Presentation to Prem Presentation to Prem Conference 2006Conference 2006

SOUTH AFRICA TECHNOLOGY SOUTH AFRICA TECHNOLOGY BASED EXPORTS: AN AGGREGATE BASED EXPORTS: AN AGGREGATE

ASSESSMENT AND SOME CASE ASSESSMENT AND SOME CASE STUDIESSTUDIES

Professor David KaplanProfessor David KaplanDepartment of Economics and Department of Economics and

Graduate School of Business, University of Graduate School of Business, University of Cape TownCape Town

Global Export Shares, 1992-2002: Global Export Shares, 1992-2002:

South Africa, Australia, Brazil and Argentina (%)South Africa, Australia, Brazil and Argentina (%)

AUSTRALIA

BRAZILARGENTIN

ASOUTH AFRICA

Share Global Exports 1992 1.16 1.04 0.36 0.69

Share Global Exports 2002 1.06 1.03 0.44 0.51

Share Global High Tech. Exports1992

0.24 0.25 0.04 0.07

Share Global High Tech. Exports2002

0.34 0.49 0.05 0.06

Share of high tech. in total exports 1992

3.6 3.9 2.1 1.63

Share of high tech. in total exports 2002

7.1 10.5 2.6 2.51

South Africa Share of Global High Technology South Africa Share of Global High Technology ExportsExports

1992 – 2002 %1992 – 2002 % 1992 2002 Growth

Total HT1 0.04 0.05 1.51

716 0.08 0.11 3.17

718 0.02 0.12 19.07

751 0.04 0.06 3.32

752 0.02 0.02 -2.14

759 0.06 0.03 -4.51

761 0.01 0.03 8.64

764 0.07 0.07 0.29

771 0.07 0.11 4.92

774 0.03 0.05 5.89

776 0.00 0.03 20.16

778 0.09 0.12 2.82

South Africa Share of Global High Technology South Africa Share of Global High Technology ExportsExports

1992 – 2002 %1992 – 2002 %

1992 2002 Growth

Total HT2 0.11 0.08 -4.07

524 1.94 0.60 -11.08

541 0.08 0.06 -2.97

712 0.06 0.18 12.47

792 0.06 0.07 2.43

871 0.03 0.04 3.96

874 0.07 0.08 1.75

881 0.05 0.11 9.25

SA Share of High Tech ExportsSA Share of High Tech Exports

• SA share of global high tech exports SA share of global high tech exports very low and well below total global very low and well below total global shareshare

• SA share of global high tech exports has SA share of global high tech exports has been decliningbeen declining

• One exception – radio-active materials One exception – radio-active materials (524). RCA >1: Positive balance of (524). RCA >1: Positive balance of tradetrade

Radio Active MaterialsRadio Active Materials

• Only 4.4% of total HT exportsOnly 4.4% of total HT exports

• Very slow growing in global tradeVery slow growing in global trade

• Strong negative growth rate of SA Strong negative growth rate of SA

exportsexports

High Tech. CompetitivenessHigh Tech. Competitiveness

• Other commodity exporters are highly Other commodity exporters are highly competitive in certain globally fast growing high competitive in certain globally fast growing high tech areastech areas

• Brazil – aircraft and parts (RCA 2.42). 50% of Brazil – aircraft and parts (RCA 2.42). 50% of high tech exports high tech exports

• Australia – medicinal and pharmaceutical prods. Australia – medicinal and pharmaceutical prods. (RCA 0.6 – 1.1). 25% of high tech(RCA 0.6 – 1.1). 25% of high tech

• South Africa – only uranium ores. 4% of high South Africa – only uranium ores. 4% of high tech exports. Slow growing global exportstech exports. Slow growing global exports

Explaining this weak overall Explaining this weak overall Manufacturing Export Performance?Manufacturing Export Performance?

• Not a lack of market demand or accessNot a lack of market demand or access

• Changes in demand impact on export supply Changes in demand impact on export supply through changes in international pricesthrough changes in international prices

• Responsive to real currency depreciations Responsive to real currency depreciations (and post 2002 appreciations) but response (and post 2002 appreciations) but response tempered by volatilitytempered by volatility

• Constraints are on the supply side – Constraints are on the supply side – infrastructure and availability of skillsinfrastructure and availability of skills

Technology based Exports – Some Technology based Exports – Some suggestive Case Studiessuggestive Case Studies

• Energy / ChemicalsEnergy / Chemicals

• PharmaceuticalsPharmaceuticals

• Software – small, mediumSoftware – small, medium

• Fine WinesFine Wines

SASOLSASOL

• World technology leader in a fast growing areaWorld technology leader in a fast growing area

• 10% of business R&D in SA10% of business R&D in SA

• $100 million per annum + Large recent K $100 million per annum + Large recent K investmentsinvestments

• GrowingGrowing

• 350 FTE Researchers (100 post-doc.)350 FTE Researchers (100 post-doc.)

