R&D investment requirement; ICGEB Agreement; Science & Technology Laws Amendment Bill

Higher Education, Science and Technology

20 November 2019
Chairperson: Mr P Mapulane (ANC)
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Meeting Summary

After the September briefing on the R&D tax incentive programme, the Committee requested a briefing on specific strategies to achieve the 1.5% of GDP government-set target from the current level of 0.83%. The Department said that it had only put together preliminary ideas on how to pursue the target. It noted that over the past few years, government has been investing more in R&D than the business sector. However, the set target would not be achieved within the desired time frame if business does not step up. Hence, tax incentive programmes were currently being reviewed to encourage business sector to invest more in R&D.
The approach recommended included: R&D investment targets must align with the Decadal Plan which would be finalised in June 2020; draw from the sector master plans and for each, identify areas earmarked for R&D and technological innovation; use recommendations from Department of Planning, Monitoring and Evaluation (DPME) review of business incentives. 

The RSA Government signed a Host Country Agreement for the establishment of the ICGEB Component ICGEB component in Cape Town on 18 March 2019 with the International Centre for Genetic Engineering and Biotechnology (ICGEB). The Agreement was tabled for ratification by the National Assembly and the Council of Provinces. The ICGEB runs 46 state of the art laboratories in Trieste, New Delhi, and Cape Town and it forms an interactive network with over 65 member states. In biotechnology, it plays a role worldwide in research, training and technology transfer to industry to promote sustainable global development.

The Department gave responses to public comments on the Science and Technology Amendment Laws Bill.

Members asked why the Decadal Plan was delayed; about the details of the tax incentive measures to encourage more private sector investment in R&D; reasons for the steady decline in gross expenditure on research and development (GERD); to whom the ICGEB accounts; concrete measures to intensify awareness of ICGEB; demographics of researchers at the ICGEB and plans for involvement of students especially from previously disadvantaged backgrounds. The Committee noted that it was ready to approve the ICGEB Host Country Agreement and the Amendment Bill.
 

Meeting report

R&D investment target requirements: Department of Higher Education, Science and Technology
Mr Godfrey Mashamba, DHEST Chief Director: Science and Technology Investment, said that the briefing was a follow to the 18 September briefing on the R&D tax incentive programme. The Committee requested a briefing on specific strategies to achieve the 1.5% government-set target – what it would take to move from the current level of 0.83% to the 1.5% R&D investment as a percentage of Gross Domestic Product. Thus far, DHEST has only put together preliminary ideas on how to pursue the target, which is the focus of the presentation.

Government's contribution to R&D includes not only R&D but also other scientific and technological activities (STA). This is a range of activities from the generation to diffusion and use of S&T knowledge, and also activities for building and exploiting S&T capabilities. Various departments play different but interrelated roles in this value chain. For example, DHEST funds early-stage and fundamental research, while the Department of Transport could be more concerned about utilisation of the technology to improve transport systems.

The scope of government's role covers the funding of public research institutions and R&D programmes; continually modernising research infrastructure; growing the high-level human capital base; technology transfer activities; specialised scientific facilities that support service delivery; incentives to support business sector R&D and innovation; and leveraging international science and technology investment (STI) resources.

Over the past few years, government has been investing more in R&D than the business sector. However, the set target would not be achieved within the desired time frame if the business sector does not step up. Hence, incentive programmes have been introduced and were currently being reviewed to encourage the business sector to start investing more in R&D.

The approach recommended in the existing policies and strategies included:
- The 2019 White Paper on Science, Technology and Innovation (ST&I) builds on preceding policies;
- R&D investment targets must align with the Decadal Plan. The Decadel Plan is expected to define more specific terms and major areas to be driven by government in implementing the 2019 White Paper.
- Draw from the sector master plans and for each, identify areas earmarked for R&D and technological innovation
- Recommendations from Department of Planning, Monitoring and Evaluation (DPME) review of business incentives; 
- Strengthen the instruments for monitoring of investments and R&D trends.

