Minister's update on Astronomy Desk Report, Department of Science & Technology Annual Report 2010/11, Research & Development Tax Incentive Programme

Science and Technology

18 October 2011
Chairperson: Mr N Ngcobo (ANC)
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Meeting Summary

The Minister of Science and Technology, Hon Naledi Pandor, gave an update report on the Astronomy Desk. She briefly described the history of South Africa’s efforts in the astronomy field, noting that the work on the High Energy Stereoscopic System (HESS), based in Namibia, and the Southern African Large Telescope, which had had a significant economic as well as scientific impact. The Astronomy Desk was established in October 2010, headed by Professor Manfred Hellberg. The Desk advised the Minister of Science and Technology on substantive policy and strategic matters relating to the development of astronomy and related sciences, and was also advising on the Square Kilometre Array (SKA) bid. The Desk’s Report, received in March 2011, had made a number of recommendations, and had reiterated the importance of significant investments in astronomy. It dealt with the human resources pipeline from young researchers to senior astronomers. It recommended that management of all astronomy should be brought under a single umbrella body, the South African National Astronomy Agency, and suggested its functions. This would be governed by a board with representation from universities, facilities, industry and international experts. Once established, this Agency would take over the roles and obligations of the National Research Foundation (NRF) with regard to astronomy. The Minister had accepted the recommendations in principle and the Department of Science and Technology (DST) was considering how to put them into practice. Two entities would merge into a single National Radio Observatory, over the longer term. At the moment, however, the focus would remain on the SKA bid, but over time the new Agency would look into funding issues, international cooperation, training and a possible bid for the Cherenkov Telescope Array. The Astronomy Desk would remain in place to implement the proposals for new governance and management astronomy systems, through a three year contract. Members were concerned about the time frames for implementation, and questioned why a three-year process, as opposed to the original one year, was proposed. They questioned some of the future projects, called for more details on the appointments and salaries and asked if there was any detail as yet on the SKA bid.

The Department of Science and Technology then presented its Annual Report for 2010/11, describing its five main strategic
goals and highlighting achievements in its core programmes. The National System of Innovation (NSI) was not yet fully fledged although some important building blocks had been put in place, and there had been establishment of the Technology Innovation Agency, an office for management of intellectual property, centres of competence and research development institutions. DST had managed to spend 1% of gross domestic product on research. It had an unqualified audit opinion from the Auditor-General. The work in the space science, hydrogen and energy fields was described, including the launch of the South African Space Agency in December 2010. An update on the SKA process was provided. The training schemes, incentives and bursaries were set out. International engagements, and work in the health and bio-economy field were described, including the work with the Centre for Aids (Caprisa) on a gel to reduce HIV infection risks. DST was also participating in climate change research. Internet connectivity was improved.  The number of South African Research Chairs (SARChi) increased from 82 to 92, the number of bursaries had also increased and there was particular focus on women. 23 science centres were awarded development grants, and 2 700 learners were supported with supplementary tuition in mathematics, Physical Science and English. There was a huge increase in the number of learners who participated in the DST Youth into Science Initiative. Socio-economic partnerships resulted in benefits to 1 640 households from the introduction of communal water stations in the Eastern Cape, whilst 26 companies were provided with a Technology Assistance Package, and there was increased dialogue to help local government and businesses to understand environmental risks and vulnerabilities.  DST and Centre for Scientific and Industrial Research (CSIR) had built houses in Kleinmond using alternative technologies. It continued its efforts to poverty alleviation, through Agronomy Science, with various projects on medicinal plants, essential oils, food crops and aquaculture job creation. Although there was still a challenge in full rollout, 467 jobs had been created. In conclusion the DST said that, although it had not met all targets, it had achieved 98% spending of the budget.

Members were pleased with several aspects of the report, but raised questions on the fruitless expenditure noted, and several Members were concerned about the vacancy rate, initiatives to address it, and staff retention strategies. They questioned the Caprisa matter and urged that it be fast-tracked. They wondered if TIA should not be able to apply for exemptions on investments, asked about the targets not achieved, and called for further information on astronotics, why some projects were shelved, the reasons why the bio-economy strategy was not yet finalised, and the challenges and criteria for research chairs. They also questioned damages claims, and asked that DST assist CSIR with communication.

