Innovation fund expands support for local investors

The Department of Trade and Industry (dti) is actively stepping up its support to inventors to position South Africa as the continent’s leader in industrial innovation.

With Nigeria and Kenya hot on South Africa’s heels, the dti recognised the urgency of driving new technologies and after 13 years decided to evaluate the impact of their Support Programme for Industrial Innovation (SPII). Between 2000 and 2013 SPII provided R623-million of funding to 401 projects, which have directly created or retained approximately 3000 permanent jobs (ie at the cost of more than R200,000 per job).

The SPII – affectionately pronounced ‘Spy’ by stakeholders – was designed to provide inventors and innovators with funding to develop new concepts into commercially viable, innovative products and/or processes. At its inception SPII, which was implemented Industrial Development Corporation (IDC), focused only on the electronics technology but gradually broadened to provide support for industrial innovation.

The SPII’s mandate focused exclusively on the phase after the basic research and up until a prototype had been built or developed – in other words, until proof of concept had been achieved. SPII did not extend its support beyond the prototype.

The opportunity for a co-funded evaluation arose when the Department of Planning, Monitoring and Evaluation (DPME) in the Presidency called on governmental departments to identify programmes and initiatives for review. The dti put forward SPII, and it was accepted by the DPME and included in the 2013/14 National Evaluation Plan approved by Cabinet. Genesis Analytics – an economics-based consultancy firm based in Johannesburg – was selected as the independent evaluator for the SPII review.

 The evaluation revealed insights into the challenges that businesses are faced with in taking their ideas from concept to actual commercialisation, and identified ways the dti can enhance its support for innovation to contribute to economic growth and – ultimately ­– job creation. Between 2000 and 2013 only 53% of SPII matching scheme projects were commercialised during the 13-year period.

Despite this success rate, the evaluation also showed 47% of respondents who received SPII support said that they could not have continued without SPII funding, while 57% of rejected applicants reported to not have continued with their project.

 Gathering consistent and comparable data over the 13-year period quickly proved to be a major challenge for Genesis.

“The data limitations were considerable in this process,” says Genesis’s senior evaluator on the project, Alyna Wyatt. “In more recent years, institutions have become much better at collecting data, and so the quantity and quality of information available improved – but in the earlier years there were significant gaps!”

For example, contacting stakeholders from the early years of the programme was difficult – people had moved on from jobs and companies, phone numbers and email addresses had changed, and institutional memory had been lost. Nevertheless, the Genesis team finally interviewed approximately 50 stakeholders involved in the programme, including a survey of all of SPII’s beneficiaries since 2000 as well as companies that were not successful in their applications and ultimately did not receive funding.

The interviews yielded many insights, but one of the most striking was just how few projects reached the stage of full commercialization. Without further support after the prototype was built a large number of projects were aborted before they could begin to generate revenue or create jobs. These project ‘deaths’ were identified as a key opportunity for increasing SPII’s impact and was a key recommendation in the final report.

“That gap between building a prototype and reaching commercialisation is the greatest barrier to the success of innovations, particularly in South Africa where the venture capital market is undeveloped and risk-averse,” explains Wyatt. “It’s particularly difficult for smaller firms. Genesis therefore recommended that SPII extend its support beyond the prototype stage, and also that the application appraisal process should more rigorously assess an applicant’s prospects of successful commercialisation as a key criterion, to maximise the impact of SPII.”

The final evaluation report was presented at Cabinet in July 2015 before being sent back to the dti for implementation.  SPII was re-launched by dti minister Rob Davies during the South African Innovation Summit in August 2015 to “promote the development of technologically innovative products or processes that are commercially viable and internationally competitive thus rendering the SA Industry to be competitive.”

The programme is divided into three support schemes, namely the Product Process Development (PPD) scheme which is a non-repayable grant focusing on small, micro and medium enterprises and capped at maximum R2 million. There is also the Matching Scheme which provides a non-taxable, non-repayable grant of between 50% and 75% of qualifying costs and capped at R5 million, as well as the conditionally repayable Partnership Scheme which is a non-taxable and conditionally repayable grant of 50% of qualifying costs with a minimum grant R10million.

 The SPII has also been transferred to the dti’s Incentive Development and Administration Division (IDIAD).

The DPME awarded Genesis and the dti a category one Government Evaluation Award for the SPII review at an event in Sandton, Johannesburg, in October this year.

Held every two years, the DPME uses the awards as a positive incentive to encourage participation in evaluations. By highlighting the role that evaluations can play in fostering learning and facilitating continuous improvement, governmental departments will begin to see their value – rather than simply being perceived as a compulsory audit, or meaningless compliance requirement. A category one award is for an evaluation that is both utilised and presented to Cabinet.

“We’re extremely proud to have received this recognition,” says Wyatt. “We took a very positive approach in that we wanted to acknowledge that innovation in South Africa is something that needs support and that SPII had a meaningful role to play in this. How can we work to improve that role? How can South Africa pull itself up to occupy a more prominent position in terms of innovation and R&D? And Genesis’s recommendations for maximizing SPII’s impact were made from that point of departure.”

 Report by Jessica van Onselen published by Business Day on 15 December 2015

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