Creating a knowledge-based economy

At a conference on intellectual property in Durban last week, Minister of Science and Technology Derek Hanekom noted in his keynote address that, “Intellectual property can be an effective lever for development, particularly for a country like ours, with the commitment we have made to migrate from a resource-based economy to a knowledge-based one”.

There can be no doubt that South Africa’s strong intellectual property stance has fostered local innovation, attracted foreign investment to our shores, and helped our country develop the most advanced economy in sub-Saharan Africa. But South Africa’s government is far from aligned on the value of strong intellectual property protections.

While the Department of Science and Technology was hosting a conference entitled “Creating and Leveraging Intellectual Property in Developing Countries: A Power Tool for Social and Economic Growth” in Durban last week, the Department of Trade and Industry (DTI) continues to push national policy reforms that undermine established intellectual property protections – creating uncertainty for South Africa’s aspiring high-tech sectors and investors.

In September, the Department of Trade and Industry released a Draft National Policy on Intellectual Property, a confusing hodgepodge of proposals that would expand the government’s power to arbitrarily break patents and ignore other forms of intellectual property protections.

More specifically, the Draft Policy gives government the power to issue “compulsory licences” for pharmaceuticals, a practice that allows competitors to produce patented medicines at a fraction of the cost. This provision is already covered in the Medicines and Related Substances Control Amendment Act. Government has yet to exercise this authority – not because the process is too complicated, as the DTIs Draft Policy implies, but because the decision would put investments at risk and should not be taken lightly.

Minister Hanekom’s message is very simple. Any industry that derives value from ideas must make substantial and sustained investments to produce a marketable product, and that product must be protected by robust intellectual property laws to recoup the cost of those investments. Without these protections, the threat that such ideas can be taken and reproduced by almost anyone, keeps any significant investments from being made.

This was the logic behind the creation of the Intellectual Property Rights from Publicly Funded Research and Development Act in 2010 – the South African government’s law to protect taxpayers’ investments in government institutions, and to which the new Draft Policy on Intellectual Property makes no reference whatsoever.

Referring to this Act at the conference, Minister Hanekom said, “The introduction of this legislation was brought about by the realisation that South African publicly funded research institutions collaborate on a global scale with countries that have strong intellectual property regimes. In cases where our intellectual property regimen shows signs of not being watertight, intellectual property may be lost through collaboration agreements”.

He referred to the case of the dolos that was invented by a South African to dissipate the force of waves and thereby protect harbours, but was never patented. Hanekom noted, “[The dolos] was never protected and it is found all over the world today and is worth billions...our efforts to create a strong intellectual property regime are geared towards ensuring that such avoidable losses never again occur”.

All countries, companies, and individuals require strong intellectual property protections for their inventions to recoup the enormous costs of investment.Last year, South African researchers at the University of Cape Town, in collaboration with Medicines for Malaria Venture, achieved a major breakthrough when they identified a new malaria drug candidate. The researchers were quick to patent the candidate compound because, no doubt, they are acutely aware of the fact that it costs billions of rand – between R4.2 billion and R16.7 billion – and could take several years to develop the potential compound through clinical trials to final approval.

The DTIs Draft Policy on Intellectual Property takes us in the wrong direction. As South Africa continues to grow its leadership role in Africa and on the world’s stage, we cannot expect our trading partners around the world to respect the intellectual property that we create if we do not respect theirs. Strong intellectual property protections will attract committed investors and dynamic innovators who can drive South Africa’s economic growth and human development long into the future. Without them, we will never transition from a resource-based economy to one based on knowledge and ideas.

(A version of this article was published in Business Report on Tuesday, 3 December 2013)

Author:  Jasson Urbach is a director of the Free Market Foundation.

Source: This policy bulletin may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.