The Department finally briefed the Committee on the Research and Development (R&D) Tax Incentive that had been introduced in 2006, but explained that this was a comprehensive report covering the period 2006 to 2009, since the applications (or forms) to the DST were done retrospectively. This incentive had been upgraded so that companies could now claim back 150% of deductible expenditure on scientific R&D, if certain conditions were fulfilled, although a full report was still needed on the numbers of claims, what this had cost the tax base, and how it had in fact increased research being done. R1 billion tax had been foregone as a result of the scheme by 2008/09. Total R&D expenditure over those years had amounted to R6.3 billion, but the eligible component was R4.6 billion. 80% of R&D expenditure came from 39% of large companies, and 25% from companies with a turnover of less than R10 million. The sector breakdown was provided, and it was noted that almost 14 000 personnel were employed. Challenges included lower than expected uptake, uncertainty about the process, and administrative processes. There were proposals to amend the Income Tax Act further to address these. DST was trying to create more awareness. Members asked how the different kinds of operational costs were distinguished, asked about the incentive for smaller companies, noting that the procedure was cumbersome, asked for clarity on the mathematical sciences, asked about the marketing, and comparison between number of enquiries and number of applications.

Meeting report

Astronomy Desk Report: Briefing by the Minister of Science and Technology on the
Ms Naledi Pandor, Minister of Science and Technology, tabled a report on the Astronomy Desk.

She noted that South Africa had a long history in astronomy and said the peer reviewed publications of South Africa indicated that astronomy was one of the “jewels in the crown” of South African science. The astronomy history began in 1897 with the McLean Telescope, which was an optical telescope. In 1961, the Hartebeeshoek Deep Space Instrumentation Facility was set up. The High Energy Stereoscopic System (HESS), based in Namibia, was a highly successful gamma-ray telescope built in partnership with South Africa, which would become operational in August 2012. The Southern African Large Telescope (SALT) was constructed in 2005. This had a huge economic impact, as well as a scientific impact, being built in Sutherland, which had a population of 4 000 but received 10 000 visitors each year to the SALT.

All these achievements had created the possibility for South Africa and Africa to pursue the development of new opportunities in astronomy, with a focus on a multi-wavelength observatory system. This possibility was supported further by South Africa’s geographic advantages of quiet and clear skies, low radio interference, ideal climate and altitude, world class industries and expertise, and the enabling legislation of the Astronomy Geographic Advantages Act. She said scientists had shown that they were able to innovate at the highest level of design and technology. Because of their data processing capabilities, South Africa had shown that it could be at the cutting edge in the world. The tests that were currently being done on the Karoo Array Telescope (KAT-7) further illustrated the very good capabilities in the country. A tender would soon go out to build the additional dishes for the MeerKAT by 2016. She mentioned that there was global infrastructure with an African base, and she mentioned the partner countries in the SKA bid, noting that Madagascar was also taking part.

In future, she noted that the Very Long Baseline Interferometry (VLBI) would become important, as it was necessary to have an asset base and high class astronomy infrastructure, and then become linked to the world. Given the prominence of senior astronomers to the universities, and facilities over the last decade, the interest of young people in this area of required the Ministry and Department of Science and Technology (DST) to adopt a serious approach. There was a strong human capital development intervention process, through the Square Kilometre Array Project Office (SASPO) and also through the National Astrophysics and Space Science Programme (NASSP). The Minister also reminded Members of a previous briefing about the steps that were to be taken to determine a new framework for the development and management of astronomy in South Africa.

She noted that the focus of her report today would be the Hellberg Report and its recommendations, and the responses. She noted that the Astronomy Desk had been established in October 2010 and was headed by Professor Manfred Hellberg. He and his team of scientists did outstanding work. Their brief was to advise the Minister of Science and Technology on substantive policy and strategic matters relating to the development of astronomy and related sciences, as well as matters related to South Africa’s bid to host the Square Kilometre Array (SKA) Radio Telescope. They focused on how South Africa could obtain maximum advantage and return on the significant investment being made in astronomy, the appropriate optimal relationship between South African (SA) national research facilities and internationally funded projects, the appropriate structural, organisational and management relationship between optical and radio astronomy and the HESS measuring gamma rays in Namibia. They also were to advise on the most appropriate government model for astronomy facilities in SA, a suitable site for the placement of the MeerKAT operations centre, and to give advice on any strategic or urgent matters that might impact on SA’s bid to host the SKA. There could be some difficulties in balancing a site in the Northern Cape with running core activities in Cape Town. They would finally be advising on other matters pertinent to the continued health and functionality of the national astronomical facilities and the SKA project.

