TECHNICAL CHANGE DOES not come by itself. It has to be sweated. Through many small steps, a hunch can turn into an idea, which can be fleshed out into a concept, which can be given body and then launched into the marketplace by injecting capital. By initially earning monopoly profits, before the early imitators start eroding the innovator's reward (the problem every worm faces at daybreak), a strong enough cash flow can be created.
This may allow new hunches, ideas, concepts and products to be dreamt up and launched, creating a virtuous cycle of investment, hiring and expansion, feeding a country's development.
A vigorously developing society has a crop of eager, dynamic innovators, beavering away at what they do best - dreaming dreams and turning them into useful products. And being rewarded appropriately.
The trick is to give innovators enough room to breathe and to recompense them through the marketplace adequately, so that they keep sharing their scarce talent with society.
Beyond this initial cycle, however, it makes sense for society to do an about-face.
After a fixed period of protection in which the originator of an idea has had adequate opportunity to exploit his or her unique insight, it makes sense for society to unleash the competitive spirit. It is then that one rips away the innovator's initial protection and allows competition to imitate the idea.
Eventually society will fully unlock the value tied up in this original idea for its own greater benefit, far beyond the attempt of the original innovator.
Every society throws up its own crop of innovators, who know how to grow baby acorns into soaring oaks. SA, too, has its legion of such people. Many work in established businesses, feeding the expansion and survival drives seen daily in the marketplace. But, as older companies come to the end of their evolutionary road, new ones need to be born to take their place.
SA has been a developing industrial economy for 150 years and is now acquiring a postindustrial complexion. It is also a fundamental reform story, undoing mistakes from the past while (hopefully) not committing too many new ones.
But, instead of encouraging talented innovators as much as possible, we have of late thrown up more and more hurdles for such promising people. In the process we undermine our development effort and invite innovators to go wherever they may fare more profitably and with a greater chance of success.
There are four hurdles that stand out: the lack of proactive incentives (tax-based); the institutional shortcomings (availability of capital); the strong rand (competition); and the weakening of the protection of intellectual rights relative to other countries.
There are no special incentives available to innovators in this country. Yet a tax holiday, especially for copyrighted ideas vested in struggling (low-income) individuals, could boost the effort going into such work.
A more fundamental shortcoming is the institutional one, in which a resource-poor innovator struggles to gain access to capital with which to launch a successful product. Today there are specialised institutions that make venture capital available, but it remains a limited niche.
In addition, the budding innovator faces two more hurdles.
One is the strong rand, making it easier for foreign competition to oppose any local innovative talent in their market-making endeavour, limiting profitability and thus longer-term survival of such innovators.
The other reality is the empowerment environment, which expects every business to take on previously disadvantaged partners if it hopes to sell in the larger marketplace.
Such empowerment initiatives are understandable for existing businesses that benefited historically. Why they should equally apply to innovative individuals generating new ideas, with a choice of exerting themselves in this country or elsewhere in the world, has probably not been considered sufficiently.
Intellectual capital is scarce and mobile. It would seem appropriate to differentiate as to which businesses should be subjected to these exacting requirements, at least to protect individual innovators for a while.
As things stand, we retain a sizeable pool of innovators generating a steady stream of new ideas and attempting to make these market-ready. How much we lose due to a lack of incentives, a lack of venture capital, a strong rand and an empowerment environment is unknown. But just because we don't know the opportunity cost of our shortcomings doesn't mean we aren't paying a price in development forgone.
Sometimes ignorance is bliss. Certainly not in this instance.
