South Africa is an innovation underachiever

Farewell to exceptionalism

Part 1: From exceptional to mediocre 

We once had a profound belief in our exceptionalism.  During the five years after South Africa’s peaceful transition to democracy people believed “Mandela will provide” – houses, jobs, investment and prosperity.  As the world welcomed the country into its embrace, possibilities seemed endless.

Thabo Mbeki’s philosopher-king reign gave us the arms deal and the hint of authoritarianism that contributed to his downfall.  The belief South Africa was destined for exceptional things lost some of its shine, but we still had his “I am an African” idealism to hold onto.

Jacob Zuma finally disabused us of our exceptionalism.  Now South Africa is no different from any other grubby, contentious African country where nefarious politicians and their cronies squabble over the spoils.  Democracy is in mortal danger and it’s now just for show.  Richard Poplak called it “fake democracies” – “ending with a flash bang, not a whimper”. 

But only the ANC, like congregants of a speaking-in-tongues TV pastor, believe the “ANC will rule until Jesus comes”.  Even after yet another chaotic State of the Nation, Zuma told a New Age Breakfast the “EFF’s perceptions of him were not a true reflection of how South Africans saw him”. 

Despite alarming cries from media analysts SA is in the “throes of a constitutional crisis of the worst kind” and in the “tenth circle of hell”, and the militarisation of Parliament, for others life goes on – it was just another ordinary Thursday. 

The day after SONA, the Cape Times and Cape Argus each devoted only a small, below-the-fold picture and some text to the scuffle in the National Assembly between EFF members and white-shirted security officers.  Their headlines focused on Zuma’s address about “growth strategy” and “radical economic change”, and pictures showed smiling parliamentarians and him standing at attention.

The radical economic transformation strategy is unexceptional, though, because we’ve been hearing this, in one form or another, for over 20 years.  Since 1994 SA has had about ten socio-economic development strategies including RDP, GEAR, CRDP, ISRDS, URP, ASGISA, NDP, New Growth Plan and Operation Phakisa (I’ve used the acronyms because most people recognise them as such). 

With the possible exception of GEAR, which conflicted with the objectives of the RDP, what’s exceptional about them, and possibly a world first, is most never met their objectives, and some were not implemented like the vaunted NDP that’s gathering dust.  They’re more rallying cries than implementable strategies, symbolising the ANC’s idea of politics. 

I’ve said before the ANC doesn’t understand economics, and listed their numerous policy blunders and ideological dead-ends since 1994.  In fact, in a way confirming what I said, last year the director-general of the Department of Trade and Industry Lionel October admitted they were “naive” about the steel industry.   This naivety, and worse, is not surprising when one considers the ANC’s and country’s leader can’t count – a prerequisite for practicing economics.

South African exceptionalism also states, as we are frequently told, our companies and institutions – financial institutions, large corporations, a few universities (I’m not sure if being ranked about 200 and worse is world-class, but anyway), etc – are “world-class”.  It’s an article of faith, really. 

But they’re really conflating world-class – among the best in the world – with another factor: very large in size (assets, market share, revenue or similar measures).  Unlike natural selection in a competitive market, in SA it’s easy to grow very large – “world-class” – like banks, supermarket chains, cell networks, etc when, for a long time, you are the only show in town (monopoly, duopoly, oligarchy) and the economic environment (inherent structure, policy and regulation) discourages new entrants and competition. 

This happened particularly after 1994, which the ANC permitted and actively pursued (limited competition, over-regulation, market and labour inefficiencies, BEE, etc).  So Zuma’s and the ANC’s complaint now (why now, though?) and proposed implementation of “radical” economic transformation purportedly to open the economy and encourage growth is not only dishonest, but against their own deliberate or negligent, or both, policy drift over the past 20 years into economic no man’s land. 

No, one word that describes and encompasses world-class, including but not limited to the economy and industry, is “innovation”.  But SA companies are innovative, some may argue. 

While working at Vodacom Nkosana Makate invented the Please Call Me service.  But Vodacom screwed him twice by falsely claiming the idea was theirs and not paying him a cent. 

If I plagiarised another writer’s work, my reputation would be destroyed.  Not so Vodacom.  In effect this is what they, with deliberate forethought, did.  And despite the Constitutional Court ruling, they refuse to pay claiming they cannot determine revenue derived from the service and, therefore, Makate’s reasonable portion. 

