Government R&D Impact on the South African Macroeconomy

This article analyses the impact of government R&D on the macro-economy of South Africa. Most literature on the impact of R&D on the economy has been on advanced countries, where R&D expenditure as per cent of the GDP has been relatively high and stable for many years. The empirical estimates of the impact of R&D is based on the backward and forward linkages of a macro-economy using an Input–Output (IO) model, and explained within a national innovation system (NIS) perspective. Inputs include factors such as investment in human capital (education) and capacity building and emphasis on knowledge and technology acquisition, and the impact on the different sectors of the economy. Further, there are structural implications of the study, namely how R&D investments can result in the creation of new industries, job creation and improved national productivity. The largest indirect impact of R&D expenditure by public institutions and agencies is on community services, financial and businesses and manufacturing, in terms of employment and contribution to the country's GDP. Community services are impacted through the backward linkages derived from the expenditure by various research institutions on intermediate inputs such as water, electricity and health. Describing and quantifying the linkages between research, development and innovation and economic impacts provides a basis for a greater understanding of the value the economy and its sectors derive from R&D. The results of the analysis indicates that the real economic significance of R&D lies not in spending, but in the results achieved and is measured in terms of contribution to innovation as a key determinant of economic and social well-being, productivity, and growth and development.