ICGEB Host Country Agreement with RSA
Mr Mmboneni Muofhe, DHEST Deputy Director General: Technology and Innovation, explained that the International Centre for Genetic Engineering (ICGEB) is a unique intergovernmental organisation initially established as a special project of United Nations Industrial Development Organisation (UNIDO). The ICGEB runs 46 state of the art laboratories, in Trieste, New Delhi, and Cape Town, and forms an interactive network with over 65 member states. In biotechnology, it plays a role worldwide in research, training and technology transfer to industry to promote sustainable global development.  

South Africa became a member of the ICGEB in 2004, and hosted the African Component in Cape Town in 2007. The ICGEB is largely funded by government through DHEST, with other funding coming from philanthropic organisations and through collaborations such as with Bill and Melinda Gates.

The RSA Government of RSA and ICGEB signed the Host Country Agreement on the establishment of the ICGEB Component on 18 March 2019. The Agreement has been tabled in Parliament for ratification.

There were challenges that delayed the signing of the Host Country Agreement such as National Treasury does not exempt South Africans who are employed at the ICGEB Cape Town Component from paying tax.

Science and Technology Laws Amendment Bill
Ms Nombuyiselo Mokoena, DHEST Deputy Director-General: Corporate Services, outlined the proposals made in the public comments. The proposals for these clauses  were not supported by the Department:

- Clause 1(c) was not supported, because the argument that if a correct and fair internal procedure has resulted in the removal of a person from a position of trust, this should be sufficient ground for disqualification. Only a court can make this determination, the Minister cannot make that determination.
- Clause 16(a) was not supported for the same reason as Clause 1(c).
- Clause 22(a) was not supported as only a court or commission of inquiry can declare a person to be fit and proper. The Minister cannot make such determination when appointing board members.
- Clause 22(c) was not supported because the principle of justice presupposes an element of rehabilitation and reconciliation, so it is unfair to condemn people for life.
- Clause 37(b) was not supported for the same reason as Clause 22(c).

The Chairperson noted that there was no need to go through the whole document as Members were aware of the Bill and comments. Members could ask follow up questions about the public comments.

Discussion
Ms J Mananiso (ANC) said that it seems that government was investing in R&D more than the private sector. She asked if assessments were conducted on the possibilities of the private sector overtaking the government in investing in R&D. She asked if there were measures put in place to increase GERD as it was stated that it was growing at a slower pace.

On the ICGEB Agreement, she asked how far the Department was in bringing awareness and translating the content into indigenous languages. She applauded the team for doing its part on the Science and Technology Amendment Bill.

Ms D Sibiya (ANC) asked for the cause of the steady decline in GERD. Secondly, the presentation on the Amendment Bill, it mentioned the reason for one of the amendments was that the Department had not been aware about the board appointment of the Chief Executive Officer. Is the Minister not consulted on the appointment of the CEO in these bodies?

Dr W Boshoff (FF+) said that it seemed that increasing the percentage of R&D to 1.5% of GDP was too aspirational. However, he had hoped that the Department would elaborate on the tax incentives that would be given to the private sector for investing in R&D. On the ICGEB Agreement, to whom will the ICGEB account?  Is it going to account to the Department or the Committee, a bit  like a department entity?

Mr S Ngcobo (IFP) asked about the expectation the Department has that the private sector is projected to be contributing more in R&D investment in the future. Does a plan already exist on how the Department would canvass business support to achieve those targets? Is there anything concrete already in existence?

It seems that a lot would have to be done to increase awareness. Are there other measures besides the ones outlined in the presentation on intensifying awareness?

Mr T Letsie (ANC) commented on the ‘no-action scenario’ which is based on the 2017/18 R&D data. It seems that the scenario failed to take into account the existence of risks. What other scenarios can be done because it would be interesting to see the outcome of other scenarios?

Ms N Mkhatshwa (ANC) asked how the Department planned on involving students in the ICGEB to ensure that lack of proximity would not disadvantage students that are based in historically disadvantaged schools. She also wanted to know about the demographics of the researchers at the ICGEB Component.

