In its briefing, the Department explained that the Technology Innovation Agency Bill (TIA) aimed to develop a public institution, together with private sector partners, that would improve the country’s capacity in translating local research and development into commercial products and services. The Department said that the comments that had been received on the draft legislation from various institutions and government departments were generally positive.
A public hearings followed which included stakeholders such as AfricaBio, IDEASA, BioSA, University of Pretoria, EgoliBio and CSIR. AfricaBio in their submission stated that the TIA Bill was authoritarian, oppressive, and would lead to the further decline of innovation. They asked government to empower entrepreneurs and not compromise nor obstruct their incentives. It requested that the control-addicted culture of current government funding agencies and ballast of equity sharing and management representation by the State be replaced by pro-business principles and attractive terms of funding. IDEASA objected to the formation of the TIA as the role of industrial design was not acknowledged in the Bill and its role was crucial in configuring a product idea into commercial products. BioSA supported the introduction of a regulatory framework that would benefit all South Africans. However the TIA would generate unnecessary conflict between private and public biotech industries. It should recognise the incubator structures as they were critical in supporting the biotechnology sector.
EgoliBio stated that it was simply not enough to provide funding for innovative research, but that there needed to be greater investment in essential complementary services and facilities. It therefore recommended that the incubation function be integrated into the TIA infrastructure as it would be essential in building sustainable economic growth. CSIR stated that TIA would play a crucial role in ensuring that innovation was exploited in the public interest. It recommended that there should be a more comprehensive set of definitions and an alignment of terminology.
Members asked the Department to comment on the repeal of the Inventions Development Act, and what would happen to the assets of the companies that fell under that Act. They sought clarity on whether research had established that there was not enough venture capital investment, and also whether state intervention was absolutely necessary. The Department was asked about the functions of the TIA and the danger of the TIA crowding out the private sector. Members also sought clarity on whether there was a role for Parliament to play in the establishment of the TIA board.
AfricaBio was asked to comment on the mechanisms which could be applied to address black economic empowerment, and how one could prevent market failure. A member felt that AfricaBio should have provided further examples on some of the issues raised, and that the submission focused too much on the negative aspects. AfricaBio was asked if there were specific companies or countries that it would like DST to communicate with in order to establish innovation best practice.
Members were concerned about whether the University of Pretoria presenter spoke in his capacity as a director at the University or as a former employee of the Department. EgoliBio was asked to provide clarity on whether they had any criteria for financing. CSIR was asked to comment on the issue of referencing in their submission. CSIR was asked to provide a written report outlining the historical perspective of what happened to the assets of the CSIR.
Department of Science and Technology briefing
Dr Phil Mjwara (Director General: DST) stated that there were many challenges faced by local innovators. These included the lack of access to venture capital, poor management of intellectual property rights, and poor business development skills. The motivation for the creation of the TIA was to develop a public institution, together with private sector partners, that would improve the country’s capacity in translating local research and development into commercial products and services. The TIA planned on developing a sustainable technology base in South Africa through developing and stimulating technology based enterprises, services and products. There had been receptive comments received on the draft legislation from higher education institutions, state owned enterprises, government departments, and science councils.
The Chairperson asked if the repeal of the Inventions Development Act had been completed.
Mr A Ainslie (ANC) added that if the Act had been repealed, what had happened to the assets of the previous corporation as set up by the Inventions Development Act.
Mr S Farrow (DA) stated that members needed to have sight of the Act that would be repealed in order to prevent some sort of duplication.
Adv Puseletso Loselo, former Head: DST Legal Services DST, replied that while the Department was in the process of developing the Bill, it was informed that there were no assets or companies that operated under that Act. Therefore a decision was made for a total repeal of that Act in order to avoid a conflict of the two acts. Dr Mjwara responded that it would not be a problem to make the Act available.
The Chairperson said that the matter was an important matter that needed further engagement at a later stage.
Mr Farrow stated that it was not just the assets that needed to be clarified, but the agency in its entirety specifically the personnel and whether anyone would be retrenched.
Mr S Dithebe (ANC) sought clarity about the companies associated to the CSIR and if they were an implicit or an explicit business unit.
Prof I Mohamed (ANC) asked the Department to explain how the Act would affect small independent companies with bright ideas.
Mr Mjwara replied that one of the ideas that had been proposed on theIntellectual Property Rights (IPR) Bill was a mechanism which would help institutions of higher learning and small medium institutions to have their ideas protected. The idea would hopefully be incorporated into the TIA Bill.
