9.3.1 Policies for Public Research

The public research sector in all countries has multiple goals, commonly consisting of training individuals in useful skills, including the ability to absorb, understand and replicate leading-edge knowledge produced abroad, providing assistance to industry, and producing new discoveries, some of which may have commercial applications.

The DST is not directly responsible for higher education, but has developed mechanisms to boost university research capacity, including the Researcher Rating Scheme, the 200-strong SA Research Chair Initiative, sixteen Centres of Excellence and five Centres of Competence. These receive generous funding and entail a mix of open and directed selection. The National Research Foundation implements these programs, and, in the case of the last three, requires beneficiaries to report on industry and community impacts. In addition, there are a large number of industry-endowed professorial positions (chairs) in mining, engineering, and agricultural sciences as well as chairs funded by state-owned enterprises in roads, water, and telecommunications.

To provide necessary skills, the DST invested heavily in the universities, as well as in the CSIR, the National Facilities and the National Research Foundation. Between 2010–11 and 2014–15, the number of researchers at universities increased by 36.5 percent, from 32,571 to 44,457, compared to a small decline at public research institutes.Footnote ³

The CSIR had a history of “knowledge transfer” through organizational development and transfer (Reference BassonBasson 1996), but its effectiveness declined in the 1980s, leading to a restructuring during the 1990s around strategic business units.

The Higher Education National Funding Formula allocates baseline funding to universities and includes a “publication output” variable that supports science (essential for understanding advances in knowledge) through funding for approved types of publication. This provided funding of ZAR 3 billion (approximately USD 250 million) in 2016.

The Innovation Fund provided competitive funding for research with commercial applications. It initially allocated three-year grants for predefined research areas and encouraged knowledge sharing by prioritizing awards to consortia of universities, science councils, and industry. This restriction was subsequently eased so that any research proposal with commercial applications could be supported. As of 2009, the Innovation Fund was merged into the new Technology Innovation Agency.

Innovation Fund projects that resulted in successful commercialization include microwave technology for egg sterilization and the Smartbolt^TM rock stress detection device. A costly but unsuccessful project was the Joule electric vehicle, abandoned after the prototype failed to elicit funds for production.

Other publicly funded ventures included four Biotechnology Regional Innovation Centres, structured as single-purpose not-for-profit companies. The combined funding for the Innovation Fund and the Biotechnology Research Centres was approximately ZAR 300 million (± USD 30 million) per year. No evaluative study is available on the contribution of the Innovation Fund or the Biotechnology Research Centres to measures of potential commercial outputs such as IP, startups, or job creation.

The South African Research Chairs Initiative was established in 2006 by the DST and the National Research Foundation with the goal of expanding the research and innovation capabilities of South African universities by attracting and retaining high-quality researchers and increasing the output of master’s and doctoral graduates. The initiative has been successful in fostering cutting-edge research, retaining skills in the country and contributing to the stock of doctoral graduates (Reference Fedderke and VelezFedderke and Velez 2013).

9.3.2 Policies for the Business Sector

From a systems perspective, policy should improve the innovative capabilities of firms. This often takes the form of subsides to encourage firms to invest in capability-building activities such as R&D or to provide skills that would otherwise not be provided by the market. To support firm capabilities, the South African government provides an R&D tax incentive that is designed to boost private sector R&D spending (DST 2015b). Firms initially filed a post hoc claim that would be verified by the DST, but this system was open to misuse. After four rounds, it was replaced with a preapproval model that required detailed submission of the intentions and expected outcomes of corporate R&D. This process appears to have deterred many would-be applicants, particularly SMMEs (small, medium, and micro-enterprises), reflecting a tension between a user-friendly incentive regime and company willingness or capacity to engage in a detailed submission process.

The government has used industrial policy to correct market failure, such as the National Foundry Technology Network to provide skills training, knowledge transfer, and diffusion of state-of-the-art technologies. The 2015–17 iteration of the industrial policy aims to strengthen “linkages between knowledge production, utilisation and innovation and industrial growth” (DTI 2015: 69). The Industrial Policy Action Plan supports R&D-led industry development programs for titanium metal powder manufacturing, fuel cell development, and additive manufacturing. All three are focal areas of the Ten-Year Innovation Plan (DST 2008).

