SA pays a third more in technology royalties for the use of international products under licence than it is getting in for its own patents, which bring a relatively marginal amount of capital into the country.
This is according to the World Bank's development indicators in the science and technology sector. As per the global financial institution's gauge, as at 2010 (the latest available year) SA's balance of payments (BOP) to international companies for technology royalties was $1.9 billion (about R14.7 billion), R12.8 billion more than SA's BOP 10 years prior, in 2000.
On the other end of the scale, SA's royalty and licence fee receipts pale in comparison, as the indicators show that SA's BOP, as at 2010, was just $59 million (about R447 million). This figure has grown a relatively marginal R77 million over the past decade, with SA's receipts in 2000 totalling R370 million.
SA 'just a consumer'
Mervin Miemoukanda, ICT research analyst at Frost & Sullivan, says the lingering discrepancy in royalty payments and receipts in SA has its basis in several factors relating to SA's stake in the global technology sector.
Firstly, he says, many international companies have been expanding into SA over the past decade. “These companies are early technology adopters, so their South African affiliates follow suit.”
Secondly, Miemoukanda says SA is not among the leading countries in the global innovation, research and development space. “Most of the technologies used in the world come from Europe, China and the US. Therefore, SA is just a consumer for technologies and other related products.”
Economic implications
Miemoukanda says, economically, this could have a detrimental effect on the exchange rates of the rand against the US dollar, as technology royalties are paid in dollars. However, he says, this expenditure could boost the country's domestic economy if South African IT research and development (R&D) entities offered similar products to South African-based companies. “This also implies that many jobs will be created in the innovation (R&D) sector in SA.”
That being said, Meimoukanda notes the lack of skilled IT human resources in SA could be a hindrance. According to the World Bank's report: “Closing the Skills and Technology Gap in SA”, the investment in R&D in SA has not yet generated any significant performance progress.
Miemoukanda says South African IT companies need to invest in R&D to compete with leading companies such as Microsoft and IBM. “In addition, this sector could be a big revenue contributor to the government as it is in countries like South Korea and Taiwan.”
Ultimately, concludes Miemoukanda, SA will remain heavily dependent on foreign technology and other related products under the current circumstances. He suggests the R&D sector needs to be boosted through the training of skilled IT human resources and innovation. “The South African government should come on board as well, through incentives such as tax breaks and special bursaries for IT students.”
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