I attended a recent workshop jointly hosted by the Academy of Science of South Africa and the German National Academy of Sciences (which is known as Lepoldina), in Pretoria.

The two-day workshop was about a low-carbon future. The Germans are big on renewables and, under its new vision, EnergieWinde, Germany may well make the technical and financial breakthroughs for the rest of the world.

The Germans have the capability and a long history of overcoming seemingly insurmountable technological hurdles. Japan, after Fukushima, looks like it is also going to go big on renewables. These two big industrial nations are taking big bets to get renewables on a large scale.

Inevitably, South Africa’s role in renewables, especially in the indus- trialisation of concentrated solar power (CSP), came up at the workshop. The promotion of particular technology pathways can at times be perilous. We have to be cautious. Before us is the strategic choice of being technology leaders or followers. It is not easy to make a choice, as we have certain realities.
South Africa does have great innovators and regularly produces interesting technology ideas, but it does not have the depth of resources, organisation and diversity of capability to see a very large and long-term technology pathway through to full fruition and the realisation of its export potential.

We will take long to achieve these aims and we will always have nervous purse keepers. We have too many other priorities and our economy is in a slow growth phase. I am in great danger of being booed for what I have just said but realism tugs at me, as I cannot see otherwise.

Clearly, CSP is aligned strongly with our natural endowments and the facilities we have – even in modest amounts. But technology scale, financing and performance risk uncertainties are not our amiable friends. The promise of what CSP can do for energy security, carbon emissions reductions and the economy has to be weighed up against the risks.

There can be ways to reap some benefits for our shores but this will require long-term visibility and good government and private-sector coordination. A bet on a specific type of CSP technology (as we cannot possibly implement all types) and some concessions are not decisions that sit well because we lack a crystal ball with respect to how the future would turn out. However, literature from the theory of the firm may shed light on the strategic approaches we may take with regard to new technology development in South Africa.

We have three options. Firstly, we may buy outright a foreign technology firm that has pioneered a CSP technology and we try to develop it ourselves. We are likely to come short because there are at least four different variations of CSP technologies, and each has its pros and cons. So, the bet on the technology that meets not only energy security but also long-term cobenefits and adds value to the economy has to be the right one. Since we do not have vast resources, our choice has to be pretty good.

Secondly, we may enter into a joint venture (JV) with a foreign company that has a strong capability and the necessary intellectual property (IP). Much will depend on what the deal is. But technology development literature shows that firms pioneering new technology waves will be reluctant to enter into a JV if it will not gain exclusivity to the surplus that the innovation would generate and to the other spin-offs that will accrue as the technology is scaled up and optimised. Firms tend to be more open to JVs if a technology already has strong market penetration and maturity. They are less open to JVs if they hold the view that there is likely to be cumulative innovations and IP that could be spun off, leading to other goods and services.

Thirdly, pioneering firms that are not keen to be bought or enter into JVs can be lured. It really depends on whether CSP is seen as entering the business cycle during a buyer’s market or seller’s market phase. A firm or firms can be attracted to local shores if the policy environment allows for the long-term visibility of CSP and there is an industrial strategy to back the industry, similar to what we have for the motor industry.

International firms are incentivised to operate and set up plants but are aligned in such a way that certain components and services are entered into with local subcontractors. This is only feasible if we have a coordinated national procurement strategy.

This may be the least risk-averse approach but it would not go without some investment by the State through tax incentives and basic infrastructural support. In the long term, even if foreign firms benefit from a new market and retain their IP, local firms can benefit from spillovers and the experience through interaction and also learning by doing.

Over time, universities and other segments of the technology and industrial knowledge community will close the network and loop. A virtuous culture of technology innovation will concentrate around the foreign firms and local contractors.

As experience elsewhere has shown, it will not be long before home-sprung innovators and technology firms emerge – either as independent entities or as JVs with foreign firms. Foreign firms will cede their guard because a new capability and endowment will have long been created and evolved out of this milieu.

It will be hard to displace the new comparative advantage and the economies of scale from the alignments and coordination achieved in this new industrial cocoon. There will be just too much to lose from displacement – unless competitors elsewhere offer something better.