An agency of the DTI, the South Africa Bureau of Standards Design Institute, seeks to use “the broad nature and bridging capacity of design to address the existing innovation chasm by linking R&D with the user, the market, the social environment for the benefit of the country’s socio-economic growth.” To this end, support is given to SMMEs and individuals to move from idea to prototype. The Institute has set up the Transnet Design, Innovation, and Research Centre for SMMEs to research and develop innovative and commercially viable ideas. This is largely a private-to-private knowledge development channel that partially involves universities and public research institutes, for instance, for micro-satellite development.

9.3.3 Policies to Support Linkages between Public Research and Businesses

A common assumption is that the public research sector in South Africa is failing to transfer knowledge with commercial value to the business sector. For example, the annual surveys of the Global Entrepreneurship Monitor (GEMS 2016) find that South African experts believe that universities are not playing a sufficiently constructive role in facilitating knowledge transfer and stimulating innovation. This next section examines the possible causes of low rates of knowledge transfer from the public research sector to firms and then describes policies aimed at addressing those causes.

Failures in Knowledge Transfer

There are two main potential causes of failure. First, the public research sector could be producing very few discoveries with commercial applications. This could occur as a result of a failure in the design of the public research sector, for instance, if there are few incentives for academics to conduct research of potential commercial value (Reference Zhang, Goldberg, Kaplan, Kuriakose, Goldberg and KuriakoseZhang et al. 2011) or to take part in knowledge transfer activities. Reference Sibanda and KaplanSibanda (2009) identified an absence of an entrepreneurial culture among researchers at public research institutes, while Reference Goldberg and KuriakoseGoldberg and Kuriakose (2011) found that insufficient attention was given to the needs of startups, especially business services and IP management. In a study of university research centers, Reference CooperCooper (2011) argued that knowledge transfer was problematic as long as universities focus on “own” research, rather than committing to use-inspired basic research, even though there was strong evidence that research group survival and use-inspired research (on the MIT and Stanford models) went hand in hand. In other words, the nature of the research was a strong determinant of its future commercial value, resonating with similar results in studies by Reference Fedderke and VelezFedderke and Velez (2013) and the National Research Foundation (2016) . Reference Kruss, McGrath, Petersen and GastrowKruss et al. (2015) claim that a policy emphasis on “Big Science, knowledge transfer and the growth of niche competences and capabilities” has created “islands of innovation,” but prevented the widespread diffusion of public research knowledge to industry. The consequence is large variation by sector in the relevance of public research to industry.

Second, the public sector could be producing commercially valuable outputs that are not taken up by firms for a number of reasons: lack of communication between the public and private sectors (network failure), a shortage of funding to support the activities of firms to develop discoveries into commercial products or processes (finance failure), or public research discoveries not meeting the requirements of firms, particularly if firms lack the internal capabilities to exploit them (demand failure).

Reference KrussKruss (2008a) found very few new knowledge networks in evidence in South Africa’s research-oriented universities. The capacity and desire on the part of industry to forge research and innovation partnerships were generally limited. In a subsequent study, Reference KrussKruss (2008b) argues that the lack of commercialization of research arises from a combination of network failure and a lack of “interactive capability” with industry.

Reference KahnKahn (2006, Reference Kahn2013, Reference Kahn2016) identified the influence of the linear innovation model on policy (instead of an innovation system model) as underlying poor performance in knowledge transfer. Ideographic research based on case studies in South Africa found that poor performance is partly due to a lack of two-way communication between public research and firms. Instead, there is implicit adherence to a linear model of innovation whereby scientists follow their own research interests, often in basic research such as the Square Kilometre Array radio telescope. This is reflected in the high proportion of South African gross expenditures on R&D (GERD) for basic research, currently standing at 26.7 percent. Although “blue sky” research can, over time, result in commercial products or processes, such research is rarely of short-term value to firms. Reference Zhang, Goldberg, Kaplan, Kuriakose, Goldberg and KuriakoseZhang et al. (2011: 14) noted that the influence of the linear model was made worse by the fact that the DST was a science-driven organization whose staff had little knowledge of industrial practice.

