Department of Science & Technology Research & Development survey results for 2008/9

Science and Technology

16 November 2010
Chairperson: Mr N Ngcobo (ANC)
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Meeting Summary

The Department of Science and Technology briefed Members on its Research and Development Survey results for 2008/09. The Survey measured the inputs into research and development and into the process of innovation. It followed the guidelines of the Organisation of Economic Cooperation and Development’s Frascati Manual as closely as possible. It covered five sectors – business, higher education, the science councils, Government, and not-for-profit. It produced statistics on the intensity of research and development, one of the commonly used indicators for competitiveness internationally. The Department reviewed  key indicators, illustrated by tables, graphs and charts of gross domestic expenditure on research and development (South Africa 1991-2008), gross expenditure on research and development as a percentage of gross domestic product (South Africa 1991-2008), gross expenditure on research and development as a percentage of gross domestic product for various countries for 2008 or the latest year available, gross expenditure on research and development of selected countries in 2006-2008, the number of full time equivalent researchers per 1 000 total employment in various countries in 2008 or the latest year available, women researchers as a percentage of total researchers (headcount) in various countries in 2008 or the latest year available, the number of female and male researchers (headcounts) per sector (South Africa 2008/09), performance of research and development by sector (South Africa, 2007 and 2008), in-house research and development expenditure by sector, major flows of funding for research and development, expenditure on research and development by major research field (South Africa, 2007 and 2008), gross expenditure on research and development by type of research (South Africa, 2007 and 2008), and basic research in various countries as a percentage of gross domestic product in 2008 or nearest year available. The Department observed that, in comparison with other developing countries, the outlook for research and development in South Africa was unfavourable. South Africa was not performing well in expenditure on research and development or in the number of researchers employed. Lack of human capital, lack of investment and funding and the global economic crisis were among the contributors to the decline.

Members felt that the total number of researchers in the country was insufficient. Members were worried about what solutions existed to the declining figures. Western as compared to eastern approaches toward research and development were also discussed, in particular, China's approach. Another issue which Members did not understand was why Government had raised the target for South Africa’s gross expenditure on research and development as a percentage of gross domestic product from 1% to 1.5% when the Department had never managed to reach the 1% target in the first place. Due to time constraints the Department could not answer all Members’ questions and would respond in writing.

Meeting report

Department of Science and Technology. 2008/09 R&D Survey. Presentation
Ms Marjorie Pyoos, Deputy Director-General (DDG): Socio-Economic Partnerships, Department of Science and Technology (DST) pointed out that the results did not look good.

The Research & Development (R&D) survey, an instrument that was internationally utilised, was a proxy measure that would never be able to capture everything that was spent on R&D. However, the Department, together with other countries, had accepted that it was a very good measure in terms of how competitive the country was. Evidence showed that the more money was spent on R&D the more competitive the country was. Most countries had accepted a particular methodological approach outlined by Organisation for Economic Cooperative Development (OECD) Frascati Manual. The participation of its membership was mainly the developed world. Developing countries such as South Africa (SA), Argentina and China were now also measuring the R&D performance described in the Frascati manual.

The survey covered five sectors which were: the business sector, higher education, science counselling, Government and the not-for-profit sector. In most areas science councils and Government were added together, reflected under Government. Thus Government spending on R&D included science councils.

The R&D sector produced statistics and measured the spending by each sector and the intensity of how much those sectors were spending on R&D and compared it from one year to the next.

The Department had therefore set up an institutional platform at the Human Sciences Research Council (HSRC) called the Centre for Science & Technology Innovation Indicators (CESTI). However, the Department supported creation of a research chair because, together with Statistics South Africa (SSA), the Department realised that there was a critical shortage of properly qualified statisticians. The Department had interns reading for their Master's degrees and Doctor of Philosophy (PhD) degrees to ensure that in decades to come the Department would be able to measure that kind of information.

Ms Pyoos said that the Department was not going to delve into the issue of the 1.5% target. She said that Government had raised the bar on the expenditure target for gross domestic expenditure on R&D (GERD). The Department previously had a target of 1% for 2008/9 and the new target was 1.5% to be achieved by 2014. Processes were under way in terms of how the Department envisaged reaching that target. The Minister had set up a review committee to study and make recommendations on the readiness of the system to respond to national objectives.

According to key indicators, there had been growth of just under R3 billion that was spent on R&D in the country between 2007 and 2008. Gross domestic product (GDP) at that point was increasing at a much faster rate than investments on R&D and the Department had slipped back in terms of the percentage of investments in R&D against (GDP). GERD was at 0.93% in 2007/8, a drop from the previous year which was 0.95% and it slipped to 0.92% in 2008/9 (table 1). There had been very limited growth on the part of Government in terms of R&D expenditure. The bulk of the expenditure increases were from the private sector. By the time the DST reached 2009/10 the results would have deteriorated even further because that was the period of the global economic recession. The Department was already receiving some anecdotal indicators that companies were shutting down their research laboratories and so the picture was not looking good for SA.

