South Africa’s research and development system is leaning ever more heavily on the state and foreign donors, and that shift carries real consequences for ordinary citizens: fewer resources for the health, energy, water and food security priorities on which people’s daily wellbeing depends. A new report warns that the country’s innovation funding model is showing strain, and that the businesses expected to drive new products and jobs are pulling back.
The figures behind that warning are stark. Business sources accounted for 29% of South Africa’s gross expenditure on research and development in 2022/23, down from 41% in 2013/14, according to the Ministerial Working Group on Science, Technology and Innovation Funding. Over the same period, government’s share rose from 43% to 51%, while funding from international sources climbed from 13% to 17%. Research carried out by the business sector itself also shrank, from 46% of total spending to 36%.
The working group was appointed after United States federal funding was withdrawn from key South African research programmes, a moment that exposed how fragile the country’s science system is when foreign support shifts suddenly. That vulnerability, the report argued, is precisely why stronger domestic investment matters: it would support innovation, industrial development and job creation while shielding research the public relies on from decisions made abroad.
Existing policy did not escape criticism. The report questioned whether measures meant to encourage companies to undertake research were working at all. “Existing instruments such as the R&D tax incentive are administratively burdensome and have proven ineffective with sparse evidence of additionality,” it said. It also suggested South Africa’s understanding of innovation is too narrow in places. “A narrow interpretation of innovation as ‘scientific discovery’ excludes many forms of applied, process-driven innovation relevant to South African firms.”
What changed, in the working group’s view, is the need for an overhaul of the incentives available to businesses. It recommended reform of the R&D tax incentive, possible tax exemptions and greater use of Special Economic Zones. The Department of Science, Technology and Innovation, the Department of Trade, Industry and Competition and National Treasury should consider co-investment grants, innovation vouchers, pooled challenge funds and concessional loans. Drawing on models elsewhere, it pointed to performance-based co-investment grants in Canada and South Korea, innovation vouchers in Finland and matching funds for collaborative research in Germany. Procurement preferences, regulatory fast-tracking and public recognition could complement financial incentives, with industry councils and sector organisations involved in designing schemes that reflect how businesses actually innovate.
Meanwhile, efforts to draw multinational companies into South African research have fallen short. The report said long-running attempts by the science and innovation department to encourage such firms to establish and invest in research capabilities in the country had not achieved significant success, and it called on government to remove the barriers standing in the way. Any such investment, it added, should create wider opportunities in domestic value chains, particularly for black- and female-owned small and medium enterprises, social enterprises and cooperatives.
The broader picture is one of decline. Gross expenditure on research and development fell from 0.73% of gross domestic product in 2013/14 to 0.61% in 2022/23, well below the country’s own ambitions. The working group recommended that government, organised business and labour negotiate a compact with clear commitments to raise that figure to 1.5% of GDP by 2035, alongside progressive targets requiring state-owned enterprises to increase their research spending in areas linked to national priorities.
Money alone, the report cautioned, will not be enough. Merely increasing the amount spent on research and development would not overcome the structural constraints holding back innovation. Instead, it called for industrial and innovation policy that encourages companies to invest in research, commercialise intellectual property and develop new products, processes and technologies, and for a dual funding model combining mission-driven grants for long-term national priorities with competitive funding for basic and use-oriented research. It identified health, energy and water security, food security, climate change, artificial intelligence and green technologies as areas where research could support national development, arguing that stronger links between research, industrial policy and the needs of companies are essential if South Africans are to see greater economic benefit from innovation.
Whether government, business and labour can agree on the compact, and whether the 1.5% target by 2035 survives contact with fiscal reality, may determine whether research serving the public’s basic needs continues to depend on decisions made elsewhere.