Reference De WetDe Wet (2001) introduced the idea of the “technology colony” to explain low rates of knowledge transfer in South Africa. This idea became known as the “innovation chasm” due to a lack of funding (finance failure) for early-stage commercialization. Reference Zhang, Goldberg, Kaplan, Kuriakose, Goldberg and KuriakoseZhang et al. (2011) question the reality and utility of the construct of an innovation chasm and suggest that the problem could be due to demand failure, arguing that policy gave insufficient attention to strengthening the absorptive capacity of firms. Reference KaplanKaplan (2011) used patent data to show that mining equipment was the only industry where local expertise was at the technology frontier. Reference Phaho and PourisPhaho and Pouris (2008), in a study of original equipment manufacturers (OEMs) in the automotive sector, determined that most OEMs failed to take steps to improve their capabilities. They did not conduct in-house R&D, did not engage in innovation activities that were new to the market, and did not use government incentives to improve their competitiveness through technology diffusion or intelligence. Reference Fongwa and MaraisFongwa and Marais (2016) studied knowledge transfer in a developing region of South Africa and found that the rate at which knowledge was transferred through the available channels was strongly influenced by the absorptive capacity of firms.

9.4.1 Informal and Contractual Knowledge Transfer

South African automotive OEMs mainly rely on universities as providers, where needed, of highly qualified personnel, rather than as partners in use-oriented research collaboration that could upgrade their technological capabilities (Reference KrussKruss 2008b).

In the “low” technology wine sector, Reference Cusmano, Morrison and RabelottiCusmano et al. (2010) found that the relationships between industry and public research were based on a mix of informal contacts and industry-commissioned research. Reference Kruss, Visser, Aphane and HauptKruss et al. (2012) reported that most academics interact with the outside community through traditional mechanisms such as training and capacity development, conferences and workshops, action research, contract research, demonstration projects, and services. Consultancy and entrepreneurial engagement was less common, informal, indirect, and not knowledge-intensive. From the industry side, there was low demand for knowledge from, or direct cooperation with, universities on the part of larger innovating firms, but stronger demand from a smaller number of R&D-performing firms.

9.4.2 IP-Mediated Knowledge Transfer

In the six years prior to the promulgation of the Public Research IP Act in 2008, Reference KaplanKaplan (2009) found that there was a dearth of economic studies on the IP system and low awareness of the value of knowledge transfer to the resource industries. IP activity between 2001 and 2007 was low, with only twenty-one patent-based startups produced by the public research sector. Reference Alessandrini, Klose and PepperAlessandrini et al. (2013) note that formalized knowledge transfer is still emerging in local universities and public research institutes.

A case study of three firms active in the southern node of the telemetry sectoral system of innovation (Reference KahnKahn 2014) found that two firms made extensive use of government innovation incentives, while one maintained independence. The case studies show the initial importance of mentorship and academic research to the startup pioneers. As the companies matured they shifted their search for knowledge exchange toward their own value chains. This autonomous behavior accords with the international pattern revealed through innovation surveys.

In a study of the patenting activity of academics, Reference Lubango and PourisLubango and Pouris (2007) concluded that most academic inventors or co-inventors had prior experience with firms or state-owned enterprises. Reference Rorwana and TengehRorwana and Tengeh (2015) surveyed thirty-six academics with research projects with industry and employed at a single university of technology to identify the effect of different factors on their participation in commercialization activities. They report that the personal interest of the academics in innovation had the largest effect on their participation in commercialization activities. No results were reported on the use of IP.

9.4.3 Case Studies

Four case studies (see Box 9.1) of sectoral innovation systems show that the main channels for knowledge transfer in South Africa are informal methods and research agreements. The case studies are based on desk research and interviews.