Ms Bongiwe Lufundo (State Law Advisor) stated that the Office of the State Law Advisors had advised the Department to repeal the existing Act, as the legislation was not in use. The Department was trying to establish a new agency which would take over the functions of the Inventions Development Act. Therefore it was better to repeal the Act and dissolve the existing corporation. It should also be noted that there was no board in the corporation, therefore there were no assets and therefore it was important to deregister the corporation as well. If there were any assets or personnel, the TIA Bill would take special consideration of the matter.
The Chairperson members needed to look into the Act and come back to the matter later during the public hearings.
Mr Blanche asked if the Department had responded to the various public comments that had been received.
Mr C Morkel (ANC) noted that the presentation made it clear that there was a consultative process before a call for submissions on the draft Bill had been made. Judging from the various submissions on the tabled Bill, there was a general feeling that there was not sufficient consultation. The Department should state if there would be further opportunities for consultation. Clarity should also be provided on whether there was research that established that there was not enough venture capital investment and whether state intervention was absolutely necessary.
Mr Majwra replied that AfricaBio was due to make a submission, which would highlight just a few of the public comments they had received. With regard to venture capital, the Department was looking to setting up funding from basic to advanced research levels. If one looked at the funding that was available at the moment there were not any huge venture funds available for innovation research. The private funding that was available only covered the research and the startup phases of the project and firms would not invest in any high risk funding. The Department was therefore of the opinion that the private sector was not being crowded out.
Mr Ainslie asked for clarity on what the primary functions of the TIA were and the danger of the TIA crowding out the private sector. Also was there a role for Parliament in the establishment of the TIA board? The Department should explain how they planned on leveraging a substantial amount of money for venture capital.
Mr Mjwara responded that the primary role of TIA was a facilitation role; however the Department still needed to address the issue of equity as it kept coming up from time to time. The TIA planned on taking the equity of the company and working with the innovators to ensure that the company moved forward in the right direction. When the company matures, TIA would then sell the equity. In terms of leveraging funds for venture capital, initial discussions had taken place with venture funds, and they had been informed about the TIA. The venture funds were funded by both public and private entities. The private entities were initially hesitant as it would be an investment in a high-risk area. However the Department asked the venture funds whether they would be happy if the Department had a venture fund in which public private partnerships were formed. The private funders were delighted at the proposal and were willing to invest.
Mr Steven Ratsatsi, Departmental representative, added that the Department had consulted a number of venture funds, and from these consultations ascertained that the TIA would not conflict with any other venture capital funding.
Dr Boni Mehlomakulu, DST Deputy Director General, replied that the Bill was drafted at the same time as the HSRC Bill was being deliberated in Parliament. The provisions were not changed according to the Committee’s amended provisions in the HSRC Bill. Therefore the final outcome pertaining to the method of appointment and who was to sit on the board was a matter that was to be dealt with by the Portfolio Committee.
Dr Majwara added that there were various processes that had tried to resolve the issues pertaining to method of board appointment. The Department only hoped that hat the Executive and the Portfolio Committee had resolved these issues.
Ms Kristin Klose, DST communications manager, added that the consultative engagements facilitated through various bodies on the TIA had been ongoing and extensive. The Department did feel that there has been an extensive consultative process.
The Chairperson stated that there needed to be further discussion on the issue of departmental consultation.
Mr Morkel commended the Department on their fair approach to venture capital. An issue that had not been addressed was how TIA’s venture capital approach differed from the private sector’s venture capital approach.
Mr Mjwara replied that the Department hoped to build a portfolio in the fund which ensured that the public good received the same type of attention as the private good. If one received more attention than the other then the Department should be made accountable through the main parliamentary process.
Mr Ainslie said that it seemed that much of the object of the TIA was to provide finance. However the Committee was worried about establishing the TIA only to discover that there was no finance.
Mr Mjwara replied that the funding for TIA was done through the DST by money that was already funded to it by Parliament. Since the TIA process had begun, DST had been approached by three venture capital companies. The Department was also finalising negotiations with other governments outside South Africa who were willing to fund the Company.
Mr P Blanche (DA) stated that the Department had not provided enough time for the public to object to the Bill. It should be noted that there were many companies that could provide solutions to many of South Africa’s problems, however there was no driving unit. The TIA should be a unit inside the DST, as once the Bill was in effect, the Committee would have no control over it.
Mr Mjwara replied that the TIA would be a public entity that would report to the DST, and the accountability issues could be brought up in Committee meetings with the DST through the normal process. Keeping TIA in the Department would not have the desired impact.
