R&D Investment Escalation — Reaching 1.5% of GDP

Theme: Science, technology and innovation

Description

South Africa's gross expenditure on research and development (GERD) stands at approximately 0.6% of GDP (2023/24)—well below the National Development Plan's 1.5% target and the OECD average of 2.7%. Business expenditure on R&D (BERD) is particularly low at 0.3% of GDP, compared to 2.0% in South Korea and 1.2% in Brazil, reflecting limited domestic innovation investment by the private sector and structural dependence on technology licensing from multinationals. The R&D Tax Incentive (Section 11D of the Income Tax Act), which provides a 150% deduction for qualifying R&D expenditure, has not achieved the uplift anticipated at its 2012 introduction: fewer than 200 companies claim the incentive annually, constrained by the narrow definition of qualifying R&D and the complex approval process administered by DSIT. The STI Decadal Plan (id=69) sets a credible path to 1% of GDP by 2027 and 1.5% by 2032. Reforms proposed: broadening the Section 11D definition to include market validation and design activities, creating an R&D voucher scheme for SMMEs (complementing the Innovation Fund, id=68), and establishing a government R&D procurement programme that counts as public GERD. The PC on Science BRRRs note DSIT's own budget declining in real terms, the opposite of what the Decadal Plan requires.

Related Reforms in Package