Address by Minister & Department of Science and Technology: Annual Report 2006/07 briefing

SCIENCE AND TECHNOLOGY PORTFOLIO COMMITTEE
20 November 2007
ADDRESS BY MINISTER & Department OF SCIENCE AND TECHNOLOGY: ANNUAL REPORT 2006/07 BRIEFING

Chairperson: Mr G Oliphant (ANC)

Documents handed out:
OECD Review of the South African NSI
Operational efficiency
Towards 2018: South Africa’s 10-Year National Innovation Plan

Audio recording of meeting

SUMMARY
The Deputy Minister of Science and Technology, and the Department briefed the Committee on the Annual Report 2006/2007. The Department noted that Organisation for Economic Cooperation and Development had carried out a review on the National System of Innovation. The findings of the review were highlighted. On the positive side,  South Africa had a resource based industry, a knowledge infrastructure, industrial and academic networks and political awareness of science and technology. Weaknesses included poor quality schooling for many, shortages of human resources at all levels involving mathematics, science and technology, lack of design, engineering, entrepreneurial and management actors, and ageing, white male dominance of industrial and academic research and development.
The Department had responded to these weaknesses and challenges by developing a governance plan and policy, innovation focus, human capital pipeline, and developing a 10 year plan for the NSI. It launched an Innovation survey, developed a Technology Innovation Agency, and sought to increase fiscal incentives. The Department then described how it sought to increase its operational efficiency, to create a unique and sustainable competitive position.

Members posed questions on the cost architecture, the savings, the poor reports of some of the Institutes under the Department, whether the Department procured services from small businesses, the mandate of the Public Benefit Foundation, how the Department ensured that children reached the higher education levels, and what the Intellectual Property offices covered. Further details were sought on the 10-year plan, coordination of science councils, innovation, whether the Department was seeking more funding, whether there was investigation of climate change, interaction with other departments, the need also to train technologists, and the need for collaboration between the universities and secondary schools. The role of the National Council on Innovation was questioned, as also collaboration with industry, the reasons why other countries performed well in innovation, and the cross-cutting nature of the innovation strategy. The Chairperson emphasised the need for the Department to present the reports of the institutes before the Committee.

MINUTES
Department of Science and Technology(DST): Annual Report Briefing
Dr Phil Mjwara, Director General, DST, briefed the Committee on a review undertaken by the Organisation for Economic Cooperation and Development (OECD) on the South Africa’s National System of Innovation, which is a requirement following the observer status of South Africa in the OECD Science and Technology Committee. He noted that the review process involved a review team comprising of OECD Secretariat, two countries as ‘special’ reviewers and consultants. Interviews were undertaken of the major National Systems Innovation stakeholders. He stated that the review was timely as it was done at a time when there were expanded Science, Technology & Innovation (STI) discussions in Cabinet and a change of leadership in the flagship STI institutions.

Dr Mjwara highlighted some of the key review findings with respect to South Africa’s strengths. These included resource-based industries, knowledge infrastructure, traditional linkage between major industries and the knowledge infrastructure, industrial and academic international networks and political awareness on the importance of STI. The review highlighted opportunities available, and aimed to raise economic performance by building on existing innovation systems strengths in industry. It also identified attraction of foreign direct investment (FDI) to establish durable South African capacities, exploiting of latent talents of the majority and building on industry-research sector interactions as ‘focusing devices’ for developing the knowledge infrastructure.

Some of the weaknesses highlighted included poor quality schooling for many citizens, giving rise to shortages of human resources at all levels involving mathematics, science and technology, lack of design, engineering, entrepreneurial and management actors, ageing and white, male dominance of industrial and academic research and development (R&D), and insufficiently holistic governance of the state components of the innovation system. In addition to these weakness some of the threats facing South Africa included, HIV/AIDS, social unrest and the demographic pressures on education, research and innovation systems.

Dr Mjwara highlighted some of the responses to these weaknesses and findings. These included the development of a governance plan and policy, innovation focus, a human capital pipeline, developing a 10 year plan for the NSI, launching an Innovation survey to complement the internationally respected research and development survey, developing a Technological Innovation Agency and increased momentum on fiscal incentives.

Towards 2018: South Africa’s 10-year National Innovation Plan
Dr Phil Mjwara addressed the Committee on the policy landscape from the White Paper on Science & Technology in 1996 to the 10 year innovation plan in 2007. He noted that there had been economic transformation from 1829, where there was significant growth during the age of steam, to the 20^th century, where there was growth of the information age, to the present day where bio-economy was experiencing a steady growth. He stated that the four pillars of the knowledge economy were economic and institutional regime, education, information and infrastructure and innovation. All these pillars are interdependent and interconnected.