While Vodacom’s unscrupulous conduct might be common around the world, for me it’s a case study of how SA corporations operate: their relative success and alleged world-class status is based on a captive market, exploitation of employees and particularly consumers, high prices and excessive profits, anti-competitive behaviour and exploitation of a rigid and inefficient economy where small, new entrants, which traditionally are the job creators and true innovators, struggle to enter and compete.

At the firm of consulting engineers I once worked for a bright young engineer created time and technical savings/efficiencies by recoding commercial engineering software programs for easier application.  His innovation was remarkable because he was out of university (Stellenbosch – he had started the project in his final year) less than a year.

About a year later he resigned out of frustration because he wanted to read a master’s degree and the firm refused, saying he’d lose his job if he did.  They lost him anyway.  Previously, another engineer was fired for being “overqualified” after he obtained a master’s degree.

This is not unusual even today.  In 2015 the University of Pretoria’s Amaleya Goneos-Malka found PhDs account for only 0.07% of 1.4 million employees at South Africa’s top 350 companies, far below the global average.  They can’t find work because employers consider them “overqualified and overpaid”.  This is not unusual for master’s graduates too.  I previously wrote:

“PhDs produce rigorous original research, and are specialist in their fields.  They are the basis of university departments, research laboratories and the technological advances we take for granted.  But in SA they are deemed surplus to requirements, which may partially account for the country’s lack of innovation and growth.”

In SA, why is innovation and enquiry by bright and eager minds encouraged, or frowned?  Why have Elon Musk and Mark Shuttleworth and many unknown others including artists left and taken their skills and talents with them?  Are there many more such diamonds in the rough, or are they only a disgruntled few? 

Whatever the case, it’s a fact that since 1994 many skilled South Africans have emigrated.  An emigration expert interviewed in the BusinessTech article “Why more South Africans are leaving the country” saw a seven-fold increase in the number of South Africans leaving for Australia.  The three main reasons are crime, corruption and a “better future for my children”.  

A combination of factors – an increasingly flawed democracy, a moribund economy, mediocre education system, troubled universities, corruption, etc – is affecting the country’s abilities to innovate and grow.  

Part 2: Global Innovation: SA is an underachiever 

SA scores poorly in many indices – unemployment, inequality, maths and science education (138 out of 140 countries, which government said is an “improvement”), economic freedom (105 out of 159, and 13^th in Africa despite being the most industrialised economy), etc.  

Bloomberg’s Innovation Index for 2015 ranks SA 49 out of 50 countries, just ahead of Morocco.  The criteria they measure are research and development (R & D), manufacturing, hi-tech companies, postsecondary education (especially in science and engineering), research personnel and patents filed.

Bloomberg states for R & D “South Korea, number 1 in this category, is proof countries can lift themselves up by their bootstraps”, and for manufacturing, “It takes a lot of know-how to stay at the leading edge of making things”.  SA is weak in these areas (among others), with manufacturing as a percentage of GDP dropping from over 20% in 1994 to about 13% in 2015.  (Without googling, can you name recent South African products or services that took the world by storm?  We have become an importer of consumer goods and manufacturing technology.)

The “missing measurement”, which is not used to determine rankings, is described thus: “This attempt to measure innovation leaves out one important but hard-to-quantify influence: government regulation, which can either accelerate or impede the adoption of new ideas.”

The more authoritative index is the Global Innovation Index (GII) published by Cornell University, INSEAD, a business school, and the World Intellectual Property Organisation.  For 2016 it ranks 128 countries using seven main categories (see table below) 110 indicators.  (In 2015 there were 140 countries using 79 indicators.)

Global Innovation Index 2016: South Africa

Rank	Economy	Score/100	GDP (billions $)*	GDP per capita (nominal $)*	GDP per capita (PPP $)*
1	Switzerland	66.3	671	80,945	62,557
2	Sweden	63.6	496	50,580	47,855
3	United Kingdom	61.9	2,858	43,876	41,756
4	United States	61.4	18,037	56,116	56,116
5	Finland	59.9	232	42,311	42,236
-	-	-	-	-	-
50	Qatar	37.5	165	73,653	141,543
51	Montenegro	37.4	4	6,406	16,050
52	Thailand	36.5	395	5,815	16,340
53	Mauritius	35.9	12	9,252	20,085
54	South Africa	35.8	315	5,724	13,195
55	Mongolia	35.7	12	3,968	12,221
56	Ukraine	35.7	93	2,115	7,940
57	Bahrain	35.5	31	22,600	46,586
58	Macedonia, FYR	35.4	10	4,853	14,076
59	Vietnam	35.4	194	2,111	6,034

(*World Bank, 2015. PPP – purchasing power parity)

South Africa (ZA) is an inefficient innovator, being surpassed by countries with similar or lower GDPs and relatively fewer resources.  It’s not classed among the achievers (confirmed by cross-comparisons with other global indices).

