Gauteng Innovation Strategy

29 November 2010
Table of Contents

INTRODUCTION

STRATEGIC OBJECTIVES

INTERVENTION MECHANISMS

WAY FORWARD

2
Table of Contents

INTRODUCTION

STRATEGIC OBJECTIVES

INTERVENTION MECHANISMS

WAY FORWARD

3
Innovation is the means by which we are able to do more, with less

A useful metaphor in an economy is in the kitchen. To create valuable final products, we

mix inexpensive ingredients together according to a recipe. The cooking one can do is
limited by the supply of ingredients, and most cooking in the economy produces
undesirable side-effects.

If economic growth could be achieved only by doing more and more of the same kind of
cooking, we would eventually run out of raw materials and suffer from unacceptable levels
of pollution and nuisance.

Human history teaches us, however, that economic growth springs from better recipes,
not just from more cooking.
Paul Romer
4
Innovation and Development

Development objectives for Government:

Creating decent work and building a growing, inclusive economy

Strengthening the developmental state and good governance

Building cohesive and sustainable communities

Stimulating rural development and food security

Better health care for all

Promoting quality education and skills development

Intensifying the fight against crime and corruption

5
Innovation and Economic growth

Why is innovation important for us to focus on?

Is there a relationship between innovation and economic growth?

Is there a relationship between innovation and job creation?

What are the mechanisms by which innovation activity leads to a change in society?

How do we stimulate these mechanisms to perform better?

How do we measure success?

6
The fastest growing economies in the world also appear to have
the highest growth in patent production.

Rank Per Capita GDP Growth in

There is a 1-1 correspondence of the countries that have had
Growth Patents per 1000
the highest per capita GDP growth between 1985 and 2005, to
those who have increased most the number of patents per 1000 1 China China
citizens. 2 Rep. of Korea Rep. of Korea

3 Thailand Thailand
Although these figures do not explain the direction of causality,
i.e. whether innovation creates economic activity, or the other 4 Singapore Singapore
way around, they do clearly indicate the close relationship
5 India India
between the two variables.

Patents per 1000 Citizens (Index normal at 1985) Per Capita GDP (Index normal at 1985)

25 4.5 China
China 4.0 India
20 Republic of Korea 3.5 Singapore
3.0 South Africa
15 Singapore
Thailand
2.5
South Africa Republic of Korea
10 2.0
Thailand 1.5
5
1.0
0 0.5 1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

Source: World International Patent Office, United Nations

Statistics
7
Innovation in past periods is highly correlated with economic
growth in current periods…

Per Capita: GDP Growth 1990-1994, Patent Growth 1985-1989 Per Capita: GDP Growth 1995-1999, Patent Growth 1990-1994
10% 6%

8% 5%

Patent Growth
6% 4%
Patent Growth

4% 3%

2% 2%

0% 1%
-4% -2% 0% 2% 4% 6% 8% 10% 0%
-2%
0% 1% 2% 3% 4% 5% 6%
-4%
Economic Growth Economic Growth

Per Capita: GDP Growth 2000-2004, Patent Growth 1995 - 1999

Increase in patents ~ Increase in per capita GDP

12%
10%
South Africa’s patent growth 2000-2004: 3%
Patent Growth

8%

South Africa’s GDP per capita growth 00-04: X%
6%
4%
Importantly – Patent growth for South Africa between
2% 2005 and 2010: 3%

0%
Does this mean that economic growth in SA will be

0% 2% 4% 6% 8% 10% 12% limited to ~3% for the period 2010-2014? Indications are
Economic Growth that it will be…

8
What about employment?

Double-edge sword

Job losses:
– Process innovation can lead to substitution of capital for labour because of productivity gains
through new technology
– Product Innovation can also lead to job losses due to replacement of less competitive products;

Job creation
– More efficient production processes lead to an expansion of production
– New products require more people to work in new factories

It is all about which of these effects dominate

Merikull found “innovation positively affects employment growth resulting from the string
effect of process innovation in medium- and low-tech industries”

9
Table of Contents

INTRODUCTION

STRATEGIC OBJECTIVES

INTERVENTION MECHANISMS

WAY FORWARD

10
Innovation Strategy Statement for Guateng

To accelerate innovation in all its forms, in order to

bolster and support the broader strategic objectives
of employement creation, and sustainable social
and economic development

11
First, we need to understand how innovation is related to different
groups in society
Academia plays a role primarily as a
Producer of innovation.
This is achieved through various
research functions which the academic
sector undertakes.
Academia also provides significant
resources regarding environmental
research and performance, as well as
academic study of the overall
environment.
The government plays two roles, in that it
consumes innovations in delivering
services, but it also indirectly produces
innovation through various channels.
Primarily, this can be done through quasi-
government organisations such as
Research Councils.
Government can play a significant role in
creating a demand for innovation, due to
it’s high ability to purchase innovations,
and the demand for government services.
The Private Sector is both a Producer and
Consumer of innovation.
It produces innovations through undertaking
research, creating new product lines and
ACADEMIA PRIVATE new value chains, as well as by importing
SECTOR technology and ideas from the rest of the
world.
It consumes innovations for similar reasons –
to take advantage of market opportunities, to
improve productivity and efficiency, and to
generate higher profits
The general community is predominantly a
consumer of innovation.
Communities play a dual role – they have
citizen needs, as well as consumer
GOVERNMENT COMMUNITY
demands. Therefore, they make demands on
both the government, and on the market.
The community is the ultimate buyer of
innovation – all goods and services are
ultimately produced to satisfy human wants,
and thus the most efficient means of doing
this is demanded by the community
12
Based on the relationship of innovation within each group, we
therefore have the following system

