When organised business leaders and the South African Government resolved in June 2023 “to urgently work together to remove obstacles to inclusive economic growth and job creation”, a fresh era for business–government relations in South Africa may just have been ushered in. In what ways might business and the government use research, development and innovation as part of constructing an effective cross-sectoral partnership in the national interest? By Gerard Ralphs and Amy Kahn
Image generated by AI, Freepik
Since an agreement in June 2023, the South African Government and organised business have been working together towards removing obstacles to inclusive economic growth and job creation.
Addressing the most urgent crises faced by the country’s economy (including transport and logistics, energy, and crime and corruption), the partnership represents a key innovation at the level of South Africa’s governance architecture.
To date, hundreds of millions of rands from the private sector and the public sector, along with hundreds of technical experts, have been deployed through the newly established national crisis committees for energy and logistics and the establishment of the Joint Initiative for Crime and Corruption, contributing vital resources.
“We’ve never seen this level of collaboration between business and government and it really is making a big difference,” said James Mackay, CEO of the Energy Council of South Africa, who was speaking alongside other sectoral role-players at a private sector forum jointly arranged by the HSRC, Business Unity South Africa and the Department of Science and Innovation (DSI) on 13 March 2024.
Indeed, relations between business and government in post-apartheid South Africa have been strained, at best, with significant low points for both sides. For example, during the Zondo Commission’s public hearings and its final reports, global consultancy firms and local businesses faced a severe backlash from public sector actors for their role in state capture deals. Similarly, despite the intensification of load-shedding over the past decade, the initial slow pace of reforms was heavily criticised by business lobby groups across various sectors of the economy, especially by independent power producers.
In this respect, the CEO of Business Unity South Africa, Cas Coovadia, spoke bluntly.
“What’s been happening in South Africa between business and the government is that we’ve been throwing bricks at each other, instead of using those bricks to actually build stuff.”
But this was now shifting, according to Coovadia. “I think business in South Africa in our context is increasingly beginning to realise in my view that the line between business and society is not there,” he said. “It is very much in business’s interest to ensure that society works.”
Mackay reinforced this view, calling for a bolder stance by business. “We’ve got to embrace the partnership between business and the government, get on with it, and business must be more confident in things to be done, calling out the government, being bold in creating some structure and pushing for action,” he said.
The Business for SA (B4SA) initiative, which regularly meets with the government through the Presidency, is an apex structure for 115 CEOs representing 1.2 million jobs and over one trillion rand in market capitalisation. However, B4SA is not the only public–private partnership that is aiming to make a positive impact on the South African business environment.
Public–private innovation models
Speaking at the forum, Sietse van der Woude of the Minerals Council South Africa highlighted increased collaboration on innovation within the mining ecosystem, involving companies, science councils and higher education institutions through the Mandela Mining Precinct.
Van der Woude cited the development of the Isidingo Drill as an example of collaborative problem-solving in the industry.
“One of the first things the Mandela Mining Precinct did was to get the mining companies together and say, ‘What do you want from a new generation or next generation rock drill?’ And they put together their criteria, and they agreed on their criteria, and then went out into an open innovation challenge. And today we have a rock drill that is not only much quieter and less vibrating and safer, but it is also more productive.”
In a similar vein, Dr Ronald Heath of Forestry South Africa described the DSI’s Sector Innovation Fund as a “game-changer”.
“It’s an amazing programme, but there’s an incentive to actually invest because the government is walking the path with you. Of course, sometimes it’s challenging to balance the imperatives that the government would like to seek and what industry would like to seek. But it works.”
Heath also emphasised the need for long-term coordinated approaches tailored to the specific needs of each sector.
“If we want to deploy a new tree that addresses climate change, or a new insect, or new growing conditions, it takes us 15 to 20 years from start to deployment. We can’t work on three-year horizons.”
The forestry sector in South Africa comprises a handful of large corporations, 1,300 timber farmers, and 20,000 small-scale timber growers, Heath explained. Therefore, it is essential for the sector as a whole to articulate a clear research agenda and to conduct research that is in the interest of all role-players.
“For our sector, what we’ve realised is multidisciplinary research is an old word. We’ve now gone to multi-institutional research where we have little capacity. There’s not enough for everybody to go around. We need to be innovative in how we use the money that’s available.”
Dr Malika Khodja-Möller from the Toyota Wessels Institute for Manufacturing Studies highlighted the benefits of sector collaboration models within manufacturing. She described an Institute programme that provides manufacturing companies with experimental space to aid them in making investment decisions.
“We actually created the management sandbox, which is a kind of technological playpen, where we have 4IR (fourth industrial revolution) industry technologies, like industrial internet of things, 3D printing, virtual reality, augmented reality, and other technologies for companies to come and experiment with the technologies without putting a capital investment in this technology.”
But Khodja-Möller called for increased sectoral collaboration to optimise resources and encourage positive spillovers.
“I always say: ‘Instead of fighting over a small piece of cake, grow the cake and everyone can have their own piece and benefit from it.’ So, if you adopted a technology and you know it worked for your business, make it open, make it accessible to others even if it’s not in your relevant sector […] to enhance and maximise economic growth.”
What the data says about innovation collaboration
The recent economy diagnostic conducted by the Harvard Growth Lab, published in 2023, identified state capacity, spatial exclusion, and green growth as significant priorities for South Africa to address.
One proposed strategy to address these priorities, according to the Harvard Growth Lab, is through partnerships: in particular, collaboration between businesses and other organisations to share productive expertise.
However, based on an HSRC policy brief, which analysed data from the South African Business Innovation Survey for the 2019–2021 reference period, researchers found that only 29% of innovation-active South African businesses engaged in any form of collaboration.
Moreover, among the businesses that engaged in partnerships, their most likely partners were suppliers of equipment, materials, components and software, rather than research institutions, whether public or private.
Equally, the researchers demonstrate that the high costs associated with coordination were a key barrier to interacting with other parties in the production or exchange of knowledge.
The authors of the policy brief argue that policy instruments should be designed based on a differentiated evidence-informed view of how business collaboration for innovation actually occurs, or why it may not occur.
For instance, non-innovation-active firms need to build interactive capabilities to engage in innovation activities, while innovation-active firms that prioritise research and development (R&D), for example, in their collaborations, require support for these activities.
South Africa’s new business–government partnership has opened the way for new thinking on how the respective capabilities of the state and private sector actors can be leveraged for the benefit of the nation.
With R&D expenditure increasing nationally and in the business sector, and with the introduction of new policy directives outlined in the DSI’s Decadal Plan 2022–2032, there are opportunities to improve, scale or re-design research, development and innovation (RDI) models.
Using existing evidence from RDI surveys can guide decision-makers in the government and business towards mutually reinforcing outcomes.
Learn more:
Innovation trends in the mining sector, 2019–2021
Innovation trends in the manufacturing sector, 2019–2021
Innovation trends in the electricity, gas and water supply sector, 2019–2021
Innovation trends in the transport, storage and communication sector, 2019–2021
Research contacts:
Gerard Ralphs (policy analyst) and Dr Amy Kahn (research specialist) in the HSRC Centre for Science, Technology and Innovation Indicators