Adv Donrich Jordaan stated that there were very few Small Medium and Micro Enterprises (SMMEs) which had their own laboratories, human capital and innovation capacity. AfricaBio believed that the TIA Bill was authoritarian, oppressive, and would lead to the further decline of innovation. The taking of equity or royalties by the TIA must be specifically prohibited, and the taking of board seats by the TIA should not impede the flexibility of an SMME. AfricaBio believed that in order to boost innovation, government should empower entrepreneurs and not compromise nor obstruct their incentives. It requested that the control-addicted culture of current government funding agencies and ballast of equity sharing and management representation by the State be replaced by pro-business principles and attractive terms of funding.
The Chairperson asked for clarification on the consultation process in relation to the public comments and how the process impacted on the Bill.
Adv Jordaan replied that should the amendments that AfricaBio proposes be implemented, then AfricaBio would be happy.
The Chairperson stated that the Department should not provide a one sided view on matters and it would be very helpful if the Committee received a balanced view on matters. AfricaBio should elaborate further on the issue of equity, as they believe that the TIA did not necessarily have to take the company’s equity.
Adv Jordaan replied that there was an institutional culture that had developed within the funding agency at the DST, in which equity was taken up as a matter of course. AfricaBio suggested that the DST should refrain from that type of institutional culture.
Mr Dithebe stated that one got the impression that if the state were involved, then the end product would not be internationally competitive. AfricaBio should clarify on this matter and also comment on the mechanisms which could be applied to address issues such as black economic empowerment. Everyone knew that this kind of industry such as AfricaBio involved a lot of risk, therefore clarity should also be provided on how to prevent market failure.
Adv Jordaan replied that AfricaBio was not opposed to state intervention, and it was essential that government got involved in the biotechnology sector, specifically the biotechnology private sector. In developing countries the government got involved through providing grants or loans. The South African government’s attempt to get involved in the biotechnology sector was commendable, however there were a number of issues that needed to be addressed and private funds were very skeptical about sitting on a board with government. The biotechnology sector was a very fast moving sector, whereas things in government tended to run slowly due to bureaucracy.
Mr B Mnyandu (ANC) commented that the submission should have provided further examples of some of the issues raised and also the submission focused too much on the negative side of things.
Adv Jordaan replied that he hoped that the TIA could make a difference and help build the biotechnology sector. A lot of SMMEs had been sidelined and there needed to be a change of attitude in the way DST looked that the SMMEs. Therefore if TIA could stop the sidelining of SMEs then there would be a solution.
Mr Morkel said that AfricaBio needed to unpack the issue of management and control being exercised through various mechanisms and see what the alternatives were. The concept that had been explained by the DST was very simple, as they were willing to act as a venture capitalist when no one else was prepared to act as a high risk venture capitalist.
Adv Jordaan replied that AfricaBio had worked and cooperated extensively with DST officials in finding alternatives. A viable alternative would be one of the incubator. AfricaBio had presented a report on the comparison between the French system of innovation and the South African system of innovation to the Minister of Science and Technology. That report was also included in the proposals to DST.
Ms B Ngcobo (ANC) asked if there were any companies AfricaBio would like DST to communicate with or whether there were any countries that were worth looking into.
Adv Jordaan replied that those countries which AfricaBio had spoken to had received considerable amounts of money and the issue of equity was not an issue. The European Union was but one example which had gained from the incubation system with minimal investment.
Industrial Designers Association of South Africa (IdeaSA) submission
Mr Bernard George Smith (Chairman) stated that IdeaSA was a section 21 company which represented the profession of industrial design in South Africa. IdeaSA objected to the formation of the TIA, as nowhere in the planning or implementation strategy of the TIA was the role of industrial design acknowledged or included. Industrial design was a complex design process which involved problem solving skills in order to configure a product idea into commercial products. Therefore to ignore the importance of industrial design within the broader development strategies of South Africa would be tantamount to economic suicide. At present there were no design training schools in the country, and there was very little tertiary training in industrial design. IdeaSA did not believe that industrial design would be the solution to the various challenges, however in order to place South Africa on an accelerated path in developing technological products, it would be crucial to look into the development of industrial design.
