Technology Innovation Agency Bill: briefing to NCOP

Meeting report

Mr Phil Mjwara (DST Director-General) read through the presentation and highlighted the following details:
-Slide 1 OECD referred to the Organisation for Economic Cooperation and Development. NIS referred to the National Innovation System.

-Slide 2 Innovation process consisted of Research, Development and Manufacture.
Research referred to the process of investigating an idea. Development was the stage where one took the idea and developed a product from it. Manufacture referred to the process of manufacturing a product from the idea. There were many local bodies producing knowledge and publishing it in journals. Overseas groups then took the knowledge from SA and used it to create products and services. These products/licences were then sold back to SA. Since SA did not invest in manufacturing its own products, a huge gap existed. This was referred to as the “innovation chasm”. The problem was that overseas bodies were taking the ideas developed in SA, developing and manufacturing products and services, and then reselling these to SA at ten times the price.

-Slide 3 referred to the opportunities lost to SA due to the situation described above. One of the worst cases was the loss of Dr Michael Thackeray’s Lithium Battery Project. The project, which had been funded by the Council for Scientific and Industrial Research (CSIR), was stopped. Mr Thackery then took the research to the United States where the production proceeded. Mr Thackery was currently an advisor to Congress. While this was a great loss to SA there were many other such examples.

Slide 4 showed how, internationally, these matters were dealt with by the establishment of TIA-like bodies to support and develop national innovative capacities and ensure that these were taken to the market. The focus of TIA would be on the development side of the process, in terms of which SA would develop products using research. This arose out of the need to bridge this gap as no one funded the process of taking the idea from the research stage to the manufacturing stage. TIA would work with other bodies currently doing work in this area.

Slide 15 which was titled “Approach” showed where the Department was in the legislative process. They were currently in phase 3, which included the development of regulations. The regulations would show how investments would take place. Since the entity would be government-funded, TIA would own part of the equity of the technology funded when it started to make money. Later, equity would be made available to black-owned businesses.

Discussion
Ms J Masilo (ANC North West) asked if there was a link between the Advanced Manufacturing Technology Strategy (AMTS) and the sectors of Health and Energy.

Mr Mjwara replied that there was no link between the area of AMTS and the sectors of Health and Energy. In fact they were currently part of separate funding instruments.

Mr T Setona (ANC Free State) asked which concerns had been raised by stakeholders during the consultation process.

Mr Mjwara said that the concerns had included the fact that Government would be taking equity in the businesses where the projects were of national interest. This was because Government was funding the projects. However Government would not be taking equity for itself, but would later release it to entrepreneurs who wanted to take the businesses further. The organisations were of the opinion that Government should fund the projects and then walk away. However this would prevent Government from enforcing obligations. If Government walked away too early they could run the risk of losing the ideas to other parties or countries. There have been numerous examples where Government funded the project to a certain point, after which the research was taken abroad to be used elsewhere. Government has lost huge amounts of money this way.

Ms Boni Mehlomakulu (DST Deputy Director General: Research, Development and Implementation (RDI), said that other concerns related to institutional arrangements and stakeholders questioned the need for TIA, given that there were bodies like the Industrial Development Corporation (IDC). However the issue revolved around the time such organizations were willing to fund a project. In the case of the IDC, they would fund it for a maximum of two years. However in the area of Biotechnology, for example, it could take ten years to develop a drug. TIA would fund the idea until the point of manufacture.

Mr Daniel Moagi (DST Deputy Director General) added that another concern was the fact that TIA would participate on the boards of the funded companies. There were arguments that these companies needed flexibility as to what they would do with their Intellectual Property. This would not be possible with TIA members on their boards.

Mr Mjwara said that there had been proposals for an Investment Committee to be set up. This Committee would specify the conditions under which TIA could take equity and when equity would be released.

Mr Setona supported Government in that they should take equity in the new technologies developed and felt that no legal issues could arise from this matter.

Mr Setona said that there had to be many institutions with capacity in Science and Technology; given that SA was already fourteen years into the new dispensation. He asked if there was no parastatal doing the same work as TIA would do. Had the Department considered simply extending the mandate of these bodies to include the functions they were proposing for TIA?

Mr Mjwara responded that within the CSIR, this type of research was only a small in-house activity. It was not available to the entire innovation cycle. There were many institutions conducting in-house research, but there was a need to provide these opportunities to persons from outside these institutions. TIA would also focus on capacity-building in universities. They were focused on bridging the innovation chasm by funding the development of ideas. Most institutions were not focused on this area.

Ms N Madlala-Magubane (ANC Gauteng) asked who elected the Chair of the Board of TIA.

Mr Mjwara replied that the Minister would appoint the Chairperson.

The Chair asked if this had to be presumed, as the Bill was silent on it.

Mr Mjwara said that this was how it was done in most institutions within the Department.

Ms Bongiwe Lufundo (State Law Advisor) said that this was specified on line 27 of page 4 of the Bill.

Mr Setona noted that there was currently a wasteful duplication of Government structures. He asked if the area on which TIA was meant to focus could not be undertaken by existing structures. Existing structures could be given the capacity to do this work instead of creating a new structure.