The Astronomy Desk Report (the Report) was received in March 2011. In the intervening months, there had been a need to think through some of the issues and formulate a response. The Report reiterated the importance of significant investments in astronomy over the past decade, emphasised the context of the exciting developments - including imminent full operation of SALT, construction of MeerKAT, KAT-7, and the upgrade of HESS in Namibia - and noted that astronomy was attracting young scientists and top international researchers. The Report endorsed the report on the decadal strategy for human capacity development in astronomy and astrophysics, prepared by Kirsh Bharuth-Ram for the National Research Foundation in 2009.  The Report endorsed all aspects of human resource pipeline, growth of the university sector, career paths for young researchers and support that should be made available to senior astronomers. The Ministry had accepted those recommendations and would use Kirsh Bharuth-Ram’s report to inform the ongoing investments by the Department of Science and Technology (DST).  

This Report also recommended that management of all astronomy should be brought under a single umbrella body, through the establishment of a South African National Astronomy Agency (SANAA), which reported directly to the DST. SANAA would oversee management of all facilities, funding for research and astronomy-related human capital development and outreach work. It should be governed by a board with representation from universities, facilities, industry and international experts. It should be headed by a Chief Executive Officer who was a scientist of stature. It would, once established, take over the roles and obligations of the National Research Foundation (NRF) with regard to astronomy.

These recommendations had been accepted in principle. The Minister had requested the DST to investigate the modalities required to give effect to this. It was noted that the Directors of optical and radio observatories should be experts in their fields, and should be supported by business managers who would oversee the administrative work. Advisory boards should be appointed for the observatories. The Ministry and DST were in the process of developing the mandate and the power of those boards.

It had already been decided that SASPO and HartRAO should merge into a single SA National Radio Observatory (SANRAO), but this would be addressed in the medium to long term. At the moment, the priority for SASPO was to focus on the SKA bid process. The new entity would look into ongoing funding for maintenance and upgrading of facilities, and would enhance international collaboration, especially with African states. The Minister had been reading a report about a science conference in Ghana, where astronomy was not discussed at all. The DST would speak to its Ghanaian counterparts to encourage them to focus on astronomy. NASSP would be strengthened to train post graduate students, by providing a second hub in the North. The possibility of South Africa, or countries in Southern Africa, making a bid for the Cherenkov Telescope Array (CTA) would be discussed. She explained that this would be the successor to the HESS gamma ray in Namibia.

It was decided that the Astronomy Desk should be retained to implement the proposals for new governance and managements systems for astronomy. This would be done through a three-year contract appointment. International lobbying for the SKA Bid would be strengthened, as well as awareness.

The Minister noted that DST would be working on all implementation plans, in conjunction with the Astronomy Desk. Professor Ramesh Bharuthram of University of Western Cape would be the new chair of the Desk. He would be assisted by a newly-appointed Director of Astronomy in the DST, as well as a reference group of prominent SA astronomers.

Ms P Mocumi (ANC) wanted to know the budget and time frame for the implementation of the recommendations.

The Minister responded that there was a budget for astronomy, which was administered by the National Research Foundation (NRF). In the last financial year, R342 million had been utilised. This included spending on SKA, SALT and the other observatories. The plans should be drawn up by mid-2012, but implementation would start in 2013, because there was nothing in the current budget for this, and it needed still to be budgeted for.

Ms M Shinn (DA) wanted to know when SANAA would be established. She asked why the Astronomy Desk was now to be extended for three years, when Prof Hellberg had recommended an extension of one year. She was concerned about the feasibility of establishing an astronomy site in the Northern Cape, when the bulk of the wealth was in Cape Town. She asked who would be appointed as the Director, whether this appointment would be done by the Department, and asked what had happened to Prof Chetty. She also asked if there was any movement on a replacement for Professor Charles. Finally, she asked if astronomy would be separated from space science.