Dr Mjwara stated that the principles informing the 10 year plan included articulation of an innovation path to contribute towards the transformation of the economy to reach a knowledge economy. This plan would be informed by a decision making process emphasising a focus on South Africa’s areas of competence, global objectives and societal transformation. It was realised that government’s growth targets required a significant investment in innovation.

Dr Boni Mehlomakulu, Group Executive: Research, Development and Innovation, DST, briefed the Committee on the grand challenges. The challenge of farmer to pharma value chain meant there was a weak role played in South Africa with respect to Pharmaceuticals, space science and technology. There was a challenge in energy security since Africa had not been able to exploit solar energy, and also global climate and other change in science and human and social dynamics. She stated that the plan was to generate knowledge through science councils, state owned enterprises, global projects, developing research chair initiatives and professional development programmes. She highlighted the funds available for publications, which included the National Research Foundation (NRF), specialist research funds and international research funds. As for the commercialisation of technology funding was generated from the Public Benefit Foundation, funds from Industrial Development Corporation (IDC) and Small Enterprise Development Agency (SEDA).

Several initiatives were taken to strengthen the innovation competence of South Africa. A Technology Innovation Agency was responsible for the Intellectual Property Rights Bill, establishment of Centres of Competence, public benefit foundation and regional innovation systems. She compared South Africa’s profile in terms of production of PhD’s with other selected countries, and identified that South Africa was not doing well. A study on students with higher education in Maths and science had shown that out of the 26 000 students registered only 561 ended up studying until the PhD level.

In conclusion Dr Mehlomakulu stated that there was need for application of knowledge to generate new products and services, to ensure innovation as a national competence through centres of competence, enhance the country’s ability to generate knowledge, including early stage research areas, and improve on the infrastructure and internationalisation of South African research enterprise.

The Deputy Minister Science and Technology, Hon Derek Hanekom, whose interest on the issue of innovation was identified by the Chairperson, stated that the 10 year National Innovation plan was of interest to other departments such as Public Works and Trade and Industry. He stated that the 10 year plan aimed to guide the DST in its work. The plan was not a government wide plan but that it was more of a view to guide the work of the DST. He noted that DST was focusing on a few main areas. This did not mean that DST was neglecting other areas, but rather that it was placing emphasis where it had expertise. These and other initiatives were geared to combating poverty and imbalances in the South African society.

Operational Efficiency
Mr Daniel Moagi, Senior Manager, DST, briefed the Committee on the operational efficiency. He stated that DST was influenced by both internal and external factors. He noted that the budget was structured so that transfers and subsidies took up 92.9% of the budget, goods and services 3.5%, compensation of employees 3.6% and payment for capital assets 0.1%. He noted that the DST had a policy of saving and had achieved this by reviewing the architectural structure of the budget to ensure that moneys unspent were saved. He stated that operational efficiency entailed continuous improvement, increased productivity, working better, minimising operational costs, improving synergies, simplifying  administration and improving outputs. The strategic goals behind the operational efficiency were the creation of a unique and sustainable competitive position.

Mr Moagi noted that the initiatives undertaken to achieve these goals included streamlining the planned framework, quarterly and monthly reports on projects undertaken, financial analysis of the cost architecture to identify where DST was over or under spending, detailed monitoring of transfers, IT infrastructure and a move towards a vacancy rate of 8%. As for the audit findings, policies and procedures were developed for asset management and user profile management procedures. In conclusion he stated that the DST reprioritised critical projects and improved its operations.

Discussion
The Chairperson asked how the Department managed to save money, as alluded to earlier He noted that some government departments would describe moneys retained when vacancies were not filled as “savings”.

Mr Moagi noted that the Department was influenced by the internal and external environment. The Department was assisted to manage its budget and this gave rise to savings. He stated that the savings were derived from the operations side of the DST, for example, reducing communication costs and travel expenses.

The Chairperson asked the presenter to clarify the overall mandate as a Department that had in the past been undertaking the duty of transferring funds. He sought clarification on whether the Department wanted to be a new Department with a new mandate.

Dr Mjwara noted that the reason for developing of the cost architecture was so that the Department could identify and understand the core objectives. He noted that the emphasis was on the fact that the money in the hands of the DST should be deployed, not spent by DST.

