90. Private Sector Agricultural Research
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Assessing Private Sector Agriculture Research and Innovation in South Africa By Kirsten, Johann; Haankuku, Choolwe; and Stander, Ruan Contributed Paper presented at the Joint 3 rd African Association of Agricultural Economists (AAAE) and 48 th Agricultural Economists Association of South Africa (AEASA) Conference, Cape Town, South Africa, September 19-23, 2010. Assessing Private Sector Agriculture Research and Innovation in South Africa By: Johann Kirsten, Choolwe Haankuku 1 and Ruan Stander Department of Agricultural Economics, Extension and Rural Development University of Pretoria, Pretoria 0002, South Africa Office: Room 2.22, Agricultural Annex Phone : (+27-12) 420 3251 Fax : (+27-12) 420 3247 E-Mail : [email protected] May 2010 1 Corresponding author: email: [email protected] Abstract Reliable data on private sector agricultural research and development is globally scarce, particularly in developing countries. In South Africa, it has been observed that research performance by the public sector via the Agricultural Research Council has declined in recent years and consequently, the private sector has embarked on a much larger role in South Africa’s agriculture research than before. However, the extent of this engagement remains unknown as data quantifying private sector agricultural R&D is limited. This study identified 51 private firms that perform agriculture related research activities and attempts to gather primary data to determine the nature and extent of private R&D in South Africa. However due to the large number of non-responses, the study covers only 19% of these firms. Nevertheless, the study found that the participation of the private sector in agriculture research in the past decade has increased; in terms of research expenditure by more than 100% and number of research personnel by more than 50%. It emerged that the nature of research done by the private sector locally is mainly adaptive research - focused on testing imported technology to ensure registration and certification for use on the local market as opposed to developing ‘own’ innovations. The most influencing government policy initiatives in the participation of the private sector in South Africa’s agriculture R&D have been deregulation of agriculture markets and liberalization of agricultural trade, which have increased the spill-in of agriculture technologies to South Africa. The study recommends that, in order to ensure sustainability and efficiency of private sector research, collaboration between the public sector and private sector as well as international organisations will be crucial. Key Words: Private sector agriculture R&D, innovations i 1. Introduction Globally there seems to be a scarcity of reliable data on private sector agricultural research and development, particularly in developing countries. As a result economists, policymakers and donors do not have the information they need to develop effective government strategies or policies for increasing agricultural productivity and reducing hunger, poverty, and resource degradation in developing nations. Studies of the impact of private sector research and innovation on farmer and consumer income and the environment are also limited (Pray, 2009). This is the context in which this study investigated the extent and nature of private sector agricultural research and development in South Africa. The results reported here are incorporated in a global project with similar investigations in the United States, Canada, Europe, and developing countries that will collect and analyze data on private sector agricultural R&D and innovation. The team also examined the policies that influence private investment in the research, development, and deployment of new technologies in South Asia and sub-Saharan Africa. The ultimate objective is to improve decision-making on policies and investments that promote private investment in poverty reducing and productivity enhancing agricultural research, development, and innovation. The paper first reviews the global trends regarding private sector engagements in the provision and funding of agricultural research and development. It then specifically considers the nature and extent of the private sector’s engagement in agricultural R&D in South Africa. South Africa has the largest research network in Africa but its once prestigious public research systems has come under extreme pressure as a result of funding shortages and poor management and loss of research expertise. Consequently funding of research and in some cases provisions of research has shifted more and more to the private sector – largely because the public system could not deliver on the demands of primary and secondary agriculture. 1 2. Private agricultural research and development Global agriculture R&D has seen an ever increasing engagement of the private sector in funding and performing agriculture research. While this trend is relatively new in Sub- Saharan Africa (SSA), it has been ongoing in developed countries such as the United States, United Kingdom and Japan whose annual growth rate of private sector expenditure in agriculture R&D was well above 4.5% in the early 1990s (Kremer & Zwane, 2005:88). For a long time, private research has been concentrated in rich countries; in 2000, the total amount spent on agricultural R&D globally by the private sector was estimated to be US$12 577 million in rich countries and only US$869 million in developing countries (Naseem et al ., 2006:7). The low level of investment in developing countries has been a result of significant failures in R&D markets and institutional inefficiencies, in particular, the difficulty of preventing the resale of seed and the ability for innovators to capture their returns on R&D investments (Kremer & Zwane, 2005:90). Inevitably, private R&D investment trends in developing countries is now changing; as most of these countries are restructuring their economies and have introduced policies (liberalization, foreign direct investments and commercialization of agriculture) that favour private sector participation in agriculture R&D. Also, due to recent innovations and developments in plant sciences and biotechnology, it has increasingly become plausible for private sector companies to invest in agriculture R&D with opportunities to capture private rents through patents (Naseem et al ., 2006:10). Many developing countries such as Brazil, India, Columbia and Mexico have experienced growth in private sector research engagement. Private sector research expenditure in India is reported to have grown rapidly (doubled) between 1985 and 1995 (Pray, 1998:35). The total expenditure by the private sector in agriculture research was higher in these developing countries compared to countries in SSA. In India, the private sector spent about US$ 56 million, accounting for 16% of the total funding of Indian research in 1998. In Columbia, it was estimated that the private sector spent approximately US$32.3 million in 1991 and in Brazil, the amount spent was about 2 US$24 million in 1996 (Naseem et al ., 2006:9). In Africa, where private sector research has been most limited, it was estimated that only US$4.2 million and US$0.5 million was spent in 2000 by private sector in South Africa and in Kenya respectively (Naseem et al ., 2006:9). Private firms in Brazil, India, Columbia and Mexico have been involved in a wide range of research activities including plant breeding, plant protection chemicals, fertilizers, food processing, agriculture equipment and livestock research. In India, food processing followed by the seed industry was the fastest growing sub-sector in private sector research (Pray, 1998). As stated above, the break-through in biotechnology sciences enhanced private sector research investments in developing countries. Pray, Oehmke, and Naseem (2005) pointed out that most of the biotechnology research was carried out by firms in developed countries; and through acquisitions and merging and the establishment of multinationals, private agriculture firms in developing countries tend to be conduits for transferring and adapting these technologies to local conditions. Similarly, these global trends of increased participation by the private sector in agriculture research have also been observed in South Africa. The private sector plays a vital role in South Africa’s agriculture not only in terms of production, processing and marketing but also, in performing agriculture research. Previous studies estimating Agriculture Science and Technology Indicators (ASTI) for 2000 showed that the private sector contributed only 3% (approximately US$ 4.2 million) of the country’s research and development (R&D) spending. However, on account of the large number of non responses, the figures in these surveys indicating the private sector’s contribution to agricultural R&D spending in South Africa is to a large extent an undercount (Liebenberg et al ., 2004:8). It is well-known that private firms have taken on a much larger stake of agricultural research in South Africa, but the extent of this engagement remains unknown as data quantifying private sector agricultural R&D is limited and often not shared due to its confidentiality . This study therefore endeavors to gather primary data to address three fundamental questions and these are: what is the nature of agriculture research by the private sector? What is the source of innovations? And what is the extent (funds and research personnel) of agricultural research involvement by the private sector? By