The Chairperson noted  that a briefing on the Decadal Plan was postponed because it was not yet ready. He asked how far the Department is on that plan because it would be an overarching policy perspective on R&D. What was the reason for the delay to get it approved by Cabinet? The presentation seemed consistent with the Committee’s observations that business does not seem to be coming to the party to invest more in R&D. He asked about the detail of some of the assumptions – if business contribution continues to decline, the country will not achieve its R&D targets. Private businesses are sitting with massive reserves which could be invested into R&D to enhance economic growth and create employment. Looking at the analysis one can deduce that this is indeed a challenge.

He had no concerns with either the  ICGEB Agreement or the Amendment Bill. If there were no objections on the Amendment Bill, it would be beneficial if the process would be expedited to the House and approved.

Responses
Mr Imraan Patel, Deputy Director-General: Socio-Economic Innovation Partnerships at DHEST, said that the process that is now in place by Department of Trade, Industry and Competition (DTIC) around the sector master plans and the process led by the Presidency with the investment envoys is something DHEST is looking at intensely. When you look at R&D investment in business, it needs to be looked at sector by sector. The key sub-sectors and the main reasons for decline at the sub-sector level is that if manufacturing and mining were to maintain their share, the picture may have looked different, including the state owned entities. The banking sector and the services sector have maintained investments because they have to remain competitive. The manufacturing and mining have decreased along with the state owned entities. The strategy that would be adopted would include mobilising the Master Sector Plan process. Hopefully the credibility that has built up through that process would encourage more investments in technology and R&D. Government and the private sector have joint initiatives to invest in various sectors through R&D.

At the moment the R&D tax incentive is a generic instrument, its impact and design are being evaluated because the incentive comes to an end in 2022.

The third area to increase the share of the private sector in R&D is re-looking at the contribution of the state owned enterprises. The R&D decrease was due to the lack of confidence in the economy by the private sector and that some big government programmes such as the PBMR came to an end.

Mr Patel replied that the different scenarios will come up as government and private sector strengthen partnerships in investing in R&D.

Mr Mashamba replied that government has a different role than the private sector in terms of investment. There is a need for continual engagement because the circumstances in which decisions are made by business are different to government. So engagement would be necessary to understand the key drivers behind the private sector’s rationale for decisions on whether to invest or not.

Mr Muofhe replied that the oversight of ICGEB is done at the Board of Governors Meeting which generates reports that would be submitted to the Department. The reports are used to look at whether the centres are progressing and making an impact. It is the Department’s responsibility to push the transformation agenda and ensure that the Centre takes that forward. The targets need to be taken seriously.

On narration in indigenous languages, there is a science awareness and engagement programme targeted at learners at various provinces by using the extension of science centres in provinces. Learners come to these centres and are then engaged in their own indigenous languages. We have not reached a stage where our outreach content is covered through indigenous languages.

Ms Kgomotso Matlapeng, DHEST Senior Policy Analyst, replied that from government's side, we need to capitalise on existing infrastructure and projects. There are various issues that businesses take into consideration when considering to invest in R&D and these are based on sub-sectors. It is not a ‘one-size fits all’ approach.

Ms Mokoena replied that a draft of the Decadal Plan will be presented to government structures including Parliament next year around July. There are other consultation processes such as the provinces, businesses, metros and civil society. The comments would be analysed sometime next year in March/April.

The Chairperson asked why government structures had promised the end of October.

Mr Patel replied that he was not sure where the October date came from. The timing after elections was expected to be by June 2020 not October. We want to ensure that it is not only a Department document but a document owned by government as well as by business. There is a lot of ownership we want to create for that Plan. We want to ensure that the Plan responds in much more rigorous way to government priorities, so part of the June deadline was also informed by Master Plans which would be finalised by June 2020. Taking all these factors into account, the ideal date would then be June 2020.

Ms Mokoena commented on the appointment of CEOs and said that it has not happened but the current provisions make it possible for that to happen.

The Chairperson said that the Committee welcomed the Bill and it will be considered and the Committee Report on the Bill will be adopted.

An October 2019 date for the Decadal Plan had been suggested by the Department and the Chairperson did not understand why the date was now changed. Instead of explaining the matter away, the Committee will interact with the Department on this once the Decadal Plan was ready and submitted to Parliament.

The meeting was adjourned.
 

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