Mr A Ainslie (ANC) stated that the Auditor General’s report should be closely related to the expenditure of the department. He noted that the African Institute had for some time received poor audit reports. He asked the Department what measures it had put in place to ensure that institutions could receive unqualified reports.

Dr Mjwara stated that a new board had been appointed, and new policies had been implemented. He stated that the Department had emphasised the need for the establishment of sub-committees that would evaluate the work of these institutions.

Mr Ainslie asked, with reference to the budget allocations on goods and service, whether the Department procured services from small businesses.

Dr Mjwara stated that the Small, Micro and Medium Enterprise (SMME) policy was governed by legislation and that the Department’s procurement was based on this policy. He stated that the Department contracted a lot of consultants from these groups and procured from small businesses.

Mr Ainslie stated that there was too little reference, on the 10 year plan, to poverty eradication.

Mr Ainslie asked what the mandate of the Public Benefit Foundation (PBF) was.

Dr Mjwara stated that the purpose of the Foundation was to assist the Department in the coordination of poverty alleviation projects. He stated that the Department had no capacity to learn from previous projects. The PBF would change this by recording the findings and evaluation of progress of these projects. This information would be used in future to assist the Department in poverty alleviation projects. He stated that R35 million had been set aside for the PBF.

The Chairperson stated that the Committee would require the Department to present reports on institutions under the Department that were the subject of discussion in the Committee meetings, such as the African Institute.

Mr P Nefolovhodwe (AZAPO) noted that the majority of talented individuals belonged to the second economy. He stated that these individuals did not have the capacity to expose their innovative ideas, and that there was a need to come up with a solution to help them.

Dr Mjwara explained that the Public Benefit Foundation aimed to target these individuals.

Mr Nefolovhodwe stated that children from disadvantaged communities became “lost” in the school system even before the country discovered their raw talent. He asked how the Department ensured that these children reached the higher education levels.

Dr Mjwara stated that the DST was trying to increase the number of students enrolling for higher education by offering attractive bursaries to them at the third year level, before they received job offers that would detract them from furthering their studies. He noted further, with respect to disadvantaged children, that the Deputy Minister was a member of a Committee with the Department of Education that had developed strategies on how to help these students.

The Deputy Minister stated that he was constantly interacting with the Ministry of Education. The Department did what it could to assist disadvantaged students, for example by giving supplementary funding. He stated that a number of Dinaledi schools had been established in the nine provinces, each linked to science and technology.

Mr Nefolovhodwe asked what the Intellectual Property offices envisaged and whether it was in line with the Department of Trade and Industry’s policies on Intellectual Property.

Dr Mehlomakulu noted that Norwegian funding had been given for certain projects, and that innovations were being launched in Norway. She stated that the Companies and Intellectual Property Registration Office was mandated with the registration of patents. These offices created an environment for people to register their patents but did not identify new ideas. She noted that through the IP offices the DST would encourage the transfer of technology from universities to registration of patents.

Mr S Nxumalo (ANC) asked what the 10 year plan meant for South Africa.

Dr Mjwara stated that it was hoped that through the plan the patent portfolio and the number of PhD students would increase. He stated that through the Science Councils the Department was looking into the possibility of developing a titanium industry, and eventually start producing airplane components.

Mr Nxumalo asked whether there was any future with respect to coordination of Science Councils by the Technological Innovation Agency.

Dr Mjwara was positive that there was a future and noted that research management systems had been established to provide information on the output of these institutions, to enhance institutional coordination.

Mr Nxumalo noted that the OECD review identified that South Africa was weak with respect to innovation. He stated that there had been no improvement with regard to mathematics and science for over 50 years.

Dr Cheryl de la Rey, Councillor, National Advisory Council on Innovation (NACI), stated that unless South Africa broadened its prospects of innovation it would not achieve its goals. She gave an example of a school in KwaZulu-Natal which had good mathematics and science teachers. These teachers travelled around the region offering their expertise. She stated that the intervention needed in some cases was minimal. She stated that there was also need to restore historic schools that did well in mathematics and science.

Mr Nxumalo asked whether the Department would seek further funds for improved operations.

Mr Moagi stated that the idea was not to ask for more funding but that the Department tried to look at better ways of doing things and therefore were able to save on some money.

Mr S Dithebe (ANC) noted that nothing was said with respect to climate changes challenges.

Dr de la Rey noted that at the focus at present was on the threat of HIV/AIDS. However, the threat of climate change was an issue of concern to the DST.

