Africa Focus: Mozambique discovers its way to being Africa’s power house

Increased R&D spend in the ENR sector will help drive SA’s economy

The benefit of extracting value from current and future R&D spend in South Africa’s ENR sector will help drive the region’s economy.

While the world may have seen tougher economic times, it can be said that the South African economy was not previously as connected and global in impact as now. The South African economy is primarily resource-driven and there is a marked impact when the energy and natural resources (ENR) sector does not perform well.

South African business leaders need to be both vigilant and visionary, with challenges and obstacles such as:

  • Reacting to the rise and fall of global demand polarised by a dominant Chinese economy
  • Fluctuating commodity and currency prices
  • The dynamics of South African labour

Calculating a response to circumstances

While there is no ‘silver bullet’ when it comes to how best to tackle and respond in such circumstances, we believe that a renewed focus on innovation in science and technology is required. When looking at the statistics, from the Department of Science and Technology (DST), on the state of R&D investment in the country, it was noted that about 0.92 percent of the country’s GDP was spent. Of this percent, the mining sector contributed only 10 percent. We compared this with the Australian mining sector contribution of 23 percent to their 1.4 percent R&D to GDP ratio for the same time period.

As a country, South Africa has much to catch up on. Innovations in the field of mining (through investment in R&D) include remotely operated and automated mining equipment, improved communication systems to reduce exposure to dangerous mining environments and to lower energy consumption.

Driving the economy

To incentivise the increase in R&D spend, the South Africa government has implemented a ‘super’ additional 50 percent tax deduction on eligible R&D spend based on a pre-approval system. New legislation has also relaxed previous restrictions on claiming such incentives for ENR companies.

  • The benefit of extracting value from current and future R&D spend:
  • It lowers costs
  • It improves cash flow
  • It improves returns to shareholders
  • It enable South Africa to compete on a value basis in the globally-coupled economy

Investing in innovation ‒ sounds like a win-win proposition.

Read the full press release here

David Okwara

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