South African universities hope to benefit from the Government's decision to offer the private sector a 150 per cent tax break on money invested in research and development as part of its drive to boost national spending on science and technology to 1 per cent of gross domestic product.
At the moment, private-sector spending on research amounts to 0.45 per cent of GDP. Thus the incentive represents a windfall of more than R1 billion (Pounds 93 million), according to the Department of Science and Technology.
The DST has also embarked on a project to improve the nation's weakened research infrastructure, which became dilapidated during a slump in research spending in the 1990s.
It has committed R50 million this year and R100 million next year for new equipment for universities and research councils. However, this is just a drop in the ocean, given that a study by the National Research Foundation three years ago estimated that R4 billion would be needed.
South Africa's total research spending - including that at universities and science councils - amounted to 0.81 per cent of GDP in the 2005-06 financial year, or R10.1 billion. This is still lower than the 1.1 per cent of GDP spent under apartheid, but it is nevertheless an improvement on the low point of 0.64 per cent.
State research funding declined alarmingly in the 1990s as South Africa's democratic Government cut back on defence research, shifted priorities to the urgent needs of the poor and practised fiscal discipline.
Over the past five years, the Government's focus has shifted back to research, and expenditure has climbed steadily. The budget for research and development has risen by R1.2 billion compared with last year. "We hope to get close to 1 per cent this year," said Nhlanhla Nyide, DST communications manager.
A new tax-credit system has been developed jointly by the DST and the Treasury as part of the Government's economic programme of action, and has been warmly welcomed by the private sector.
The aim of the tax credits is to boost South Africa's 6 per cent economic growth rate by stimulating private-sector research and development.
South Africa's corporate tax rate is 36 per cent. But the Government will forgo 18 cents of tax revenue for every rand spent on research and development - through this it is in effect paying companies to conduct research to support their business objectives.
In adopting this scheme, South Africa is following the successful examples set in countries such as Canada, Australia and Singapore.
Announcing the tax-credit system, Mosibudi Mangena, the Science and Technology Minister, noted that tax incentives had previously focused on large state-driven programmes such as biotechnology and university research chairs.
He said: "The new incentive is an efficient way of lending balance to our portfolio," he said.
The scheme is designed to encourage small and medium businesses especially to conduct more research, he added.
Guidelines for the system's operation are expected in the coming months.