Minister Pandor responded that she had not proposed that there should be an office of SKA in the Northern Cape. She had mentioned the Northern Cape as the geographic heart of astronomy in South Africa. It would be good if this province could benefit in some way.

The Minister clarified, in regard to the appointments, that Prof Chetty was appointed by the NRF, and the Minister had nothing to do with that appointment. She had asked the Director General of the DST to discuss matters with the Chief Executive Officer of the NRF, to see how they could complement each other and avoid any duplications or competition.

The Minister noted that interviews had been held to fill the post of Director, but she was not aware of any outcome as yet.

The Minister noted that there would be interaction between astronomy and SANSA, but she did not think that astronomy should remain under SANSA, as it was regarded to be big enough to occupy its own space.

Mr P Smith (IFP) was concerned about the relationship between the business managers and the Director. He agreed with the Minister’s suggestion to have advisory boards for each observatory.

The Minister clarified that business managers would manage the administration of the observatory, because this was really an administrative and financial function that was not directly in the interest or skills of scientists. That was the reason why administrative support was proposed.

Mr Smith enquired about the cost of the Desk and the 3 year contracts.

Dr Phil Mjwara, Director General, Department of Science and Technology, said the Chairperson of the Desk would be somebody seconded from the university, so that person would be paid for his/her time. No salary as such would be paid. The DST intended to employ an intern who would do detailed background work. The cost of the reference groups attending meetings would also need to be added in. He estimated that the amount would be the equivalent of a director’s salary in the public service.

Mr Smith asked for more detail on how the SKA bid had gone, and how it was received. He enquired if there was any truth in the rumour that neither country would win the bid, but that there would be a joint award for the hosting to the two competing countries.

The Minister said that both South Africa and Australia submitted strong bids. South Africa had done very well, had met several leaders and had been to several institutions. South Africa was going ahead with the conversion of a satellite dish, and was working with Namibia on the Mawulana Park, which was being built with support of India and China, and would be supporting the establishment of a Mozambique Radio Astronomy. The Minister had been given a date to address the Science and Technology Committee of the European Union (EU). She said she too had heard of the rumour, from colleagues in both countries, but it was not a concrete opinion.

Department of Science and Technology Annual Report and Financial Statements 2010/11
Dr Phil Mjwara, Director General, DST, highlighted that the DST had five strategic goals. The first related to enhancing SA’s knowledge-generation capacity, in order to produce world-class research papers and turn some advanced findings into innovative products and processes. The second was to develop appropriate Science Technology and Innovation (STI) human capital to meet the needs of society. The third was to build a world-class STI infrastructure. The fourth related to positioning SA as a strategic international Research Development and Innovation (RDI) partner and destination, through the exchange of knowledge, capacity and resources between SA and its regional and international partners. Finally, the DST aimed to develop the innovation capacity of the National System of Innovation (NSI) and contribute to socio-economic development.

Dr Mjwara said that as yet, South Africa did not have a fully-fledged innovation system. However, some important building blocks had been put in place, but needed to be enhanced. The Technology Innovation Agency (TIA) had been established, as well as the intellectual property management office, Centres of Competence and RDIs to support sector competitiveness and dynamism. He thanked the Committee for assisting the DST’s attempts to reach the target of spending 1% of Gross Domestic Product (GDP) on research. South Africa was still a long way from reaching the OECD average of 2.3% spending.

Dr Mjwara set out that the DST had five programmes, which he described (see attached presentation). DST was driven by the White Paper on Science and Technology; Research and Developments Strategy and ten year Innovation Plan. Corporate Services and Governance was responsible for the overall management of DST. It provided central support to funded organisations to comply with good governance practices and to align to the strategic focus of NSI, as well as supporting the monitoring and evaluation of science councils.

He noted that the DST had achieved an unqualified audit opinion from the AG. There were no material findings on the annual performance report.

Dr Mjwara noted that the DST, under its RDI, was responsible for space science, hydrogen and energy, innovation instruments and planning, biotechnology, and health. It aimed to provide leadership in the long term and to do cross cutting research and innovation. Its space science, engineering and technology programmes were aimed at harnessing the benefits of space science and technology for socio-economic growth and sustainable development. He cited achievements as including the launch of the SA space Agency in December 2010, and the launch of the Space Weather centre at the Hermanus Magnetic Observatory.

