General Country Description
South Africa, known as the rainbow nation for its harmonious transition to democracy in 1994, is one of the most diverse, attractive and sophisticated emerging markets in the world. Its strategic location at the tip of Africa offers a platform for trade and industry regionally, and the country is a gateway to the continent which has a market of more than a billion people.
Part of the emerging economies bloc; Brazil, Russia, India and China - South Africa rounds off the collective giving birth to the acronym BRICS. The country has a favourable demographic profile and its rapidly expanding middle class has growing spending power. Boasting the second largest economy in Africa (after Nigeria) with a GDP of $349.299bn, The World Bank forecasts South Africa’s economic growth will accelerate to 1.3% in 2019 from 0.9% in 2018.
South Africa’s growing biotechnology sector is supported by world class infrastructure and there are exciting innovations across sectors including: industry and environment, health, agriculture, and indigenous knowledge systems. Bio-Economy SA is a national initiative set to encourage bio-innovation and spur economic growth through four key sectors: industry & environment, health, agriculture, and indigenous knowledge systems.
Developments in the biotechnology sector are poised for growth as the country has sophisticated financial, legal and telecommunications infrastructure, with a range of global business process outsourcing operations located in the country.
South Africa’s stable political and macro-economic climate makes it an attractive investment destination. South Africa’s investment incentives under the auspices of the Department of Trade and Industry, the Department of Economic Development and the Industrial Development Corporation, make it one of the most enabling trade and investment destinations in the world.
Brief Organization Description
The Department of Science and Technology aims to promote the development of science and technology through the enabling mechanism of the National System of Innovation. It strives towards introducing measures that put science and technology to work to make an impact on growth and development in a sustainable manner.
The department provides leadership, an enabling environment and resources for science, technology and innovation. Through its programmes and several entities, the department is accomplishing ground-breaking science and enhancing the wellbeing of all South Africans.
South Africa has active participation and leadership in a number of global initiatives, including the hosting of the International Centre for Genetic Engineering and Biotechnology. The country hosts the central node of a regional bioscience network, SANBio, which seeks to build regional capacities and develop collaborative research and innovation opportunities. South Africa has established the Tshwane Animal Health Cluster and the Strategic Health Innovation Partnerships (for human health) to provide focused funding in areas of critical need for the country.
SANBio includes regional nodes on tick borne diseases, indigenous knowledge systems, bioinformatics, fish biodiversity and aquaculture.
According to the National Survey of Research and Experimental Development 2016/17, produced by the Centre for Science, Technology and Innovation Indicator on behalf of the Department of Science and Technology, South Africa’s gross domestic expenditure on research and experimental development (GERD) stood at R35.693 billion at current Rand values in 2016/17.
There is growth in funding of R&D from both the broader government sector and business
Government funding (inclusive of science council funding and higher education own funds) continued to outstrip business funding of R&D in 2016/17. After showing signs of slowing down in 2015/16, the growth in funds from the business sector increased from R12.578 billion to R14.046 billion in 2016/17. Similarly, government-funded R&D increased from R14.426 billion to R16.428 billion.
The contribution by foreign sources to funding of R&D across all sectors stood at 11.7% of GERD in 2016/17. Over the ten-year period starting in 2007/08, foreign funding of South African R&D increased in real terms by R485 million. Most foreign R&D stakes are in the business sector. However, foreign funding of the business sector has declined in real terms since 2007/8. The higher education sector has seen the most growth in funding for R&D from overseas.
R&D performed continued to tend towards applied research
Over the last ten years, most of the R&D in South Africa has consistently been conducted in the engineering sciences, information, computer and communication technology sciences, medical and health sciences and social sciences. The 2016/17 results show that the majority of R&D activity is now taking place in social sciences (21.0%), followed by medical and health science (19.2%), and then the engineering sciences (12.9%).
R&D expenditure on medical and health sciences is now lower than those in the social science research field. The rapid growth in social sciences, starting in 2011/12, derived from activities taking place in the business sector, followed by the higher education sector. Since 2014/15, R&D expenditure on engineering sciences, which for many years prior to 2011/12 was the leading research field, has been declining.
Regulation and Policy
South African policies are focused on increasing the economy's outward positioning. The government continues the call for foreign investment supported by investor-friendly policies. Commitment to a conducive business environment is demonstrated in approving over
R50-billion in new industrial funding projects since 2009 through the Industrial Development Corporation. The National Development Plan (NDP) is a policy blueprint to 2030. It makes several proposals to lowering costs of doing business in South Africa. In 2013, NDP reforms were introduced to strengthen the ability to stop corruption in supply-chain management, highlighting the pledge to grow, improve and maintain a long strategic outlook.
Manufacturing is highlighted as a key area to drive growth. The Industrial Policy Action Plan (IPAP) focuses on growing jobs, exports and the production of value-added goods. IPAP ensures realignment of the value-added exports to rapidly developing economies in
sub-Saharan Africa, the country's BRICS partners, and other emerging markets.
Incentives for R&D and Investment
South African government departments offer an array of incentive schemes to stimulate and facilitate the development of sustainable, competitive enterprises. A variety of these incentive schemes seek to support the development or growth of commercially-viable and sustainable enterprises through the provision of either incentivised funding (through the National Research Foundation, the Department of Trade and Industry, and the Technology Innovation Agency, among others) or tax relief. The incentive schemes are broadly classified into three categories:
1. Concept and Research & Development Incentives: These are incentives available to private sector enterprises that invest in the creation, design and improvement of new products and processes. Such businesses conduct investigative activities with the intention of making a discovery that can either lead to the development of such new products and processes or to the improvement of existing products.
2. Capital Expenditure Incentives: These are incentives for companies that want to acquire or upgrade assets to either establish or expand the business’s productive capacity.
3. Competitiveness Enhancement Incentives: These are investments that facilitate increased competitiveness, sustainable economic growth and development in a specific sector.
4. A tax incentive, ranging from 100 to 150%, for private sector spend on R&D.
For more detail on these incentives, please see www.investmentincentives.co.za
South Africa presents many attractive assets for investors such as demography, a diverse, productive and advanced economy, abundant natural resources, a transparent judicial system and political stability. The Department of Trade and Industry established InvestSA, a division that offers a One-Stop-Shop service to investors.
• Bio-Economy SA launched by the Department of Science and Technology (2013) with buy-in from stakeholders in key sectors: industry and environment, health, agriculture, and indigenous knowledge systems;
• Development and testing of novel platforms and products for HIV prevention;
• Novel medical devices for maternal and child health proven to reduce perinatal mortality and maternal deaths;
• New gene discovered –CDH2 - that predisposes young adults and athletes to sudden cardiac arrest through a global collaboration;
• Exatype, an innovative platform for rapid, accurate HIV drug resistance analysis at affordable rates for routine HIV and other drug resistance testing;
• New interventions for the diagnosis and treatment of non-communicable diseases;
• World-leading digital health interventions to improve health service delivery;
• Africa’s first integrated drug discovery platform focused on translating basic science knowledge into potential innovative new medicines to treat malaria, tuberculosis and combat antimicrobial resistance; and
• The first large scale African Genomics Centre, under construction at the South African Medical Research Council in partnership with Beijing Genomics Institute, to set the course for the development of personalised medicine for African populations.