Pharmaceutical in South Africa

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South Africa is facing structural problems in strengthening its research and innovation capacity in order to become and remain competitive in the global business environment. Although greater emphasis is given to strengthen Research and Development efforts in the country and to translate it into commercialization of products, South Africa are lagging behind its competitors on four critical domains of:
Pharmaceutical in South Africa

• The level of technological exports;

• Funds invested in Research and Innovation activities;

• Capability to transform relevant scientific knowledge and technological inventions into commercial applications; and

• Sourcing for competitive technologies.

Although it is realised that South Africa as a developing country cannot match the R&D spending of developed countries, the assumption is made that if South Africa can carry out R&I activity levels comparable to that of principle trading partners and competitors, it will be able to sustain its relative competitiveness in the world.
Pharmaceutical in South Africa

Complicating the situation further is the fact that South Africa is considered an innovation environment in which medium to low technology innovations dominate. Therefore, it is not a strong competitor for attracting research exports from foreign companies. This is due to the fact that this privilege belongs to environments classified as at the forefront of research efforts, high technology oriented, huge market opportunities and dynamic in nature. Typical countries adhering to these requirements include amongst others China, India, the United States of America, Hungary and Romania (RTDinfo, 2006).

Purpose

The purpose of this article is to describe the vulnerable research and innovation base of South Africa in terms of the three domains mentioned in the introduction.
Pharmaceutical in South Africa

Technology exports of South Africa as percentage of world exports

According to statistics provided by Kaplan (2005) high technology export of South Africa, 0.3% in 2002, as a percentage of global exports represents indeed a very small proportion of world exports in technology. How poor is only conceived when compared to 2002 figures of other European countries such as Turkey (1.6%), United Kingdom (1.25%), Sweden (13.7%), Switzerland (21.6%), Spain (5.7%), Slovenia (4.9%), Portugal (6.8%), Norway (4.6%) and the Netherlands (18.7%).

Sufficiency of funding for R&I in South Africa

Whilst the aim of the South African Government is to spend at least 1% of its GDP on R&D this objective has never been reaches since 1983 (No survey was done in 1995 and 1999). With a median of 0.76 and currently at 0.806 GERD:GDP too little emphasis is given to R&D activities. Currently only R10.1 billion (+/- US$1.6 billion) is spend on R&D in comparison to a 2005 GDP of R1 250 billion (+/- US$208.33) comparing favourably with levels experienced in a country lie Portugal. However in comparison with other countries in Europe like Switzerland, Sweden, United Kingdom and the Netherlands which spend two percent and more of their GDP on R&D, South Africa are lagging far behind. Further, of the R10.1 billion available for R&D, only 13% is spend on the advancement of knowledge, whilst the most (60%) is spend on economic development. This indicates that too little is invested on human factors, which is Pharmaceutical in South Africa

considered a critical element for a successful knowledge based economy. The conclusion is thus that not sufficient funds are allotted for R&I activities in South Africa.

Capability of South Africa to transform scientific and technological inventions into commercial application

Pharmaceutical in South Africa
The first consideration in determining the capability of South Africa to transform R&D activities into commercial application demands an analysis of human resources availability in the scientific community. The Department of Arts, Culture, Science and Technology (2002) has made a comparison between four countries, South Korea, Malaysia, South Africa and Australia regarding the development of human capital as expressed by number of researchers per 1000 of the population as indicated by Table 1. Although performing better than Malaysia on this component, South Africa are performing weak on the broadening of research literacy in the general population. It is a further disturbing fact that South Africa has an aging research workforce. The Department also indicated that the number of science, engineering and technology (SET) practitioners, will vary between 7 and 11 per 1000 of the population in the years 2002 to 2012 and a university throughput in SET of only 2.7% to 3% during the same time frame. The latter figures compare extremely unfavourable with SET graduate throughput in some of the European countries like the United Kingdom (19.5% - 21.0%), Turkey (5.2%), Switzerland (7.0% - 7.7%), Sweden (13.3% - 13.9%), Spain (12% - 12.6%), Slovenia (8.7% - 9.0%), Portugal (7.4% - 8.2%), Poland (8.3% - 9.0%), Norway (7.7% - 9.3%) and the Netherlands (6.6% - 7.3%) for the same period.