Dr Mjwara gave an update on the SKA process. Professionals and experts were stationed in the Radio Astronomy Advances (RAA) and the SASPO segment of DST, where there were 100 scientists and engineers responsible for the SKA project. The first seven dishes had been completed, as an engineering prototype of the MeerKAT, and this already gave some guidance as to how the next dishes would be done. A trial run had already delivered images of some galaxies 14 million light years away.

On the training side, 62 new bursaries were awarded to students under the human capital development programme, including 6 postdoctoral, 6 PhDs, 12 MScs, 12 Hons, 3 BTechs, 10 Undergraduate degrees, 9 Further Education and Training (FET) 3 National Diploma, 2 SARChi. DST participated in an exchange programme where two students were supervised in Oxford, one by Hertfordshire University, and one by the Berkeley California Institute of technology.

Other achievements included the work done by the project office of converting the dish in Ghana, which was donated by Vodafone for astronomy related activities. DST achieved breakthroughs in hydrogen and energy fuel cell programmes, in metal hydride technology, and there were partnerships with Anglo Platinum and a US company to bring expertise and the knowledge to South African industries. He said that DST also contributed in the bio-economy side. The consortium of the Centre for Aids Programme of Research in South Africa (CAPRISA) had discovered that use of a Tenovir gel reduced the risk of infection with AIDS by 39%. However, the findings had still to be confirmed before the gel could be licensed.

TIA was listed as a scheduled 3A entity, and a Chief Executive Officer was appointed in September 2010. There had been migration of entities to it by October 2010. Four regional offices were established. The National Intellectual Property Office (NIPMO) had been moved to the main Hub, and four new Offices of Technology Transfer (OTT) were established in Gauteng, KwaZulu Natal, Western Cape and Eastern Cape.

DST was responsible for the multi lateral agreements, and various collaborative efforts had leveraged funding from the European Union (EU), Finland, Germany Japan, Canada and the USA. The DST had established dialogue with the EU on space science, energy, social sciences and humanities, and these discussions also benefited the rest of the Continent (see attached presentation for further detail).

Two workshops were held on Southern African Development Community (SADC) climate change, and this led to a STI Climate Change Framework being drawn. The number of South African Research Chairs (SARChi) increased from 82 to 92, the number of bursaries had also increased and there was particular focus on women. 23 science centres were awarded development grants, and 2 700 learners were supported with supplementary tuition in mathematics, Physical Science and English. There was a huge increase in the number of learners who participated in the DST Youth into Science Initiative.

Dr Mjwara noted that the internet connectivity of the Research Development Institutions was upgraded and 50 research institutions were now connected to SANReN, which enabled the Hartebeeshoek Radio Astronomy observatory to participate in an international electronic Very Long Baseline Interferometry (VLBI) experiment, and had allowed researchers from the SumbandilaSat project to send and receive data from a satellite much faster than conventional networks would allow. The connectivity within the country was shown on a slide (see attached presentation).

The Department’s Socio-Economic Partnerships (SEP) programmes would consider the economic impact of science and technology. They also provided policy and strategic support for R&D-led growth, by enabling a better understanding of global change. 1 640 households benefited from the introduction of communal water stations in the Eastern Cape, knowledge generation was being worked on by various networks, 26 companies were provided with a Technology Assistance Package, and there was increased dialogue to help local government and businesses to understand environmental risks and vulnerabilities.  A series of policy dialogues within the social cluster had already been initiated through the Human Sciences Research Council (HSRC).

Dr Mjwara tabled a list of patents (see attached presentation). He noted that in Kleinmond, the DST and Centre for Scientific and Industrial Research (CSIR) had built houses using alternative technologies. It continued its efforts to poverty alleviation, through Agronomy Science, with various projects on medicinal plants, essential oils, food crops and aquaculture job creation. Although there was still a challenge in full rollout, 467 jobs had been created.

Dr Mjwara noted that the DST had met some, but not all of its targets (see attached presentation). In cases where they were not met, the DST had overstretched itself. He expressed regret that DST had been unable to track the learners participating in past Youth Science Weeks.  

