Any inventor needs assurances that their ideas, once put into the public domain to be capitalised upon, will receive adequate protection. Predictable laws and institutions that attract and encourage investment are fundamental to economic growth.
South Africa’s Bio-economy Strategy aims to turn more of the country’s material resources into sophisticated commercial goods, focusing on the entire innovation chain from research and development to product commercialisation.
For science, technology and innovation to become key in driving South Africa’s economic growth prospects, output needs to be shifted from a predominantly resource-based economy to one that is knowledge-based. And that cannot happen without a strong respect for intellectual property rights (IPRs).
The International Chamber of Commerce states, “The protection of intellectual property stimulates international trade, creates a favourable environment for foreign direct investment, and encourages innovation, transfer of technology, and the development of local industry, all of which are essential for sustainable economic growth, and its concomitant benefits for public health”.
A lack of protection for IPRs not only discourages investment by multinational companies but also retards local innovation. Innovators and creators (foreign and local alike) need to be able to secure their investment in developing their creations.
A robust and effective intellectual property rights regime may not be sufficient in and of itself to attract FDI, but a weak or poorly enforced regime is a definite deterrent for innovative companies seeking to earn a return on investment. Simply put, innovative companies often will not create and certainly will not invest in commercialising and bringing products to market if their product can be stolen and copied. Succinctly put by Norman Balmer, a senior patent attorney in the United States, “Just as a donkey will not chase after a carrot on a stick unless he is allowed to catch it once in a while, innovators will not invest in inventing, developing, implementing, and marketing new technology unless they believe the patent promise to be real.”
Retired South African Judge, Louis Harms observes, “[In the context of intellectual property], there is a significant direct link between judicial system performance and economic development... For intellectual property rights to serve their purpose, effective judicial support is necessary... [A] right without a remedy turns out to be an expensive fallacy. When judicial support for these specialised rights is feeble, [innovation] falters, with considerable losses to the country”. The protection and enforcement of IPRs is essential.
Intellectual property laws foster innovation and development. Successful implementation of IPRs depends on complementary factors such as the quality of legal institutions, markets and infrastructure. The efficacy of IP reform, ultimately, is subject to the environment in which IPRs operate. National prosperity is achieved when countries implement a policy paradigm – an important component of which are IPRs.
Many governments have fallen into the trap of cherry-picking certain policies to pursue certain agendas. A problem with this is that policies from opposing paradigms are contradictory. Instead of getting the best of all worlds, they end up with the worst. More importantly, they end up without a coherent policy paradigm.
IPR protection is a necessary condition to attract investment, but it is not sufficient if there are other not so good policies that scare off investors. South Africa ought to consider adopting a suite of policies that foster investment. For example, we need skilled foreigners to augment the pool of highly skilled South African and other scientists and engineers already working here. But skilled foreigners will not come here if visa requirements are onerous, conditions such as crime remain a significant threat, and if they are barred from being able to practice because of restrictions contained in one or other piece of legislation.
Countries characterised as ‘winners’ have strong IPRs. To lower South Africa’s IPR standards would be tantamount to relegating its citizens to levels that characterise ‘loser’ countries. If we stop respecting the IPRs of international investors, they will take their money and expertise elsewhere. If we do not want to lose much needed investment and innovative spirit, South Africa should adopt policies that characterise rich nations, which includes respect for the rule of law and a sound property rights regime.
Jasson Urbach Economist at the Free Market Foundation of Southern Africa
this article was first published in ENT News on July 2017