The number of R&D personnel had also seen a drop from 31 352 in 2007/8 to 30 802 in 2008/9 (table 1). Another concern was the drop in the number of full time equivalent research personnel per 1 000 total employment to 1.4 in 2008/9 (figure 4). The number of full time equivalent researchers had not changed much over the years but low compared to other countries (figure 4). The Department stated that the number of female researchers as a percentage of total researchers was not too poor compared to that other countries but there had been a decrease to 39.7% in 2008/9 (figure 5).

It was clear that gross expenditure on research and development (GERD) increased from 2001 to 2008 (figure 1).  However, as a percentage of the gross domestic product (GDP) it reached its peak at 0.95% in 2006 and decreased to 0.92% in 2008. Thus it had still not reached the 1% target which Government had then set. However that decline could be combated if Government accelerated the pace, particularly since the new target was 1.5% of GDP.

Gross expenditure on R&D in South Africa was 0.92% of the GDP, lagging behind countries such as China which spent 1.44%, Spain's 1.35% and the Russian Federation's 1.03% of their GDPs. South Africa was still ahead of Argentina, but the Department believed that Argentina was investing heavily in science and technology and state of the art systems.  South Africa was still far from the OECD average (figure 3).

In terms of performance per sector, the private sector spent more than any other sector in both 2007 and 2008, 58.6%, leading to an increased proportion of R&D in the business sector. Higher Education maintained its 19%, Government and science councils 23%, while performance in the not-for-profit (NPO) sector was a worrying 1.1%, a drop from the previous year (figure 7).

The major flow of funding for R&D for 2008/9 in the business sector was mostly into its own R&D and into its own laboratories. Of the R8.9 billion, the business sector transferred R8.3 billion into its own R&D, R153 million was granted to Government institutions, R27million to NPOs and R454 million to higher education institutions. Government injected, of its R9 billion funding, R3 billion into its own institutions, R2.5 billion to the private sector, R3.2 billion to higher education and R33 million to NPOs. Foreign agencies or governments also contributed to R&D in SA and, of R2.3 billion, transferred R1.3 billion into the business sector, R445 million into Government institutions, R410 million into higher education and R143 million into NPOs (figure 8).

The research field which had seen the highest amount of expenditure in both years was engineering sciences, followed by natural sciences and medical and health sciences. The Department stated that agriculture had seen an alarming decrease from 6.8% in 2007 to 5.5% in 2008 and was also the lowest of all research fields (figure 9).

South Africa spent 0.19% of its GDP on basic research, on par with the Russian Federation but more than Argentina (0.15%) and China (0.05%) (figure 11). The reason that countries invested in basic research was that new activities required a strong base of fundamental investigations; if a country did not have those fundamentals it would just be tinkering with existing technology and basic knowledge.

Ms Pyoos said that the investment profile for R&D for 2008/9 did not look good. There were a number of areas of concerns, concerns about the overall quantum of investments, human capital, certain sectors and concerns about significant decreases.

Mr Godfrey Mashamba, General Manager: Science and Technology Investment, DST, said in terms of the quality review, the R&D Survey had been granted official statistics status for the 2001 survey. At that time the Department had used a limited set of dimensions and so Statistics SA (SSA) developed the SA Statistical Quality and Assessment Framework (SASQAF). The Statistician General (SG), according to the Statistics Act, had the authority to authorise certain statistics as part of the official statistics. The criterion was that whoever produced such statistics did so to meet the needs that were beyond their own. DST not only produced statistics to support itself but other users covered by the DST. The other aspect was the service sustainability which meant that whoever produced those statistics must do it for a longer period of time and must be part of the national statistics system. There were eight dimensions which the Department looked at over the past year under SSA: Relevance (information must be relevant to user needs), timeliness (statistics must be available as soon as possible), accuracy (statistics must be accurate), accessibility (must be available to a wide range of users), interpretation, methodology and coherence.

The Chairperson said that two more points should be added to those dimensions such as cost benefit and user benefit.

Mr Mashamba said that those two points were embedded as part of detailed criteria.

The Chairperson replied that statistics could be made user friendly but in terms of costs the user could not benefit.

Mr Mashamba agreed. He stated that the Department was in the process of implementing some of the recommendations which came out of the meeting with the SG last month. These included adopting the quality declaration statement. R&D Survey was still recognised in official statistics and over the next two years there would be a gradual implementation of recommendations to make sure that the R&D Survey was in line with the SASQAF.

Over the course of this year the Department had arranged workshops with two higher education institutions in Pretoria and Cape Town to dig deeper into issues they had with completing the survey and the time and effort it took them to complete and submit it. The Department had useful feedback. One of the issues the Department needed to act on with the 2009/10 survey was to point out that public institutions were obliged to respond to the surveys as they were largely funded by Government.