South Korea 2.771

Pharmaceutical in South Africa
Secondly, of the top 700 firms, by R&D expenditure in the world, only one namely Sasol is located in South Africa with a US$91 million spending during 2003, whilst more than 80% of these firms come from only five countries, spending more than 82.5% of R&D: the United States (42.3%), Japan (22.0%), Germany (7.6%), the United Kingdom (5.6%) and France (5.0%). The remaining 20% comes from Finland (0.9%), Sweden (2.1%), Switzerland (2.9%), Republic of Korea (1.4%), Taiwan (1.1%), China (0.1%), Bermuda (0.4%), Brazil (0.3%), Croatia (0.1%) and South Africa (0.1%). Of these firms more than 50% operates in the high and medium technology environments of information technology, pharmaceuticals, biotechnology and automotive. In essence Transnational Corporations dominate the global business R&D and in all of this South Africa plays a relative insignificant role in participation. However, as internationalisation of R&D by Transnational Corporations increased, South Africa benefited from this approach and the amount of US$67 billion spent in 2002 of which US$24 million was allotted to South Africa. This benefit however, does not reveal the fact that other developing countries like China, Singapore, Hong Kong, Malaysia and the Republic of Korea are the main gainers in the internationalisation of R&D worldwide (World Investment Report, 2005).
Pharmaceutical in South Africa

Sourcing of competitive technologies in South Africa

The history of South Africa and its political dispensation of Apartheid till 1994 led to international isolation causing the country to adopt an internal innovation approach. Since 1994 however, the country began to participate actively in the global economy and a need exist to source new technologies locally as well as from elsewhere (NSTF, 2001). Lorentzen (2004) provided the following statistics regarding to the sourcing of competitive technologies in South Africa over the period 1999-2001 as indicated by Table 2. According to Lorentzen, the 22% foreign sourcing is primarily for radical innovations, whilst local technological sourcing happens within the domain of incremental innovations. It can therefore be concluded that knowledge resources do not meet the competitive needs of South Africa especially in high technology innovations.


Further, whilst South African inventors secure around 100 United States patents per year, this represents only 2.5 patents per million of the population per annum. In comparison Japan secured 776 patents per million of the population per annum (Department of Arts, culture, Science and Technology, 2002).
Pharmaceutical in South Africa

Conclusion and Recommendations

The results reveal that South Africa performed poorly and insignificantly low in the export of high, medium and low levels technologies. The country is therefore poorly positioned globally to compete successfully due to a lack in ability to commercialise the results of R&I in the international markets. This can be partially be attributed to the fact that not sufficient funds are allocated for R&D as indicated by the gross expenditure on R&D. In order to sustain its competitive position South Africa needs to follow a three-tier approach. Import the technology it requires to fulfil in its trading needs by securing access to external sources of technology, establish strong links with the global production system and seek co-operation agreements with international expertise to ensure technology transfer to South Africa.
Pharmaceutical in South Africa

In order to strengthen the research and SET capacity in South Africa, the throughput at university level should at least be doubled to come in line with developed and developing countries in the European union and to contribute significantly to the formation of SET human capital and technological innovations. South Africa has also embarked on a process of embarking on an incentive approach that provides funding sources to different stages for commercialisation of research innovations.

Due to the fact that South Africa is not performing well in the area of patenting, a better approach could be to focus on trademarks, rather than patents based on the argument that final consumers are less concerned on whether a product has been manufactured solely on the basis of imported or self-develop technology that buying the right product that would satisfy their needs. Trademarks better address the latter component and are focussing more on the licensing of technology as opposed to protecting industrially applicable inventions as in the case of patenting. Whilst patenting is focussing on the supply side of the market to prevent competitors from copying the innovation, trademarks is focussing on the demand side of the market by influencing consumers, which trademark to buy. South Africa therefore could benefit to focus on establishing preferred trademarks in the marketplace in order to grow its competitive base in the global world especially in the field of indigenous technology applications.
Pharmaceutical in South Africa

From a global perspective South Africa is also performing poorly to attract R&D funds from Transnational Corporations. Funding obtained is primarily intended for the auto industry. The funds invested, represents a very narrow base on which to build the competitive edge through R&I.

It can therefore be concluded that South Africa founds itself on the periphery of global knowledge creation and innovation as well as in sourcing for technological innovations. If South Africa intends to maintain and grow its global competitiveness greater emphasis should be given to:

• Increase the budget for Research and innovation dramatically;
CONTACT INFORMATION
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138 Delphinium Street Winchester Hills Ext 2 Johannesburg
City - Johannesburg
Country - South Africa
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