South Africa: Minister Blade Nzimande Releases Results of Business Innovation Survey

press release

The Minister of Higher Education, Science and Innovation, Dr Blade Nzimande, officially released the results of the latest Business Innovation Survey (BIS) 2014-2016, which revealed that two-thirds (69,9%) of South African businesses are innovation-active.

The Centre for Science, Technology and Innovation Indicators (CeSTII), a unit of the Human Sciences Research Council, carries out the BIS on behalf of the Department of Science and Innovation (DSI).

The DSI facilitates the survey as a partner within the national statistics system, with the support of Statistics South Africa.

"The BIS was undertaken in South Africa to produce indicators on business sector innovation performance, which helps the government and stakeholders to understand the nature, determinants and impacts of innovation. Such information is useful in shaping government policy on how to better promote innovation in order to boost inclusive economic growth and competitiveness," said Minister Nzimande.

Minister Nzimande further said that new data on innovation in South African businesses are particularly important to inform the implementation of the objectives of the 2019 White Paper on Science, Technology and Innovation and that a new set of programmes should be informed by a more contemporary view of the state of business innovation in the country.

"The survey results are being published at a time when businesses are being forced to become innovative in order to survive in the unusual circumstances created by the outbreak of COVID-19. With stringent safety regulations to combat the spread of the virus, the products and services sectors need to innovate to ensure people's safety and business continuity said Minister Nzimande.

The Minister further said that in his role as Minister, he came across amazing innovations by South African businesses, particularly as South Africa and the world grapple with the COVID-19 pandemic.

The 2014-2016 BIS is the sixth such survey undertaken in South Africa and reveals that during the period surveyed, innovation was pervasive across all sectors, particularly in engineering and technology, manufacturing and trade.

The survey is a major source of evidence and helps to update statistical indicators on business innovation performance in the country.

According to the survey, innovative South African businesses engaged in four types of innovation. 48% carried out product innovation activities, 42,0% organisational innovation, 41,7% marketing innovation, and 34,6% process innovation. These patterns vary significantly between sectors.

Process innovation was most prominent in logistics businesses (61,7%), while product innovation was highest in the manufacturing sector. Organisational innovations were reported more frequently by businesses in the financial intermediation sector, and the greatest concentration of marketing innovation was recorded in the engineering and technology sector.

"BIS shows that local businesses invested in innovation activities that helped them and their workforces to prepare for technological and organisational change," Minister Nzimande pointed-out.

The business innovation activities reported by the largest share of companies were training (59,3%), acquisition of computer software (58,3%), and acquisition of computer hardware (57,2%). In both the industrial and services sectors, the biggest innovation expenditure item during 2014-2016 was the acquisition of machinery and equipment.

The survey also showed a link between innovation and market access. Businesses with innovation activity were more likely to have sold their goods and services on national markets (58,1%) than those without (37,7%). Non-innovation-active firms accessed selected provincial markets (57,4%) more than any other market.

"Innovation-active local businesses also accessed national and global markets in the rest of Africa, Europe, Asia and elsewhere than their counterparts with no innovation activity," the Minister confirmed.

Another benefit for innovative-active companies was the overall improvement in the quality of goods and services. Figures in this category show that 38,0% of product and process innovators saw quality as a highly successful outcome of innovation, followed by increased revenue (31,8%) and improved profit margins (30,9%). Similarly, for 49,5% of organisational innovators, the improved quality was the most highly rated innovation outcome.

While innovation proved to have a positive impact on businesses, innovation investment accounted for only small percentages of turnover in businesses with successful innovations in the 2014-2016 period.

Products new to the market accounted for 10,8% of turnover, products new to the business 7,0%, and products new to the world 1,8%. By contrast, 80,5% of turnover in innovation-active businesses was generated by goods and services that were unchanged or marginally modified.

At the same time, the figures also showed that very few businesses protected or profited from their intellectual property (IP) rights. The preferred strategies for IP protection were trade secrets or confidentiality agreements (used by 16,5% of innovation-active businesses and 4,7% of non-innovation-active ones) and trademark registration (used by 12,4% of innovation-active businesses and 3,9% of non-innovation-active ones).

Only 14,8% of businesses reported increased IP revenue as a highly successful outcome of their innovation activity, while only 5,1% of innovation-active businesses granted a licence on any intellectual property resulting from innovation. Only a few businesses viewed IP rights as a barrier to innovation (4,3% of innovation-active businesses and 6,2% of non-innovation-active businesses).

Major obstacles to innovation were mostly financial but included market factors. Eight widely reported obstacles were a lack of funds within the business or business group (31,5%) or from external sources (25,0%), the high cost of innovation (22,5%), lack of credit or private equity (24,8%), difficulty in accessing government grants (21,5%), uncertainty about demand for innovations (19,3), market competition (16,4%), and lack of customer demand (8,6%). For non-innovation-active businesses, the most widely reported barrier to innovation was a lack of demand for innovations (20%).

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