ACHIENG OJWANG: Innovation is key to business survival, but it is being overshadowed

SA’s businesses list innovation as their biggest risk, as well as their largest opportunity. Yet they have not placed it at the top of their priorities, based on the results of the private sector voluntary national review on sustainable development goals (SDGs).

In recent years, the domestic business sector has faced a global pandemic, a consistently weak economy, a volatile international trading environment, sustained energy shortages and a disrupted international supply chain.

All of these competing and critical issues made it difficult to prioritise enablers such as innovation, making it extremely difficult for SA businesses to attract the investment needed to fund the research & development (R&D) required for innovation.

The Global Compact Network SA is a corporate sustainability platform tasked with compiling the private sector’s second voluntary national review on its progress towards meeting the UN’s 17 SDGs. These are aimed at ensuring that by 2030 the world enjoys peace and prosperity for people and the planet.

The 2024 review report on SA reveals that SDG 9 — build resilient infrastructure, promote sustainable industrialisation and foster innovation — has slipped from its 2019 spot as business leaders’ fourth priority to eighth. 

Above innovation are, in order: decent work and economic growth (SDG 8); limit and adapt to climate change (13); partnerships for the goals (17); good health and wellbeing (3); sustainable cities and communities (11); quality education and lifelong learning for all (4); and responsible consumption and production patterns (12).

What is also revealed by the survey is that while business leaders are prioritising the country’s most pressing challenges, such as our high unemployment rate and the increasingly large effects of climate change on daily life, they do not discount the critical importance of innovation. That is why SDG 9 is listed in survey responses as the SA private sector’s biggest risk and largest opportunity SDG.

The private sector is acutely aware that if businesses do not innovate in our ever-changing world, especially in the face of rapid technological advances including artificial intelligence and automation, they will be left behind. In just one example, we have already had warnings, including from the government, about how SA stands to lose key export markets if the motor vehicle industry does not quickly switch to the production of electric vehicles. 

It is also true that innovation is part and parcel of any work towards realising the seven SDGs that lie ahead of it on business’s list of priorities. However, without funds expressly set aside for the kind of R&D that leads to true innovation, SA’s business competitiveness will lag. We need to find ways to inject funds into R&D.

The good news is that things are looking up. While short of the 1.5% of GDP target for R&D spending that President Cyril Ramaphosa announced in December 2023, SA’s spending on this vital stimulus for economic growth increased to 0.62% of GDP in 2021/22 from 0.6% of GDP in 2020/21.

It must be remembered that in 2020/21 the economies of SA and the world were in survival mode in the middle of the Covid-19 pandemic. In 2007, our R&D spending was edging towards the 1% mark, at 0.92% of GDP. We have declined.

This recent upswing in R&D spending is driven strongly by an increase in expenditure by the business sector, according to the National Survey of Research & Experimental Development, published in February 2024 by the Human Sciences Research Council. 

Our survey also shows that business leaders believe the private sector is benefiting from the end of state capture. They consistently celebrated this in their submissions, seeing it as a vital enabler for flourishing investment.

However, they indicated that further progress is required to fully deliver a private sector environment that is trusted, and to overcome the reputational damage from the past. Add to that the recent turnaround in SA’s electricity supply — more than two months without load-shedding — and it is possible to see a few green shoots of hope for our economy. 

Let us hope that the upwards trajectory in R&D spending keeps on moving in that direction and accelerates.

• Dr Ojwang is executive director of the UN Global Compact Network SA.