1. © ARVIR 2010 www.arvir.co.za Balancing Funding Priorities for Innovation Projects; Does the South African Government Address the Issue of Portfolio Management? Dr David Walwyn

2. © ARVIR 2010 www.arvir.co.za Government is a Major Player!

3. © ARVIR 2010 www.arvir.co.za How does it decide? ‘Rolling’ budgets as part of annual budget process New projects subject to political decisions taken at Cabinet level and/or cost/benefit analysis R&D projects prepared at organisational level and then consolidated by DST Final decision often taken by National Treasury based on ‘surplus’ funds

4. © ARVIR 2010 www.arvir.co.za Innovation Portfolio Management Process Project Proposal Evaluation Screening using Screening Matrix Portfolio Selection Final Resource Allocation Project Implementation Project OutputsEx-post Project Evaluation Stage/Gate Evaluation Strategy Development

5. © ARVIR 2010 www.arvir.co.za Public Finance Management Act PFMA states that projects should demonstrate value for money, for example by enabling departments to achieve more with the same resources or as much with fewer resources be affordable i.e. fit within a department’s budgetary parameters be procured using transparent and competitive processes show evidence of substantial risk transfer from the department to the private sector be implemented within a sound and suitable project management and administrative structure

6. © ARVIR 2010 www.arvir.co.za Scoring Technique Used by some provincial departments technical feasibility environmental feasibility financial/economic feasibility (including return on investment) time period of the project human capital development compliance with the specific requirements for a public private sector partnership socio-political feasibility (includes public acceptability and legal or institutional).

7. © ARVIR 2010 www.arvir.co.za What does not happen? Consolidation of departmental strategies Specifically for the S&T portfolio, ex ante project evaluation (and ex post for that matter) Portfolio balancing and management Long term and short term High risk and low risk High return and low return Synergies with other areas (strategic alignment)

8. © ARVIR 2010 www.arvir.co.za Why is IPM not applied in the Public Sector? Problems of causality and non-linearity Diversity of stakeholders and beneficiaries (and hence expectations) Problems of time frames Diversity of outputs (patents vs publications) Lack of skills and training

9. © ARVIR 2010 www.arvir.co.za The Lack of Application is Evident Case Study Expenditure (R million) < 2009 (Historical) 2009 [1][1] (Latest) >2009 (Planned) Total HIV Vaccine [2][2]20040N/A>300 PBMR8,0001,90031,000~40,000 SKA/MeerKAT300310990~19,600 [3][3] [1][1] Figures given for the latest audited financial year (2008/9 or 2009/10) [2][2] Department of Health and Department of Science and Technology [3][3] The total cost of the SKA bid including the construction of MeerKAT (R900 million) is R1.6 billion; thereafter the estimated cost of the SKA construction is Euro 1.5 billion

10. © ARVIR 2010 www.arvir.co.za What can we learn from the Case Studies? Three studies exemplify the problems of IPM in the public sector HIV vaccine; long term and high risk SKA; lower risk but questionable strategic alignment for a developing country PBMR; prototype development with high risk

11. © ARVIR 2010 www.arvir.co.za HIV Vaccine Economic return (of result) easy to compute due to well established methodologies for quality adjusted life years (QALY) and other health economics approaches Global effort is well supported ($800 million) Initial support was politically lacking; continues to impact on extent of funding ART budget is R6.5 billion

12. © ARVIR 2010 www.arvir.co.za SKA Big science project Implications for international relations and kudos (what is the value of this?) Technology transfer significant Value of new knowledge generation? Initial CBA was undertaken; specified direct and indirect benefits

13. © ARVIR 2010 www.arvir.co.za PBMR Electricity generation project which was always controversial Present status very uncertain; reports that it will be stopped Benefits of expenditure to date highly limited (restricted to small sector)

14. © ARVIR 2010 www.arvir.co.za Conclusions Public sector IPM is limited despite obvious need NACI could play a key role in fostering such a culture and developing appropriate methods R&D management within government departments important Publication of public sector indicators through portfolio committee would assist in clarifying objectives and managing expectations