Private Sector Government

3

1: Innovations which help

2 4 business improve efficiency
and productivity

2: Innovations which satisfy

consumer demands (i.e. new
products)
Society
3: Innovations which help
government deliver services

4: Innovations which satisfy

citizen needs

13
The two objectives of the strategy are to support economic
growth, and government service delivery

Objective 1: Objective 2:

To improve the competitiveness of To improve the efficiency of the

the Gauteng economy, in particular a provincial government in
set of strategically identified sectors delivering services

Impact: Impact:

Improve internal efficiency of
Improve ability of government

organisations to purchase and drive

Improve external or environmental innovations
efficiencies
Use government demand to

Create new local value or stimulate innovation in strategic
knowledge chains areas

14
Table of Contents

INTRODUCTION

STRATEGIC OBJECTIVES

INTERVENTION MECHANISMS

WAY FORWARD

15
Improving economic competitiveness

Internal Industrial Industrial

Efficiency efficiency Innovation Unit

Communication
Social Networks
and access to
(Innov8)
information

Spaces for Science Parks

innovation (TIH, JSP)

External / Public Campaigns and

Economic
Environmental Awareness Evangelism
Competitiveness
Factors

Standards and SABS

Regulations representations

Inclusive Open Innovation

Innovation Networks

Create local Incubation and

value chains entrepreneurship
Local Knowledge
and IP Subsidisation
Promote
e.g. Voucher
Business R&D
system

16
Improving the ability of government to deliver services efficiently
and effectively

Identify
Channels for
Generic Innovation procurement
innovations to
Procurement strategies within
government
PFMA / MFMA

Government
Efficiency

Strategic Government Government

innovation demanding specific Innovation
procurement innovation Competition

17
The Industrial Innovation Unit will ultimately seek to improve the
market share of Gauteng-based industries

Labour

Technology Company Products

Capital Market Share

PRICE
TECHNOLOGY COMPETITIVENESS MARKET SHARE
QUALITY
By improving the productivity of labour and capital through innovative technologies, companies are able to produce
either BETTER or CHEAPER products. This allows them to capture a LARGER MARKET SHARE as they are more
COMPETITIVE

18
How will this be achieved?

Industries identified by the Gauteng Industrial Policy will be prioritised. These include low- and
medium-technology industries, as well as certain high-tech industries such as automotive production

Companies within those sectors will be invited to participate in industrial development, design and
engineering programmes. Examples include rapid prototyping, industrial re-engineering and design
manufacturing

Specific mechanisms need to be determined to implement this programme, but it is given high priority
within the Innovation Strategy

Sustainable development and manufacturing will form a core part of this intervention, to ensure that
Gauteng’s industries are at the forefront of environmentally conscious manufacturing and production

19
Innovation Vouchers can help foster innovation, and improve
access to new ideas

The Innovation Voucher allows you to concentrate on running your

business while knowledge providers come up with a solution

INNOVATION VOUCHERS

Finances
IDEA KNOWLEDGE PROVIDERS
Time
Expertise
Networks
20
Innovation Vouchers allow organisations to ‘purchase’ research
for their own ideas

Certain entities are registered as Knowledge Providers, including amongst others:

– Private organisations
– Universities and academic institutes
– Private individuals

Companies or individuals may then purchase “Innovation Vouchers” from the IDO for a certain
amount, say R50k. This can then be redeemed at one of these Knowledge Providers for research
equivalent to R100k

Companies could purchase Innovation Vouchers, and provide them as CSI to start up companies,
NGOs, Charities, etc.

Caution needs to be taken to ensure that the voucher system is not abused

Similar systems have proven exceptionally successfully elsewhere in the world – the challenge is to
develop a system that is appropriate for Gauteng

21
Government Procurement can be used to drive innovation
through competitions, focussed on public service innovation

2. Open
3. Applications
1. Open competition
received from
competition driven by
companies and
approved by IDO strategic
processed
objectives

5. Phase 1
demonstration of
6. Assessment of 4. Most
feasibility – • Green Energy Technologies
projects for Interesting Ideas (including wave power, gas
lasting 6 months
Phase 2 Funding selected turbines, energy efficiency)
and worth R500k
to R1m
• Social Housing

• Health care provision

8. Leads to
7. Phase 2 –
competitive • Defence and Military Applications
Prototype
procurement by
development
department and Low-emission vehicles
lasting multiple •
product to
years, R1 – 10m
market • Advanced Materials technology

22
Government Procurement can be used to drive innovation
through competitions, focussed on public service innovation

Stimulate technological innovation

Utilize small businesses as a mechanism to meet government research and development needs

Fostering and encouraging participation by socially and economically disadvantaged small business
concerns and women-owned business concerns

Mitigating risk through phased project delivery

Enabling departments to appeal for a wide range of ideas and evaluate these through short-term
simplified contracts

Reducing administrative obligations

Facilitating engagement with entities that the government would not usually do business

Creating novel solutions to existing or emerging issues

23
Table of Contents

INTRODUCTION

STRATEGIC OBJECTIVES

INTERVENTION MECHANISMS

WAY FORWARD

24
Only certain aspects of the strategy are being actively pursued
due to budgetary considerations

25
END OF PRESENTATION

THANK YOU

Comments to be submitted by 10 December 2010

Eunice Lottering
Eunice.lottering@gauteng.gov.za

26