Some Government departments were doing well but there was still a reluctance to submit the survey and engaging with them to find ways to improve that. Regarding the integrity and improving the quality of the survey, the Director General (DG) and SG resolved on implementing a technical approval committee that would oversee and take the statistics through rigorous certification processes before publication.

The Department engaged with users on two levels. The first was through a planned web page and through engagements with national experts in science and technology.

The Chairperson asked where the expert groups came from.

Mr Mashamba said they were from OECD. He further said that SA was much respected because those experts wrote documents that were to be adapted to annexure the Frascati manual, which outlined the R&D measurements in developing countries.

The Chairperson asked why the Department used OECD to benchmark its standards and why the Department was using one source instead of multiple sources.

Ms Pyoos answered that the SG quality framework was demanding actual proof if DST wanted to retain its position that those statistics were relevant. Mr Mashamba indicated, regarding user interface, that there had been discussions with data providers but the user that was most important to the Department was the Portfolio Committee (PC) and if the PC was not using the Department’s statistics then it meant something was wrong with it. The Department was not only responsible for R&D survey but also for CESTI, the innovation survey which was for the private sector only. It did not ask how much profits it was making but whether there had been some new innovations introduced.

A new instrument used by the Department was the measurement of technology balance of payments which measured how much new technology SA was importing and how much SA was exporting. The result was called the technology balance of payments. It was calculated by the Reserve Bank and the Department for a while had been arguing that there was an error in its calculation. The Reserve Bank, after much debating with the Department, decided to adopt the method of calculation developed by the Department. In June 2011 when the Reserve Bank did its quarterly report it would be in line with the DST, which would be a first for SA.
There was another new instrument devised by the Department - the science and technology activity expert report which looked at science and technology investment and was for Government only. Expenditure on these activities meant that Government was improving the sophistication of the science and technical infrastructure. Thus, even the purchase of new computers was regarded as science and technology investments. If police forensics upgraded their systems in laboratories it would also be a form of investment. Science and Technology training was another category in which Government could invest in.

Ms Pyoos continued to say that there were various manuals to measure standards, such as the Oslo manual which measured innovation and the Canberra manual which measured human capital. The Department was using the United Nations Educational, Scientific and Cultural Organisation (UNESCO) guidelines on science and technology activities. But when it came to R&D, the Department was using the OECD which strictly measured how competitive generating new knowledge was.

The Chairperson said that that was the western approach but if one looked at the far eastern approach the standards were completely different, but they were successful.

Ms Pyoos said that one would never see a report from India coming into OECD and what the OECD therefore did was to extract India’s data from UNESCO reports. It was true that there were some East Asian countries that did not use the OECD framework in terms of preparing reports on how they invested in R&D. There were many countries that did not report, such as South Korea, but they had a strong alliance with the United States of America which was a member of the OECD. There were different geo-political reasons why some members followed a particular approach than others.

Ms M Dunjwa (ANC) said that she was worried that researchers were teaching and doing research at the same time and asked whether that did not affect or compromise research outcomes.

Ms Pyoos answered that researchers were the upper echelons of expertise. The Department urged them to teach to contribute to growing a stronger base. Academic teaching helped to get undergraduates motivated to do research degrees. A critical criterion for funding was that the Department took students at Master's and PhD levels. But only the time spent on research was counted as full time equivalent.

Ms Dunjwa stated that the Department had presented a number of declines and asked what the reasons for those declines were.

Ms Pyoos said that between 2006 and 2008 the economy grew at a pace which exceeded expectations. The DST was caught flat footed (not only Government but also the private sector) because it did not increase the pace at which it was investing. R&D was growing but not as fast as the GDP. There was a smaller percentage in terms of the relationship between the two but that did not mean that spending on R&D was less, but rather it was that the Department did not spend as much as it wanted to spend of the GDP. SA had been hit by the recession and therefore the opportunity to increase the R&D expenditure did not exist any longer. The GDP had been declining along with the R&D and it looked as if the Department might come out with 0.92% again in 2009/10.

The Chairperson asked Ms Pyoos to explain, based on the above argument, the Chinese boom versus the GDP.

Ms Pyoos said that China began designing the new economy for itself primarily in the period 2005-2006 which meant that in 2006 it had trebled its government investments in R&D. Even though the economy was opening up, the investments were still highly controlled in the Chinese environment. Why the Department did no hit its target was a difficult question to answer because the Department had no control over how much companies were spending on R&D and could only work through the Committee to encourage them to spend more and promote the benefits of spending more on R&D.