Mr Dithebe noted that there seemed to be a half-hearted approach towards interdepartmental interface on the innovation strategy. He noted that the 10 year plan as stated by the Deputy Minister was focused on the vision of DST alone, as opposed to speaking to the Industrial Policy Framework.

Dr de la Rey stated that in order for the innovation strategy to be interfaced with other departments, a comprehensive information plan was needed, and people had to be aligned with ideas. Where it was possible to develop bilateral agreements with other departments the DST would do so. She stated that through the economic cluster the DST was undertaking a number of projects with the Departments of Minerals and Energy, Trade and Industry, Public Enterprises and others. The titanium project was an example. She stated that even though the innovation strategy was a DST plan, there was also work with other departments.

Mr Dithebe noted that although the Deputy Director talked about four pillars of the knowledge economy there did not seem to be emphasis on the economic and institutional regime. He thought that all work of DST should be grounded on sound macro economic policies and sustainability of employment.

Dr Mjwara stated that the Department had not ignored the economic and institutional regime, and was working with the Department of Trade and Industry. The Department was concentrating on the pillars over which it had direct control.

Mr J Blanche (DA) stated that it was one thing to build an engine but another for it to work. He stated that there was a need to share information on the innovation strategy with other departments. He stated that PhD graduates would not drive the economy, but technologists would. He believed  that the Department must look at ways of transferring technology knowledge. He noted that one of the problems faced in South Africa with respect to sharing information was that there were 11 official languages.

The Chairperson noted that the issue of language could be discussed,  to identify whether it was an advantage or disadvantage.

Mr Bethuel Sehlapelo, Group Executive: Human Capital and Knowledge Systems, DST, noted that there was a need to train people and get more PhD students to enhance the technology capabilities. He stated that there was a need to invest money in universities to develop technology.

Mr C Morkel (PIM) noted that there should be collaboration between the universities and secondary schools to identify students who were innovative, and students who studied mathematics and science. The focus should not only be on the number of students who graduate with PhDs but also on the quality and output of the programmes and the students.

Dr Phil Mjwara stated that it was not possible for the DST to bulldoze its way into championing the whole knowledge infrastructure through Cabinet. There were various partners undertaking initiatives to tackle these problems.

Mr Morkel noted that the presenters had identified collaborations with other departments. Many of the initiatives taken may require collaboration agreements for purposes of co-ownership and harmonisation. He asked whether there were any existing collaborations, and, if so, then the Committee should be made aware of them.

The Deputy Minister noted that the Department was doing what it could to work together with other government departments. He stated that NACI could be a very important organisation if it took up the mandate of coordinating the innovative strategy within the government spheres.

Dr de la Rey noted that the composition of NACI was specified in the legislation. She stated that NACI had decided, with respect to the review of OECD, to combine a small group of members of NACI with some specialists to complement the expertise. NACI specifically invited someone with expertise on SMMEs to assist NACI to interrogate the recommendations in order to formulate advice to the Minister of Science and Technology. The mandate of NACI was to advise the Minister of Science and Technology on the innovation strategy, and that was the reason behind the comments of the OECD review that NACI was too restricted.

Ms B Ngcobo (ANC) asked whether the Department was comfortable with the review of the OECD.

Dr Mjwara stated that the Department was happy with the review and noted that if it had been done three years earlier the findings would have been different.

Ms Ngcobo asked whether the Department was working together with SASOL in regard to bursaries to students.

Dr Mjwara stated that three weeks before the meeting the Department had a meeting with SASOL’s executives and sold the idea of SASOL working with the Science Councils and universities.

Mr B Mnyandu (ANC) noted that the presentation identified countries that had high economic and scientific wealth. He asked whether the Department had undertaken any studies to identify why these countries performed well with respect to their innovation systems.

Dr Mjwara responded that the newly industrialised countries such as Japan and South Korea exploited their innovative systems and produced goods that would sell in the global market. South Africa was not able to do the same, as it was not ready to implement the innovation strategy. In other countries the innovation strategy was implemented from the Premier’s office. South Africa needed a structure that looked at the role of innovation in the economy.

Mr Mnyandu sought confirmation with respect to the department’s ability to cut across departments with the innovation strategy.

Dr Mjwara stated that the mandate on the innovation strategy was only with DST at present.

The Chairperson thanked the presenters and re-emphasised the need to present the institutional reports before the Committee.

The meeting was adjourned.