Beginning in the early 1800s, incomes across the globe began to increase and in a relatively short period of time, humanity made a dramatic leap in living standards with billions of people having risen out of poverty. According to economic history professor Deidre McCloskey, for most of human history, the average person in the world lived in dire poverty – the equivalent of approximately $3 a day (roughly R30 a day), adjusted for inflation.
Prof McCloskey ascribed the dramatic improvement in living standards to innovation. Indeed, innovation is an essential ingredient to improved health outcomes, better agricultural technologies and more efficient use of energy.
The BIO International Convention, held in San Diego from 23 to 26 June, is arguably the world’s biggest convention supporting innovative companies from around the world. It attracts over 15,000 individuals and showcases the latest developments in biotechnology from genomics to wireless healthcare to agriculture that make it possible for people worldwide to live longer, healthier and happier lives.
The BIO Convention also provides countries with a valuable opportunity to encourage innovative companies to invest in their local economies. A delegation, comprising government officials and private sector companies, represented the South African government at the Convention in an effort to attract some of the $100-billion available for investment in the life sciences sector. The government clearly recognises that increased investment in our economy would lead to income per capita increases, which in turn would result in greater levels of saving and investment thus completing the virtuous circle.
In January, former Minister of Science and Technology, Derek Hannekom, launched the government’s Bio-economy Strategy to send a message to foreign investors that South Africa is “open for business”. The Bio-economy Strategy shifts the focus from developing the biotechnology sector in South Africato creating a bio-economy, thus changing South Africa from a resource-based into a knowledge-based economy.
Individuals andbusinesses, both local and international,rely on government to create an enablingenvironment.Certainty that their ideas and products will be protected through institutions such as private property rights, impartial courts, predictable lawsand regulations gives them an incentive to innovate and invest in South Africa. Without these institutions, people would not be able to bring their products to market. Patent protectionand laws that protect property rightsare thus critical to safeguarding the value of innovation investment.
The Scientific American Worldview Scorecard rates countries’ innovation potential through a collection of averages and totals within seven categories: Productivity; Intellectual Property Protection; Enterprise Support; Intensity; Education/Workforce; Foundations; and Policy and Stability. According to the final results, South Africa has plummeted down the rankings from 30th out of 54 countries to 36th within one year, and is thus one of the biggest losers on the score card.
South Africa ranks particularly poorly in the areas of Education of Workforce (50th out of 54) and Policy and Stability (41st out of 54). Although each metric receives an equal weighting, these two areas, in particular, are critical for attracting investment. Another area of especial concern is that of Intellectual Property Protection. Currently South Africa has a relatively high ranking (23rd out of 54), but with the release of the Department of Trade and Industry’s Draft Policy on Intellectual Property which threatens to weaken our intellectual property laws, potential investors have become nervous about future investment.
If intellectual property rights protection in South Africa is lessened, South Africa will inevitably slip further down the rankings on the Scorecard and the result will be entirely predictable – less investment and innovation will occur in the country and all South Africans will experience a material decline in their overall wealth and wellbeing.
Government needs to make a concerted effort to improve South Africa’s position by protecting and strengthening property rights and creating a stable policy environment. This country’seconomy and more importantly, the lives of all South Africans can improve only if predictable laws and regulations encourage ideas and innovation and reward creativity.
If government wants to see the South African economy grow and its people prosper it must adopt policies that will encourage innovation and entrepreneurship. It must protect and uphold fundamental institutions such as private property rights and the rule of law, which are cornerstones of any innovative society. History has shown that these institutions are crucial to investment, innovation and humanity’s continued progress.
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