Science and technology and economic growth in South Africa: performance and prospects

Presented at the GLOBELICS 6th International Conference 2008 22-24 September, Mexico City, Mexico.The main contribution to economic growth in South Africa prior to the early 1990s resulted from factor accumulation – principally capital, but also labour. Technological progress, as measured by total factor productivity (TFP) growth effectively made no contribution. From the 1990s however, this situation reversed. The economy shed labour such that labour made a negative contribution to growth. With low levels of investment, capital made a much smaller, albeit positive, contribution to growth. TFP growth, by contrast, became the major source of growth (Fedderke, 2005: 10). It is of singular importance that TFP growth became so significant in a context where there are very major unemployed human resources – and with this magnitude increasing. That technology and capital accumulation have underpinned growth at the same time as the contribution of labour has been negative underpins the major divide in South African society – those with command over capital and skills and indeed those who have formal employment whose productivity and remuneration have risen, have benefited from a pattern of growth that has also seen increasing numbers unemployed. At the same time, growth rates have been modest. A critical component of any future growth strategy must aim to ensure higher levels of factor accumulation – both investment, and particularly labour. Indeed, in the presence of major unemployment and under-utilisation of labour and low rates of investment, factor accumulation offers the most potential for enhancing growth, and also for improving equity. But, enhancing technological advance, TFP growth, will also be of importance. The contribution of TFP to overall economic growth in South Africa, receives little recognition. One significant illustration of this is the South African treasury appointed international panel. Based largely at the Kennedy School, Harvard University, the panel examined South Africa’s policies for growth and specifically its ambitions to achieve both a more ambitious growth target and simultaneously more inclusive employment generating growth. A number of proposals were made by the panel (for a summary see Haussman, 2008). However, the Panel made no study of or recommendations in respect of innovation or technological change more broadly – despite this having been the principal contributor to growth. This paper examines South Africa’s technological performance and concludes that a number of indicators suggest that while there was some increase in output in the 1990s, there are clear signs of slowing down if not system stagnation. Addressing this slowdown would make an important contribution to enhancing the overall long term growth rate. The first part of this paper provides a high level assessment of the innovation performance of the South African system. The second part centres on the recent Review of South Africa’s Innovation Policy by the Organisation for Economic Co-operation and Development (OECD) (OECD: 2007OECD). The third part of the paper centers on a report by the responsible government department, the Department of Science and Technology (DST), that defines the Government’s strategic goals and aspirations for the S&T system, detailing a ten-year plan, 2008-18, for South Africa (DST: 2007). The paper concludes with some broad proposals for future policy directions