Incentives to boost R&D spending

29 May 2006

Minister of Science and Technology Mosibudi Mangena has outlined a number of measures aimed at stimulating research and development in South Africa, so as to boost economic growth.

“In today’s world, speed and the capacity to innovate are what count,” he said at the presentation of his department’s budget on Friday, emphasising the need for scientists and researchers to work in with business and civil society rather than in “indulgent” isolation.

The first incentive is tax breaks for businesses that up their research and development (R&D) spending. In February Finance Minister Trevor Manuel announced the creation of a more favourable tax regime for “arresting the depreciation of R&D capital” along with an increase in the deduction allowable for current R&D expenditure from 100% to 150%.

These incentives, Mangena said, “effectively reduce the real cost of a company’s investment in R&D, thus stimulating the investment climate by rewarding inventiveness, which in turn raises returns and bolsters the economy as a whole”.

International funding of R&D in South Africa has already grown from virtually nothing in 1994 to 10% of total R&D funding in the 2003/2004 financial year.

R&D spending tends to be among the first victims of an economic downturn, while increased investment reflects increased confidence and a growing economy. This investment then creates more work for scientists, engineers and technology experts, which in turn boosts the innovations that help drive economic growth.

In the medium-term expenditure framework, government funding for R&D has increased by R1.2-billion, putting the country on course to meet the goal of spending 1% of gross domestic product on R&D by 2008.

By 2003/04, public and private expenditure on R&D was 0.81% of GDP – up from 0.69% in 1994, Mangena said.

A new policy on intellectual property rights from publicly funded research has been drafted to protect the innovations coming out of the increased investment of R2.8-billion the government puts into research at the country’s universities and science councils. The draft policy was approved by Cabinet in January for public consultation.

Mangena said patent applications from publicly funded institutions had not followed the growing worldwide trend because of a lack of coherent policy and well-defined incentives and obligations.

Other measures to boost research include the creation of 210 new research professorships by 2010 through the Research Chairs Programme, and the establishment of seven Centres of Excellence, the most recent being the South African Centre for Epidemiology, Modeling and Analysis, which will focus on mathematical modelling in the study of HIV/Aids, malaria and tuberculosis in Africa.

Also put in place are the Research Post-Doctoral Fellowships Programme and new measures to alleviate the financial burden on promising undergraduate students to enable them to pursue full-time post-graduate research.

Biotechnology is already attracting a major slice of R&D funding, with investment in genetic engineering growing by 360% between 2002 and 2004. Some 3% of the country’s patent applications involve biotech innovation.

Other developments include plans to establish a South African Space Agency and the launch later this year of a second low-earth orbiting satellite, at a time when Algeria and Nigeria are discussing with South Africa the development of a cluster of satellites called the African Resource Management Constellation.

The aim of this, Mangena said, would be to develop satellites in Africa to help with disaster prediction and mitigation, the projection of crop yields, tracking urban and rural development, as well as a number of other potential spin-offs.

On energy, the Department of Science and Technology has taken the lead in the development of the Hydrogen Economy initiative, which aims to harness Sasol’s pioneering technology with pebble bed modular reactor technology and fuel cell technology “to create a globally competitive energy mix”.

Source: BuaNews

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