An Overview of South Africa's Innovation Vitality

An Overview of South Africa's Innovation Vitality

GDP Performance (2010-2020)

Although South Africa is one of Africa's largest economies, its economic woes are reflected in its pre-pandemic GDP performance since 2010. Since the height of 2011, South Africa's GDP shrunk by approximately 27.5% by 2020. Although South Africa's GDP experienced a short stint of recovery between 2016-2018, economic activity declined once again in 2019. The pandemic just worsened South Africa's economic situation as global lockdowns severely hampered economic growth.

Nonetheless, according to the International Monetary Fund (IMF), South Africa's economic outlook is positive. By the end of the year, the economy is projected to grow to over USD 399 Billion. Furthermore, in the next 5 years, SA's GDP is expected to be well over USD460 Billion.

New Business Registrations (2006-2018)

New venture creation is extremely important to economic growth as it indicates citizens and companies are actively creating solutions to problems and competition generally leads to a wider range of options for consumers. New business formation has a few noteworthy implications for a nation: an increase in competition, higher productivity, innovation, and employment opportunities. The magnitude of these implications depends largely on the resource endowment of the new entrants and incumbents.

Data suggests that tough economic situations lead to an appetite for new venture creation. Our analysis reveals that South Africa's new business registrations increased by a Compound Annual Growth Rate (CAGR) of 11.63% per year between 2010 to 2020. Amid the pandemic, there were 77,364 more new registered businesses compared to 2019. Furthermore, there were 2.4 times more new businesses registered in 2020 than in 2010. However, early-stage entrepreneurial activity in South Africa is showing worrying signs. According to the Global Entrepreneurship Monitor's latest report, 8.5% of adults in South Africa are engaged in early-stage entrepreneurial activity in 2022 compared to 17.5% in 2021. Only 6% of adults intend to start a business within three years compared to 20% of adults in 2021.

High Tech Exports (2010-2019)

According to the World Bank, High-tech exports are R&D-intensive products, such as computers, pharmaceuticals, scientific instruments, and electrical machinery. South Africa is not a high-tech export-oriented nation as illustrated by the graph below. High-tech exports only accounted for less than 5% of manufactured goods exports in 2019.

ICT Service Exports

This measures the value of Information, Communication and Technology services that are exported by a nation. It includes services related to telecommunications, courier, and news-related services.

Human Capital

The capabilities of a nation’s labour force play a significant role in determining its innovation vitality. Nations with a relatively high proportion of researchers, firms that invest in R&D, and people in R&D tend to be more innovative as they spend more time creating new solutions to problems.

South Africa is plagued with extremely high unemployment (33.5%) and low tertiary enrolment rates (24%). However, a respectable proportion (17.41%) of university graduates come from Science, Technology and Mathematics fields.

Patent & Trademark Applications

This is the dimension of innovation vitality that South Africa has experienced commendable growth in recently. Prior to 2021, the average number of total patent applications was 6389 between 2018-2020. In 2021, the number of patent applications increased by nearly 39%. To put things into perspective, SA's patent applications accounted for 52.4% of Africa's total patent applications in 2021. Trademark applications have also grown, albeit more steadily, in recent years.

Commercialization of Intellectual Property

South Africa has been doing a commendable job of commercializing its Intellectual Property: between 2010 to 2020, IP receipts only dropped below USD 100 Million once [during the pandemic]. Nonetheless, as illustrated by the graph, IP receipts were slightly cyclical during that period; decreasing between 2011-2015, increasing between 2016 to 2018, and finally decreasing yet again until 2020.