GII scores and GDP per capita in PPP $ (Global Innovation Index, 2016)

South Africa: Pillars score (Global Innovation Index, 2016)

	Indicator	Ranking	Score
	Global Innovation Index	54	35.8
	Innovation Efficiency Ratio	99	0.6
	Pillar
1	Institutions	46	69.1
2	Human research & capital	55	33.1
3	Infrastructure	85	37.4
4	Market sophistication	17	58.7
5	Business sophistication	56	32.2
6	Knowledge & technology outputs	63	24.7
7	Creative outputs	77	26.5

The scores (averaged) for the seven pillars show except for institutions (political, regulatory and business environment) and market sophistication, the country performs poorly – 37 and under – in five pillars.  Under human research and capital, although education expenditure (score 58.1) is a “strength”, tertiary education and enrolment (27.4 and 17.2) and gross expenditure on research & development (16.2) are weaknesses, among others.  The QS university ranking average score of the top 3 universities is 46.6.

The innovation efficiency ratio of 0.6 shows how much innovation output SA is getting for its inputs. 

SA’s overall innovation quality (sum of scores of QS university ranking average score of the top three universities, patents filed and citable documents H index) is 80 (maximum 300). 

For the region, GII notes since 2012 Sub-Saharan countries have had “more countries among the innovation achievers than any other region”.  Mauritius, South Africa, Rwanda and Botswana helped it achieve its highest scores in institutions and market sophistication, on par or above South East Asia, East Asia, Oceania and Europe in some pillars. 

However, among the 25 Sub-Saharan countries measured, SA is “performing at level of development” only.  Mozambique, Malawi, Rwanda, Uganda, Kenya and Madagascar are the innovation achievers for 2016. 

Given SA’s resources – human capital, infrastructure, etc – size of GDP and market, total education spending (2016: R22.9 billion, or 12% GDP, with mediocre results) and being the most industrialised economy in Africa, the country ought to be performing much better than it has, certainly at the top of African achievers and among global innovators and not marking time, neither here nor there.  This result recalls my comment above of the “ANC’s policy drift over the past 20 years into economic no man’s land”. 

These results and similar are well-known – economists, ratings agencies, IMF, etc have been saying so for years.  During an address titled “Bridging South Africa’s Economic Divide” at the University of Witwatersrand July 2016, the IMF’s David Lipton gave the audience of business leaders and opinion makers a “blunt message: there is something else going on that has developed with the evolution of the [SA] economy that I know are very familiar to you”.

He spoke of the familiar economic problems and urgent need for restructuring.  Unfortunately, I doubt government and business and labour (and others) were ever listening. 

Zuma’s/ANC’s “radical” plan to transform the economy as delivered at SONA was dismissed as lacking substance and demagogic.  The “fundamental change in the structure‚ systems‚ institutions and patterns of ownership‚ management and control of the economy in favour of all South Africans‚ especially the poor‚ the majority of whom are African and female‚ as defined by the governing party [emphasis added], which makes policy for the democratic government” refers exclusively to the transfer of ownership from white to black, however this is supposed to happen.

Without a sustained and significant increase in household income for the poor (mainly blacks), which can only come about through decent education, economic growth and jobs, which in turn will only happen after genuine economic restructuring, there’s no way this transfer of wealth and ownership shall occur.  In short, it appears to be another attempt, but on a larger scale, of the rapacious, one-sided black economic empowerment model we’ve had to date where only the connected elite benefit while the rest fight for scraps.

Except for institutions, the country has relatively few world-class socio-economic indicators to be proud of.  Whatever innovative qualities it has, or had, are being neglected and squandered.  But while its institutions (and remaining top universities) are still good, they are under attack by a corrupt president, governing party and their ideological bedfellows and crony friends who feel no ethical and moral obligation to the constitution and fellow South Africans. 

With the current stasis in the politico-economy, which may be exacerbated by possible ratings downgrades, the prognosis is not good.  But it might improve after Zuma and his hand-picked cohort, and beyond that, the ANC’s dead hand on economic policy, goes.  With that the country can begin the long, difficult work of deliverance. 

Previously published on Politicsweb.