South African companies need to explore collaborative opportunities with government, academic institutions and companies in other industries in order to improve the country's competitiveness, explore new markets and lower costs to consumers. This is one of the key findings of the second Deloitte CEO Insomnia Index.
The Insomnia Index measures at regular intervals the issues concerning CEOs and what keeps them awake at night. It aims to help executives to identify challenges and opportunities facing their companies, industries and sectors. The first Deloitte CEO Insomnia Index was published in January 2012. In this round of the survey, collaboration was indicated as the second most important issue, right behind innovation.
Mike Vincent, Director for Strategy and Innovation at professional services firm Deloitte, says there are two levels of collaboration that South African companies need to explore.
The first is collaboration between business and government, together with research and academic institutions, while the other is collaboration between companies.
Vincent says collaboration with government happens when government and business strategically position a country and a sector or industry globally. Vincent notes that governments can use their tax regime, incentives like export credit and various types of subsidies and grants to achieve this goal.
According to Vincent, at present there is not enough communication on research and development between government and business bodies, and there is huge scope for improvement in collaboration.
On private sector collaboration with academic institutions, Vincent notes that a couple of academic chairs at universities are sponsored by the private sector, but he says more could be done in this area. Many examples exist in countries like the United States of proactive collaboration between educational institutions and business that lead to new products and innovative business solutions. The historical role that universities played in South Africa in supporting mining innovation helped to establish that sector as a world leader.
The next level of collaboration is between companies. Vincent says strong competition laws, both in South Africa and globally, prevent collaboration between competing companies in the same sector. But companies in the same value chain, or companies in different sectors, can collaborate to benefit consumers.
This can happen when manufacturers collaborate with distributors to lower delivery costs or manufacturers who source from a single large supplier, such as the steel and chemical sectors in South Africa.
The most successful collaboration happens between companies across industries. An obvious example of this is the collaboration between cellphone companies and banks to introduce banking and payment methods that have extended financial services to the previously unbanked and lowered the cost of everyday banking.
Two important measures of a country's competitiveness are the GDP per capita as well as the pay and productivity ratio. South Africa does not do too well on either measure.
According the World Bank Development Indicators, as well the World Economic Forum Global Competitiveness Report for the three years between 2010 and 2012, South Africa lags 10 emerging market peers on the continent, such as Nigeria, and Egypt, as well as its BRICS counterparts of Brazil, India, Russia and China on the global stage in GDP per capita.
Yet, when measured on pay and productivity against the same set of countries, South Africa has the highest ratio, while China has the lowest. This means that South Africa pays the highest level for similar levels of work, and thus has its competitiveness eroded.
Another measure that Vincent uses to show South Africa's failing research capacity is that while the country used to be a net exporter of intellectual property, during the development of companies like Sasol, the country is now a net importer of intellectual property.
“So South Africa really needs to improve dialogue between business, government, labour and academia, while also improving education, skills and ultimately productivity, in order to reap the full rewards of innovation and collaboration,” says Vincent.