Dr Mjwara noted that the DST had managed to spend 98% of its funding, and the underspending resulted from the long time taken to analyse some reports, before doing further spending. He tabled the demographic breakdown of staff, noting that 78.66% were African, 9.77% were White, 6.43% were Coloured and 5.14% were Indian. DST had also been happy with the performance of entities that reported to DST.

The Chairperson expressed satisfaction with the report.

Mr Smith congratulated the Minister and Dr Mjwara on this good report.

Mr Smith asked about the fruitless expenditure noted. He was also concerned with the vacancy rate, and questioned why it was high. He wanted more information on the targets that were not met.

Dr Mjwara said the AG would, after making its audit findings, then approach management to get a response. In regard to the Sowetan, he said he suspected that the management report was leaked before management had responded. The fruitless expenditure related to two staff members who attended a course but did not complete it and get their certificates. In relation to secondment of staff from the SASPO office, the Minister of Science and Technology should have written to the Minister of Finance for approval to second the staff, but there was no proof that this was done, so the expenditure was regarded as “wasteful”. The third issue related to use of a service provider where no service level agreement was entered into. This service provider had been used before, and it was not realized that the amount for shipping equipment to Shanghai, through the provider, would exceed the prescribed amount so that the shipping should have gone to tender.

Dr Mjwara agreed that the vacancy rate was high, but said it was being monitored monthly, and the positions of the Chief Operating Officer and Deputy Directors General were being filled.

Mr Smith asked what would be involved in bringing the NSI to full functionality.

Dr Mjwara said there was still more work that needed to be done to reach the high status of the NSI and said it was not fully fledged at the moment.

Mr Smith enquired about the CAPRISA funding and the R 39 million related to it. Mr Smith asked why there was no sense of urgency on CAPRISA and why there was no funding.

Dr Mjwara noted that DST had provided funding for CAPRISA, and he would be meeting with the Director General of the Department of Health on this partnership.

Dr Val Munsami, Deputy Director General: Research Development and Innovation, DST, added, in relation to the CAPRISA matter, that DST had raised the issue with the medical board, and was told that it should not unduly influence the process. In view of the importance, he had instructed the staff to draft a letter at executive level.

Ms Shinn noted that she had written to the Minister of Health asking that matters be speeded up, but had received no reply, a full month later.

Mr Smith enquired if it was possible to arrange a generic approach for TIA, since it had to approach National Treasury to get exemptions for every investment.

Dr Mjwara noted that National Treasury was looking for a well-researched framework. TIA had shown that it was able to attract other funders to the project, and this was indicative of credibility

Mr Imran Patel, Acting Deputy Director General: Socio-Economic Partnerships, DST, added, in respect of the performance targets, that some strategic indicators required re-thinking, and that DST was working with HSRC and CSIR to identify appropriate indicators. In some cases, the non achievement of the targets was related to defining suitable performance indicators.

Mr Thomas Auf der Heyde, Deputy Director General: International Co-operation, DST, said that the one target not achieved was partially achieved, and that was the India, Brazil and South Africa (IBSA) initiatives. In one instance, Brazil had withdrawn and the initiative was called off, whereas in another there was a communication glitch in India.

Dr Val Munsami, Deputy Director General: Research Development and Innovation, DST, said there were 25 companies that had been supported.

The Chairperson asked why not much had been said about astronotics.

Dr Munsami said that South Africa had been the prime responder on astronotics, and a week long programme had highlighted some of the initiatives taken

Ms Shinn wondered if perhaps DST was trying to do too much, which was the reason that it was not achieving the targets. She commented that she wanted to know more about the lack of a strategy in bio-diversity, and why the Antarctica research strategy plan was shelved.

Dr Mjwara responded that the bio-economy strategy had not been finalised, but there was a draft document, and the final one would be ready by December. He noted that the staff on the Antarctica research had to do more work on the astronomy side, but this did not mean that nothing was being done, although he apologised for the delay.

Ms Shinn asked what was being done to resolve the challenges with the research chairs, and asked if there was no virtual model that could be used for these Chairs. She also felt that staff turnover was very high, at 16% at top management level.