The four case studies fall into two groups. The first two, on oil and gas and platinum group metals, display similar hub-and-spoke models with universities, with the main companies (Sasol and Anglo-American Platinum) forming the hubs. Interviews revealed that neither company relied on the flow of research information from universities for its core business. The other two cases, for pulp and paper and viticulture, resemble triple helixes, with universities, companies, and government contributing to research of commercial value. None of the cases exhibits demand-led characteristics; all are supply-side driven, although capacity development is an important goal.

Reference Breschi, Malerba, Breschi and MalerbaBreschi and Malerba (2005) stress the importance of networking and other forms of knowledge exchange in sectoral innovation systems. They note that these systems evolve organically and cannot easily be developed through government fiat. Sasol was a state initiative, although its evolution into a research-led organization was driven internally. Including the Centres of Competence within a sectoral system seems to be left to an evolutionary process.

9.5.1 Metrics of Non-IP-Mediated Knowledge Transfer

Non-IP-mediated knowledge transfer includes informal methods such as hiring university graduates and contacts with university staff that are not based on a payment to the university, plus formal methods such as collaborative research, consulting, and contracting.

South Africa’s total publication output rose from 0.39 percent of world publications between 1996 and 2000 to 0.63 percent between 2011 and 2015 (NACI 2016). There is also extensive co-authorship between South African and foreign academics, creating opportunities for inward knowledge transfer. However, a search on the Web of Science for the period 2005–15 did not find any co-publications between the major foreign patentee firms active in South Africa and South African universities.

The South African R&D Surveys record a greater number of R&D collaborations between local firms and universities than with public research institutes, supporting the results of the innovation survey. The flow of funds from firms to universities amounts to 8 percent of higher education R&D (HERD), while that to public research institutes is 10 percent of their expenditure on R&D (DST 2015a). Given that universities use some of these funds for studentships, this suggests more extensive R&D collaboration with public research institutes. In addition, industry R&D collaboration with public research is highly concentrated, with only one-sixth of 600 firms that received an R&D tax incentive reporting collaboration with either universities or public research institutes.

9.5.2 Metrics of IP-Mediated Knowledge Transfer

The 2008 Public Research IP Act gave incentives to public sector researchers to patent and commercialize their inventions, while funding to defray patent application costs was also provided. The preferred patenting route is the Patent Cooperation Treaty (PCT), to which South Africa acceded in 1999. The output of commercially valuable knowledge from universities and public research institutes can be tracked via PCT filings and USPTO assignments. South African patent applications via the PCT nearly tripled between 2000 and 2013 in three stages – up to 2004, from 2005 to 2012, and from 2013 onward. The post-2004 increase could be due to the support of the Innovation Fund for IP activity and subsidization of the costs of PCT filing. The distribution of PCT filings over the period 2009–15 shows a shift from the private sector and public research institutes toward universities, with Stellenbosch University the most prolific, followed by industry giant Sasol and the University of Cape Town. The five universities with the most patents are Stellenbosch, Cape Town, Witwatersrand, North West, and Pretoria. The top two public research institutes are the CSIR and the ARC.

The number of USPTO patent awards by South African organizations has increased slightly from 2011 onward, with Sasol in first place followed by the CSIR and United States of America (U.S.)’s company Amazon. There has been a significant shift away from the mineral resources sector – hardly surprising in that gold production has declined by 83 percent from its 1970s’ peak, while platinum exports have remained static. Gold and PGM miners have restructured and in some cases moved their primary listings abroad. Eskom, Denel, and Mintek (previously important patentees) recorded no USPTO patents in the period 2011–15. Another significant change in the identity of assignees is the participation of local universities, namely Witwatersrand, Cape Town, and Northwest.

A survey by the DST, NIPMO, SARIMA and HSRC (DNSH 2017) (the inaugural South African National Survey of Intellectual Property and Technology Transfer at Publicly Funded Research Institutions) collected data on formal knowledge transfer activities of up to twenty-five universities and eleven public research institutes for fiscal year 2013–14. The questionnaire followed that of the Association of University Technology Managers (AUTM) in the U.S. Most of the questions collected data on inputs (research expenditures) or outputs (invention disclosures, patents, startups, etc.).