Mr Mjwara responded that TIA would address a gap in the system. He read through the slide titled “Tech dependency or Knowledge Economy” on page 2. The CSIR performed research and were not a funding agency. Their contributions were limited to areas within the CSIR mandate. TIA was responding to gaps in the funding mandates; that is; areas which fell outside the scope of the CSIR and the National Research Foundation (NRF). With regard to these groups expanding their mandates, the Department felt that this would not address the gap in the system, since far greater focus was needed to accomplish this. The area of research required a different set of skills to that of research funding.

Mr M Thetjeng (DA Limpopo Province) expressed concern that mismanagement was the only ground upon which the Minister could dissolve the Board. He felt that this was too limited. He referred to the situation where the Board was not guilty of mismanagement but of incompetence. The Minister should not be limited in this way.

Mr Mjwara said that mismanagement included the situation where the Board was not delivering on its mandate. This term should be understood in a broader sense, which included how the institution was managed.

Mr James Spies (DST Manager: Legal Services) said that the Bill was subject to the Public Finance Management Act (PFMA) and should therefore be interpreted in that context. This means that the broad interpretation of ‘mismanagement’ would apply. In addition deliverables in terms of this Bill were very specific.

Mr Setona said that the term should be interpreted as it was commonly understood and used. The Department should not interpret it according to their own assumptions. He added that ‘mismanagement’ did not mean ‘incompetence’.

Mr Spies repeated that the Board was an accounting authority in terms of the PFMA and was therefore completely covered by that Act. In addition, the PFMA was being overhauled by the Department of Trade and Industry and the new comprehensive Act would go even further in regulating Government standards. It was therefore not necessary to change the wording of that provision of the Bill.

Mr Mjwara added that the Chief Executive Officer (CEO) signed a performance agreement with the Board. If s/he did not meet deadlines/mandates, the Board could therefore get rid of him/her. In addition the Board had the responsibility of examining their performance against their targets on a quarterly basis. There were therefore mechanisms to deal with non-performance.

The Chair accepted that the term “mismanagement” encompassed the circumstances raised by Members.

Mr Thetjeng referred to line 44 of page 5 of the Bill, which dealt with the appointment of the CEO. The Minister was not given the ability to choose, query or even apply his own mind once the Board made a recommendation. He therefore proposed that the word “must” should be replaced with “may”.

Mr Mjwara replied that the word “must” referred to the fact that the Minister would have to make a decision at some point. This decision would take place once the Board had recommended a suitably skilled person. The provision was therefore aimed at ensuring that the Minister would eventually make a decision so that posts did not remain unfilled indefinitely. If the person recommended was not suitably qualified, the Minister did not have to appoint him/her.

Mr Thetjeng referred to line 49 of page 4 of the Bill, which dealt with the issue of who qualified for membership of the Board. He expressed concern that membership was limited to SA citizens and felt that this might amount to xenophobia. In addition, he felt that this could be problematic in circumstances where the body could not find the necessary skills among South African applicants.

Mr Mjwara responded that this provision was governed by the recommendations by the Department of Public Services and Administration (DPSA) relating to Board appointments. DPSA had recommended that Board appointees should be South African citizens. However they were able to bring in foreign expertise by appointing these foreigners to sub-committees of the Board. The DPSA recommendation was important as Boards sometimes dealt with confidential information which could not be made available to non-citizens.

Ms H Lamoela (DA Western Cape) asked what challenge TIA posed to the private sector, if any.

Ms Boni Mehlomakulu explained that the Bill sought to introduce competition by giving consumers the ability to choose from numerous products developed and manufactured in SA. The Bill was also aimed at protecting public funded research, which the private sector had previously been able to acquire very cheaply.

Ms K Kgarebe (ANC Eastern Cape) asked how the Department had informed the public about the Bill.

Ms Mehlomakulu answered that the Department had published the Bill for comment, but had not gone to explain it at community radio stations.

The Chair asked if it really was necessary for the Committee to hold public hearings, given the fact that the National Assembly had already held hearings.

Mr Setona said that while this was not really necessary due to it being a S75 Bill, it would be advisable to publish a notice inviting written submissions.

Ms Lufundo said that this was S75 legislation and public hearings had already been held in the National Assembly. It was therefore not necessary to hold further hearings, given that the Committee had applied their minds to the Bill.

Ms Refilwe Mathabathe (Parliamentary Legal Advisor) disagreed, saying that S72 of the Constitution provided that the National Council of Provinces (NCOP) must facilitate public involvement and did not distinguish between S75 and S76 legislation in this regard.

The Chair said that it was impossible to hold hearings on every piece of legislation.

Ms Masilo supported Mr Setona’s proposal.

Mr Thetjeng said that one had to follow procedure. He also supported Mr Setona’s proposal.

The Chair said that he would be making a ruling in this matter.

Mr Setona reminded the Chair about cases where the NCOP had been embarrassed by not following proper procedure and suggested that the Committee should play it safe.

The Chair ruled that for the present the Bill would be “stamped off”. He thanked the Department for the presentation and assured Members that everybody would be involved in the process on the way forward.

The Committee adopted the minutes of Committee meetings held on 13 February 2008, 27 February 2008, 19 March 2008 and 26 March 2008.

Mr Thetjeng pointed out that the Committee tended to ignore its oversight functions. They were not merely supposed to focus on Departmental operations.

The Chair said that while it was impossible to prioritise all the relevant Departments, Members could suggest areas which they felt needed to be dealt with.

The Chair adjourned the meeting.