Dr Viresh Ramburan and Dr Antonel Ockers (Interim Management Team Members) stated that BioSA had been founded in September 2007 and it was the independent voice for private biotech SMMEs. BioSA thanked government for introducing a regulatory framework that would benefit all South Africans. However, BioSA believed that the private entrepreneur should not be in competition with the state, and therefore recommended that clause 4(1)(a)(ii) should be completely deleted. The TIA should also recognise structures such as incubation as they were critical in supporting the biotechnology sector. In its current form, the TIA would generate unnecessary conflict between private and public biotech industries and also alienate private entrepreneurs who would have to compete with the TIA. This would be detrimental to South Africa as it would create a barrier for private entrepreneurs to enter the market. BioSA recommended that clause 3, which outlined the object of the agency, be reformulated in a way that would assist both the public and private sector in developing sustainable innovations.
University of Pretoria Submission
Mr Dhesigen Naidoostated that the TIA had the ability to contribute to the bridging of the Innovation Chasm that would absorb the risk in the product development part of the value chain. University of Pretoria was hopeful that it would in turn stimulate partnerships and co-investment with both public and private sector players. Universities were core partners in the development of any knowledge economy. TIA engaging the universities as primary partners would organize for the conversion of the relevant knowledge generated in the university sector into products that could contribute to the development of the local economy. The University congratulated the DST for this significant contribution that had the potential to transform the South African Innovation landscape.
Mr Farrow questioned whether the presenter spoke in his capacity as a director at the University or a as a former employee of the Department. It was also worrying that none of the other universities had made a submission.
Dr Naidoo replied that not he did appear before the Committee wanting to promote his own interests, but rather to provide the views that had been sanctioned by the directors of the University. It was also important to note that the University of Kwazulu Natal was due to make a submission.
Dr Charles Dettman (Chief Executive) stated that the aim of the submission was to demonstrate the importance of the incubation function in ensuring an effective national innovation system. Since its launch in 2003 EgoliBio had contributed substantially to the promotion of the South African biotechnology sector. EgoliBio believed that the vast majority of scientists had little or no knowledge of innovation, and that the current innovation system fell short of addressing crucial issues. Providing funding for innovative research was simply not enough. There needed to be greater investment in essential complementary services and facilities. The Incubation function was one of the solutions to the problem, however the TIA did not provide for the incubation function. EgoliBio believed that the cost of providing for an effective incubation support was relatively small and the benefits of the function were substantial. There were presently three established incubators in South Africa and none of them were funded by the DST. EgoliBio recommended that they be integrated into the TIA infrastructure as the foundation to building the incubation function into the TIA infrastructure.
Mr Farrow asked for clarity on whether they had any criteria for financing.
Dr Dettman replied that EgoliBio was not a funding agency; however there was a policy that where possible the organisation entered into some kind of agreement where there was some kind of return. Currently the organisation was looking into providing support for services for the public good, and did not want to hamper the developments of other services.
Ms Khungeka Njobe (CSIR Group Executive) stated that the CSIR supported the objectives of the Bill, as the objectives resonated with the CSIR mandate of ensuring effective management and technology transfer at a national level. TIA would play a crucial role in ensuring that innovation was exploited in the public interest and CSIR fully supported the establishment of a separate independent agency. CSIR would however recommend that there should be a more comprehensive set of definitions, and an alignment of terminology in key legislative and enabling documents. With regard to the objectives of the Bill, the CSIR believed that the Bill did not adequately reflect the object of the TIA as a source of funding local research. In terms of powers and duties, CSIR recommended that the TIA board should include members of a social development orientation. When it came to the Public Finance Management Act (PFMA) CSIR recommended that TIA be designated a National Government Business Enterprise.
Mr Ditebe (ANC) said that the CSIR concern in Clause 4 was that it referred only to persons and not to consortia and enterprises which would limit the Agency. His understanding was that consortia and enterprises in that particular instance would constitute juristic persons.
Ms Njobe replied that CSIR chose to focus on consistency in the Bill’s referencing.
Mr Farrow said that CSIR mentioned that they had limited assets left. However when the CSIR was established, it had a lot of assets. CSIR should therefore provide a historical review of what had happened to their assets since the organization was establishment.
The Chairperson asked CSIR to provide a written report outlining the historical perspective of what happened to the assets of the CSIR.
Ms Njobe replied that it would be only be fair enough to deal with the matter through a comprehensive report in order to avoid confusion.
- University of Pretoria Submission
- University of Cape Town Submission
- Medical Research Council Submission
- Industrial Designers Association of South Africa (IDEASA) Submission
- eGoli Bio Life Sciences Incubator Submission
- Department of Science and Technology PowerPoint Presentation
- DNA Biotec Submission
- Council for Scientific Research (CSIR) Submission
- BioSA Submission
- AfricaBIO Submission
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