• Global FootprintGlobal Footprint

• Importance to the regionImportance to the region

SASOL SASOL

•Role of the stateRole of the state

•HO based technologyHO based technology

• JV internationalization JV internationalization (Chevron)(Chevron)

PEBBLE BED MODULATOR PEBBLE BED MODULATOR NUCLEAR REACTORNUCLEAR REACTOR

• Indigenous technology Indigenous technology linked to nuclear linked to nuclear programmeprogramme

•Massive state supportMassive state support

•Uncertain successUncertain success

PHARMACEUTICALPHARMACEUTICAL

• Appetite suppressantAppetite suppressant

• Estimated US market >$3 billionEstimated US market >$3 billion

• San-CSIR-Phytofarm-UnileverSan-CSIR-Phytofarm-Unilever

• San to receive 8% milestone San to receive 8% milestone payments and 8% of global salespayments and 8% of global sales

• Sui generis rightsSui generis rights

PHARMACEUTICALPHARMACEUTICAL

• Unique arrangementUnique arrangement

• Manage the process in AfricaManage the process in Africa

• In the North, market size and In the North, market size and regulation require a partnerregulation require a partner

• Significant share goes to the “North”Significant share goes to the “North”

SOFTWARE - SmallSOFTWARE - Small

• Many small companies <20 employeesMany small companies <20 employees

• Reliance on one innovative productReliance on one innovative product

• Exporting cos. Have some foreign connectionExporting cos. Have some foreign connection

• In home market, protected by product In home market, protected by product

complexitycomplexity

• In global market, require IPRIn global market, require IPR

SOFTWARE - SmallSOFTWARE - Small

• Many sell via web portalsMany sell via web portals

• Require no marketing costRequire no marketing cost

• Often export to other African countriesOften export to other African countries

• Growth constraints appear in Growth constraints appear in

marketing / supportmarketing / support

SOFTWARE - SmallSOFTWARE - Small

• Government support confined Government support confined

to skill provisionto skill provision

SOFTWARE – Medium/LargeSOFTWARE – Medium/Large

• Transaction processing systemsTransaction processing systems

• Early internationalization Early internationalization

strategystrategy

• Local developmentLocal development

• Marketing constraintsMarketing constraints

• Locate HO abroadLocate HO abroad

• No state supportNo state support

SOFTWARE – LargeSOFTWARE – Large

• Thawte – digital certificatesThawte – digital certificates

• Largely web based salesLargely web based sales

• Sale to US CompanySale to US Company

• No state supportNo state support

FINE WINESFINE WINES

• Main problem is marketsMain problem is markets

• Aligning operations to consumer needAligning operations to consumer need

• Main problem is not technologyMain problem is not technology

• State support for technologyState support for technology

• Need for collective marketingNeed for collective marketing

• Buyers are the main drivers of technological Buyers are the main drivers of technological

changechange

POLICY PRIORITIES FOR AFRICAPOLICY PRIORITIES FOR AFRICA

1.1. Develop modern engineering faculties that Develop modern engineering faculties that articulate with infrastructure provision (ICT, articulate with infrastructure provision (ICT, power, transport and logistics)power, transport and logistics)

2.2. Grow specialized technical and engineering Grow specialized technical and engineering services related to main raw material outputsservices related to main raw material outputs

3.3. Public R&D – build institutions and practices Public R&D – build institutions and practices incl., competition in the system; fiscal certainty; incl., competition in the system; fiscal certainty; long-term planning; budgeting linked to goalslong-term planning; budgeting linked to goals

4.4. Dedicated ministry/agency with oversight and Dedicated ministry/agency with oversight and

responsibility for the systemresponsibility for the system

POLICY PRIORITIES FOR SOUTH POLICY PRIORITIES FOR SOUTH AFRICAAFRICA

1.1. Expand engineering and technical skills Expand engineering and technical skills significantlysignificantly

2.2. Do more to promote Higher Education – Do more to promote Higher Education – Business linkages especially for SMMEsBusiness linkages especially for SMMEs

3.3. Explicit policies to attract knowledge Explicit policies to attract knowledge intensive FDI – especially to serve the intensive FDI – especially to serve the continentcontinent

4.4. Coordinate industrial and technology Coordinate industrial and technology policiespolicies

THANKSTHANKS• Mike Kahn – Mike Kahn – Human Sciences Research CouncilHuman Sciences Research Council

• Erika Kraemermbula – Erika Kraemermbula – University of OxfordUniversity of Oxford

• Gatsha Mazithulela – Gatsha Mazithulela – CSIRCSIR

• Adi PattersonAdi Patterson – DDG Department of Science and – DDG Department of Science and

TechnologyTechnology