The Chairperson asked about the criteria for identifying research chairs

Mr Auf der Heyde responded to the question about the model by saying that DST had  had reached an agreement in principle with a Switzerland university for the joint funding of two research chairs. The incumbents would spend part of their time in Switzerland and part of their time in South Africa. The two institutions would fund the project jointly. Candidates could be drawn from either country, but had to have a focus on human and social sciences

Dr Mjwara agreed there was a problem with the high staff turnover, but added that most of the Deputy Director Generals had accepted new posts as Chief Executive Officers of other entities. It took the DST a long time to fill these posts as it was difficult to find people willing to work in policy environments.

Mr Thulani Mavuso, Acting Chief Operations Officer, DST said the current vacancy rate was 9.5%. He agreed that there had been a challenge because some staff had been poached by other entities. However, this was one way to “recycle” staff in the public service. He added, in relation to the fruitless expenditure mentioned earlier, that one of the two members sent on the course had in fact passed away.

Ms Shinn enquired about the R400 million on damages to the vehicles, and wanted more information about claims in respect of other government departments.

Dr Mjwara said government did not provide insurance cover, so any damages had to be paid by the Department.

Ms Nombuyiselo Mokoena, Deputy Director General: Corporate Services, DST, added that some of the amounts were carried over from previous financial periods as there would still be investigations to be carried out. She confirmed that there were not so many incidents, but the value of damage was high.

Ms H Line (ANC) asked when the DST would be briefed on the bio-economic strategy.

Ms Line asked whether there was any intervention from the DST to the medical board with regards to the Tenovir gel.

Ms Line asked when the finance board member for SANSA would be appointed.

Dr Mjwara noted that the Minister and he were assisting SANSA to appoint a board member for finance.
The Chairperson complained about the lack of communication by CSIR and wanted DST to assist CSIR in its communication.

Dr Mjwara agreed and said DST had developed a senior managers communications forum where the partes would raise the issue and challenges and work together.
Ms Mocumi wanted to know what strategy was in place to curb the high staff turnover. She would be concerned if the DST claimed that it could do nothing and that it did not have a retention scheme or mechanism.

Mr Mavuso said the staff turnover was not too alarming, noting again that the vacancy rate was 9.5%. One way to address the challenge was to do better career pathing, and appoint senior managers to mentor junior staff members in different areas. When vacancies arose, the DST tried to fill them with appointments from internally. However, it was difficult to retain an official who had “outgrown” the Department. Quarterly reports were compiled on the exit interviews with staff members, to get an idea of where the challenges in the organisation lay.

Ms Mocumi asked who would declare a care to be a write-off, and how it would be disposed of.

Ms Mokoena said the process of disposal was two- fold. An assessor who would determine the value and bill the Department. The Department may find its own assessor to verify those findings and pay the amount, which would be the amount written-off. However, in the second stage, there would be investigations as to the cause. If it was found that an official had been negligent, and caused loss, that person would be asked to pay. A Committee was appointed to deal with disposal of assets, and would assess if there should be disposal, which was usually done through an open auction process.

Report on the Research and Development Tax Incentive Programme 2009/10: DST Report
Mr Godfrey Mashamba, Chief Director, DST, noted that in November 2006 an improved R&D Tax Incentive was introduced through section 11D of the Income Tax Act. This incentive comprised 150% of current deductible expenditure on scientific research and development (R&D), a step-up from the previous 100% allowable deduction. This improvement also included an accelerated depreciation of R&D assets over a three year period at the rate of 50:30:20, rather than the previous four-year depreciation.

The programme aimed to encourage higher private sector investment in R&D. The programme was managed by DST in conjunction with South African Revenue Services (SARS). DST also worked closely with National Treasury (NT) and the Department of Trade and Industry (dti). The Minister had to report, annually, to Parliament on the direct impact of the incentive programme, giving figures of  in terms of the aggregate of the R&D expenditure supported, the tax revenue foregone due to the incentive, and the direct effect to economic growth, employment and other broader government objectives.

In order to be eligible, companies must have activities that constituted scientific and/or technological R&D, these activities must be undertaken in SA, and the R&D must be for the purposes of deriving income. The programme worked retrospectively. DST was therefore still receiving forms for applications for 2008/09.