Ms Dunjwa pointed out that research covered the entire demographics of the country. The people who constituted the OECD were from developed countries. SA would always be different from developed countries. She said that there was more emphasis on deadlines rather than doing well in the country. For transformation in gender equality in research as well research itself to be changed, the whole system and method of R&D needed to be changed. If not, SA would always have challenges. She asked what could be done to solve this.

Ms M Shinn (DA) asked who held the research chair on statistics and where it was based, and, if it was operational, how many students it had.

Ms Pyoos said that the Department awarded two chairs through the usual National Recruitment Framework (NRF) processes. The professor who was meant to take up the chair did not inform the University that he was no longer available and thus the position had not been filled and it was therefore difficult to take on students. The chairs were at the University of Cape Town and the University of Pretoria.

Ms Shinn asked about R&D tax incentives which were due to be tabled in July but had not been tabled. She asked for some clarity on these.

Ms Shinn asked what was inhibiting businesses from spending on R&D and what could be done to improve R&D spending.

Ms Shinn said that R&D tax rebates were too bureaucratic, which was one of the reasons that people did not apply for them. She asked for the Department’s feedback.

Ms Pyoos said that the tax report was long overdue. It had been taken through the stages of getting accepted by the Minister and was on its way to Cabinet. The results were a lot more promising in terms of engaging with the private sector. Some found the application forms cumbersome, because they had not had much training on it, but the Department had made the form more user friendly and it was accepted by larger private companies. There were other reasons why some companies did not take up tax incentives, for example in the mining sector in terms of eligibility. A substantial amount of investigative research work in prospecting and early stage geological survey was not eligible for R&D tax incentives. It was more geared toward manufacturing rather than prospecting. The Department was, however, redesigning its national framework to support prospecting and surveying.

Another reason was that one of the qualifying criteria for calculating the claim disadvantaged a company in that if it was already receiving an incentive from the state, the company must take the total quantum of research that was performed, subtract the state’s proportion of contribution and double that amount, which left it with a negligible amount. Thus companies felt that, for the effort in completing those forms and applying, it was not worth it.

Mr Mashamba added that the process was bureaucratic and it was something the Department was addressing.

Ms Shinn said that a report had been presented by the National Advisory Council on Innovation (NACI) regarding the balance of payment calculation and NACI had concerns about whether the Department should continue following the OECD approach or whether the Department should develop their own. Had the Department discussed it with NACI?

Mr P Smith (IFP) asked why Government had raised the target for South Africa’s gross expenditure on research and development as a percentage of gross domestic product from 1% to 1.5% when the Department had never managed to reach the 1% target in the first place. Last year the Director-General had said that it was an aspiration and now the Minister had said that it was a target.

Ms Pyoos said that the target appeared in the medium-term expenditure policy framework as a recommendation and not as a target. It was a target to be aspired to in line with the OECD but the Minister had committed to growth and it was subsequently translated into a target.

Mr Smith said that there was a problem of measurement in the past because it was outsourced and now it was all done in house but it seemed as though the Department located it at HSRC and thus the capacity to do the measuring was not really within the Department, but staff could still pack up and go. He asked what the difference was between the way the Department was doing it now and the way it was doing it before. 

Mr Smith said that the increase of total researchers by 64 was a woeful situation.

Mr Smith stated that the 1% target was never attained in the past and now the target was 1.5% but the Department had not even reached 1%.

Ms Pyoos said that that was a big concern to the Minister who had thus put in place a review committee in order to establish what discourse she needed to have with the private sector and the Government science system. A very critical weakness that was being interrogated was the coordination across the entire science system.  Different modes of operation in the current structure could give the Department more discretion to change the way systems operate and the necessary funding could see the Department reaching the target.

Mr Smith pointed out that in figure one it stated that in real terms there was still growth but for the last two three years there had been virtually no growth. The economy was booming in 2005/6 but expenditure was flat. He asked for clarity.

Mr Smith said that some years were going well but some were not and asked what the Department was doing right in those good years and what it was doing now.

Mr Smith said that there was no data for 2010 in figure 2. Businesses were not spending and nor was Government and thus the figure of 0.92 would drop. But if the economy went up those figures would still be satisfactory, but if the economy stayed flat, R&D would be in trouble and the Department would never get to 1.5%.

Mr Smith said that the full time equivalents in figure 4 were alarming, but SA had an unemployment rate of 40% which was significantly more than the other countries mentioned and thus those statistics were misleading.

Mr M Nkonkonyana (ANC) said that there was a 1% target that the Department could not meet but the Department did not say why it was not able to meet that target.

The Chairperson said that if those numbers in figure 2 went down, they would never go back up. He asked how the Department was going to deal with that problem.

The Chairperson added that as long as the Department stuck to the old ways of doing things there would be no improvement and he asked it to come up with proposals on how that could be changed in the next presentation.

Due to time constraints the Chairperson asked that the Department respond to the unanswered questions in writing.

The meeting was adjourned.


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