are directly connected to innovation strategy through the nexus between the quality of training needed to produce advanced human skills and the labour productivity generated by the deployment of these skills in the workplace. Progress is achieved by the effect of skills on more efficient production, but also through the accumulation of skills and capabilities through learning by doing and labour-augmenting technical change (Ziesemer 2021). The building up of human skills in all domains is one of the key drivers of innovation, because skilled and trained brains are better prepared to produce new
ideas and try them out for the creation of new processes, new production methods, new products and new services (Ziesemer 1991). Technological progress is also a driver of social change as the introduction of new products, new production processes and new markets change the consumption patterns and create new possibilities for social interactions and new technical change.

In the context of South Africa, the accumulation of human capabilities projected by the NDP forms a key input for the reinforcement of the innovation system, which in turn catalyses innovation as a key enabler of development through its effects on creative destruction (Schumpeter 1934; Aghion and Howitt 1992). Because of the key role that the National Development Plan assigns to STI in reaching its 2030 vision, the 2019 White Paper on Science, Technology and Innovation, as approved by the government, provides a strategic policy framework for building the necessary capabilities and using
policy instruments to harness the power of innovation for tackling socio-economic challenges. Such policy instruments include the use of public procurement as a vehicle to strengthen the South African innovation environment and increased support for the private business sector, with closer collaboration to foster a culture of innovation and improve the related outcomes.

 The commitment of the government to increase the funding of the innovation ecosystem and reach the gross expenditure of research and development (GERD) target of 1.5 of the country’s GDP is a further indication of the government’s determination to harness the power of innovation in order to expand the state’s capacity to meet the nation’s socio-economic challenges. Innovation policy in itself, however, is not a substitute for the broader economic development strategy, which encompasses several domains of planning and organising, as well as resource mobilisation. For the achievement of the innovation policy objectives, the National Development Plan (NDP30) also identified water, power,
marine, space and software engineering as domains of special consideration because of the perceived comparative and competitive advantages that South Africa is endowed with in these domains.

South Africa can rely on the strengths of its academic and public research excellence as well as theconducive innovation ecosystem of its largest metropolitan areas (in particular Cape Town and Johannesburg) to support innovation in the private sector and reap the corresponding benefits.
However, questions remain about the nature of this research excellence, and its relevance to South Africa’s developmental challenges. It is important that STI is responsive to the specificities of South Africa and to South Africa’s own socio-economic development needs, as discussed further in this report.

Furthermore, South Africa’s tax incentive system, tends to favour innovations at the technology frontier, involving mostly large firms active in the export sector (World Bank 2017). This may become a limiting factor on the benefits of an innovation support strategy, because the target beneficiaries of these incentives are in the skills intensive activities and have only limited employment potential (in a country grappling with chronically high unemployment rates)

Source: 

University of Johannesburg

Innovation and socio-economic development challenges in South Africa:
An overview of indicators and trends
DSI/NRF SOUTH AFRICAN RESEARCH CHAIR IN INDUSTRIAL DEVELOPMENT


Alexis Habiyaremye, Nicola A King and Fiona Tregenna


SARChI Industrial Development Working Paper Series
WP 2022-03
ISBN 978-1-77630-393-9


March 2022


All copyright vests in the University of Johannesburg and unauthorised reproduction or use
of the work is not permitted without the University’s prior written approval.

Mozambique Doing Business - South Africa

2025

Link: https://www.uj.ac.za/wp-content/uploads/2021/10/sarchi-wp-2022-03-habiyaremye-king-tregenna-march-2022.pdf


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