The first report covered the period from November 2006 to September 2008. In this period there were only 80 applications. There were none, and therefore no annual reports, for 2006. The second report attempted to reconcile the information for the first four years of the programme. In February 2009 there were 412 forms received, but some were repeat applications, because 133 companies were applying for the second time and 41 for the third. Total R&D expenditure over those years had amounted to R6.3 billion. The eligible component was R4.6 billion.  80% of the R&D expenditure came from 38.6% of the companies with an annual turnover of R100 million and above, and 25% came from companies with a turnover of R 10million and below. A total of R1 billion tax revenue was foregone over 2005 to 2009, but this data also included deductions from the previous programme.

In terms of the impact, it was observed that the number of companies claiming had increased on a quarterly basis for the first three years of the programme, and then had jumped sharply as more companies became aware of the programme. About 51.9% of participating companies were from the manufacturing sector, accounting for R 2.7 billion or 57% of R&D expenditure. About 61%, or R2.8 billion worth of R&D fell within the sectors prioritised in terms of the National Industrial Policy Action Plan (IPAP). The top five fields of R&D expenditure reported were outlined, with their percentage breakdown (see attached presentation).

There were 13 792 personnel involved, including scientists, engineers, technologists, managers and other employees directly involved in R&D. The growth of personnel involved in research had been between 1 and 49 persons. He noted that a small sample was, of necessity, used to make the conclusions.  

Challenges included slower-than-expected uptake, uncertainty by companies in regard to approval and/or eligibility, and wider challenges concerning investment in R&D. The administrative processes between SARS and DST were sometimes difficult. There were also challenges around funding of research by small and medium enterprises.

The Report proposed that section 11D should be further amended to deal with the uncertainty around approvals, and to streamline roles of SARS and DST. There was a need to improve impact monitoring. DST was currently waiting to hear from the Minister of Finance if there would be any tax law amendments. DST was trying to intensify awareness about the R&D incentives, using more simple language in brochures, engaging with industrial associations and targeted workshops, collaborating with the Department of Trade and Industry (dti) and TIA in promoting industrial support programmes, and meeting with the larger R&D performers. DST was also undertaking a feasibility/needs analysis to determine if a targeted programme to support SME R&D activities should be introduced.

Mr Smith wanted to know how DST distinguished R&D operational costs from other operational costs.

Mr Mashamba said that SARS had a method for distinguishing the operational costs from R&D costs, and there were clear rules about classifying the expenditure. If the criteria were strictly applied, there would be mismatches, because the definition of R&D in the national survey was different to the definition in the Income Tax Act.

Mr Smith asked why the word ‘form’ instead of ‘application’ was used.

Mr Mashamba said that in future, if the amendments were granted, the word “application” would be used throughout, but the current wording referred to a “form” being submitted by companies to DST to report R&D expenditure that they had claimed from SARS.

Mr Smith enquired if the incentive would work for smaller companies, and, if so, what particular challenges they faced.  

Mr Smith asked what “mathematical science” organisation would do R&D.

Mr Patel clarified that mathematical science was computer science.

The Chairperson asked for concrete information relating to mathematical sciences being treated as computer science.

Mr Smith enquired how actively the DST attended to marketing.

Mr Mashamba said that DST was constrained by its budget as to the amount of marketing it could do. However, DST had placed some newspaper adverts, had engaged with Trade and Investment SA to talk to investors, and placed advertisements in investor magazines. At the end of the day, everything depended on the companies’ own requirements. 

Mr Smith asked if there were limits on the programme.

Mr Mashamba said that no limit was currently in place.

Mr Smith asked the relationship between number of enquiries and number of applications.

Mr Mashamba could not answer this, because there had not previously been information to capture the enquiries and the applications. He acknowledged the shortcomings in this regard and said that in future DST would provide a table.

Ms Shinn said the report was very complicated and there were confusing terms, so she did not understand how many companies participated on this programme. She asked if the forms were completed annually or quarterly. She noted that SMEs may not complete them if they were too time consuming and cumbersome, and wondered if a separate and simpler set should be created for SMEs. She asked why the medium-sized companies had not participated.

Mr Mashamba said the claims were done annually, when companies submitted their assessments to SARS. DST could track how many companies were claiming for the second time and upwards. The bulk of the R&D was done by a small number, and there was a need for DST to get a better understanding of the medium sized business environment and interact with those companies. The work with dti and TIA would help in this regard. He again said that the figures were retrospective.

Mr Patel said the number of companies who had applied would be addressed in the future reports.

The meeting was adjourned.


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