The results, given in Table 9.5, identified fifteen startups in the 2013–14 fiscal year and 315 international patent applications, which is almost 50 percent higher than the number of domestic patent applications. The survey also found that there were twenty-eight licenses in 2013–14. License revenues totaled ZAR 35.6 million (USD 3.4 million) compared with aggregate expenditures of ZAR 86 million (USD 8.1 million) for knowledge transfer costs such as maintaining a KTO. Based on the experience in Europe and the U.S., some institutions are likely to have earned revenues that more than covered their costs while the majority were likely to have revenues below costs.

Of particular interest is the finding that 79 percent of licenses were given to foreign-owned firms, suggesting that there is very little IP-mediated knowledge transfer to domestic firms. This could also explain the higher number of international patents. With data for only one year, it is not known whether the large role of foreign-owned firms as recipients of formal knowledge transfer is a one-year anomaly or a long-term characteristic of the South African innovation system.

With greater experience, it is likely that knowledge transfer outcomes will increase in the future. During 2013–14, 52 percent of the 100 staff employed by KTOs had under four years’ experience. Many are on contract, with their salaries paid by NIPMO. This intervention has been critical to establish capacity and build experience, which is mostly obtained on the job.

Unfortunately, the study did not collect data on non-mediated forms of knowledge transfer such as through research agreements, but it did collect data from twenty-four KTOs on the level of impact (high, moderate, or no impact) of four obstacles to knowledge transfer: (1) inadequate awareness on the part of research staff of the need to disclose and manage IP, (2) inadequate funding for the KTO, (3) inadequate funding for IP registration costs, and, (4) a lack of specialist resources. Two obstacles were given a high impact rating by 42 percent of respondents: inadequate KTO funding and a lack of specialist resources, while the other two (inadequate awareness and lack of funds for IP registration) were given a high impact rating by 25 percent of respondents. In addition, 75 percent of respondents cited a lack of awareness among research staff of the need to disclose their inventions as a medium-impact obstacle. This indicates that formal methods of knowledge transfer are in a state of infancy.

9.5.3 Impacts of Knowledge Transfer

The Technology Innovation Agency commissioned an Economic Impact Assessment for the period 2011–16 (Urban-Econ 2016) which estimated that expenditures of ZAR 6.0 billion (USD 600 million) contributed to ZAR 1.7 billion (USD 170 million) of economic activity with an aggregate employment multiplier of 4.66. Specific cases of knowledge transfer were not studied in this evaluation.

The largest science council, the CSIR, has not provided an impact assessment of all its activities, although individual CSIR divisions have published occasional impact studies.

In contrast, the ARC publishes impact assessments of a range of its activities.Footnote ⁸ For example, an assessment of grain crop activities (involving the ARC, Grain SA, the University of Pretoria, seed companies and its parent government department) reports that the knowledge transferred through new cultivars between 1997 and 2012 resulted in a massive 3,700 percent return on investment to maize production. ARC research on peach and nectarine cultivars released to local producers demonstrated a rate of return of 56 percent, while that for plums was lower at 14 percent.

Until recently, there was a poor track record of independent evaluations of public research institution activities, let alone use of their findings. The establishment of the Department for Planning, Monitoring and Evaluation (DPME) and a Centre of Excellence in Scientometrics and Science Policy at Stellenbosch University signal new capabilities for conducting evaluations to advance policy learning.

The above discussion points to significant gaps regarding knowledge transfer from universities and public research institutes to businesses that may lead to economic or social impact. There appear to be no studies of the links between university/public research institute activity and the formation of new enterprises and job creation. Impact assessment post hoc – let alone ex ante – is also thin on the ground. The fact that a compliance culture is in place may serve as the starting point to engender more routine impact assessment with associated data collection. An evaluation culture is emerging, although organizations tend to prioritize compliance with Auditor General reporting requirements over engaging in evaluation to serve as corrective and learning devices.