Answer first: South Africa’s economic strategy remains anchored in traditional resource extraction and manufacturing, while global value increasingly derives from intellectual property (IP) and innovation. Thomas Brennan, CEO of Franc Group, highlights how current policies like the Preferential Procurement Policy Framework Act and…
Patents context for IP teams
South Africa has spent the last three decades attempting to address legacy economic challenges, even as the global economy evolves toward knowledge and innovation-based value creation. Thomas Brennan, CEO and co-founder of Franc Group (Pty) Ltd with over 15 years of experience in machine learning, biomedical engineering, and digital health, critiques the country’s current economic focus as outdated and misaligned with future opportunities.
As local elections approach, political discourse remains dominated by traditional service delivery issues such as potholes, refuse collection, water infrastructure, policing, and housing. While these are critical municipal responsibilities, there is a notable absence of discussion on South Africa’s capacity to compete globally in manufacturing or to capture greater value from its strategic mineral resources essential for artificial intelligence and clean energy technologies.
Key takeaways for South Africa intellectual property ownership
- Confirm how the development affects patents ownership, enforcement, licensing, or portfolio records.
- Separate confirmed facts from legal interpretation before advising business teams.
- Map deadlines, affected assets, contracts, and evidence files to the responsible internal owner.
- Use the issue as a prompt for monitoring, filing strategy, dispute preparation, or member education.
Practical analysis
Brennan emphasizes that politicians are still fixated on managing an industrial economy, whereas global economic value has shifted dramatically toward intangible assets. In the 1970s, tangible assets like factories and machinery comprised most of the S&P 500’s value. Today, approximately 80% of corporate value derives from intangibles such as software, patents, brands, algorithms, and data. The World Intellectual Property Organization identifies this as a structural shift, with investment in intangible assets now consistently outpacing physical capital expenditure.
This transformation is not merely an accounting change but reflects a fundamental shift in value creation. Leading global companies like Apple, Nike, and Nvidia own minimal manufacturing capacity; instead, they generate outsized profits through intellectual property ownership. Manufacturing has become commoditized and easily relocated, while breakthrough ideas, proprietary technologies, and trusted brands remain scarce and highly valuable.
Knowledge has become the new capital, a trend accelerated by artificial intelligence, which compresses research cycles and expedites design and testing. As execution costs decline, the competitive bottleneck shifts from labor to insight. Countries that own intellectual property and innovation will outpace those that supply only labor or raw materials.
South Africa faces a critical choice: continue focusing on mining and exporting raw minerals or invest in owning the intellectual property, processing capabilities, and advanced manufacturing that transform these resources into indispensable global products. Brennan argues that wealth today is generated by owning ideas rather than factories, yet South Africa’s economic policies largely fail to incentivize IP ownership.
Current procurement policies under the Preferential Procurement Policy Framework Act mandate local production content for categories such as buses, pharmaceuticals, textiles, and furniture to protect jobs and build capacity. However, these policies measure local assembly rather than innovation or IP ownership. Consequently, companies importing foreign-designed products for local assembly qualify, while South African firms that develop and own the underlying IP but manufacture elsewhere often do not. This procurement framework is indifferent to who owns the intellectual property.
Similarly, the Black Economic Empowerment (BEE) framework prioritizes ownership, management control, skills development, and enterprise development but does not meaningfully reward black ownership of patents, equity in high-growth technology companies, or capitalized IP ventures. Because ownership points are calculated based on net business value, capital-light, IP-rich companies score lower, making it harder for black entrepreneurs to build knowledge-based enterprises compared to acquiring equity in traditional industrial firms.
Brennan highlights that BEE’s emphasis on ownership structures and existing enterprises can inadvertently discourage investment in high-growth sectors critical for South Africa’s future. Capital flows toward where returns are maximized, and when regulations reward compliance over innovation, investment follows the scorecard rather than IP creation.
While transformation remains imperative, Brennan stresses that economic growth and empowerment are interdependent. Policies that disincentivize investment and risk-taking reduce wealth creation, thereby limiting the resources available for meaningful empowerment. He advocates for a forward-looking BEE framework that values founding IP-generating companies and holding equity in such ventures as highly transformative.
South African universities and companies continue to treat research and development as cost centers rather than engines of exportable value. According to the National Advisory Council on Innovation’s 2025 report, South Africa invests only 0.61% of GDP in R&D, significantly below OECD innovation leaders. Patent applications have declined, and the country ranked 69th in the 2024 Global Innovation Index. University funding debates focus on enrollment and fees rather than translating research into intellectual property, which is often undervalued as a national asset.
Industrial policy success is still measured by jobs created per factory rather than ideas generated per rand invested. Incentive schemes tied to capital investment, headcount, special economic zones, and local content quotas fail to assess whether the country gains ownership of patents, algorithms, or platforms. The OECD’s review of South Africa’s innovation system calls for a shift from resource-based industries toward productivity-driven, innovation-led growth.
Brennan clarifies that advocating for IP creation does not oppose manufacturing. Countries like Germany, South Korea, and Taiwan remain manufacturing powerhouses because their factories embody decades of accumulated research and intellectual property. Manufacturing is the culmination of knowledge, not a substitute for it.
Nor does this argument oppose mining. South Africa’s mineral wealth is increasingly strategic amid the AI revolution. However, historical evidence shows that the greatest returns accrue to those who develop technologies that enhance extraction and processing efficiency. While Australia has advanced mining productivity through automation and robotics, South African mining productivity has stagnated, increasing costs and reducing competitiveness.
Related IIPLA reading
South Africa Must Shift Focus from Mineral Exports to Intellectual Property Ownership to Thrive in Future Economy South Africa’s economic strategy remains anchored in traditional resource extraction and manufacturing, while global value increasingly derives from intellectual property (IP) and innovation. Thomas Brennan, CEO of Fran... Read the full IIPLA blog post: https://iipla.org/blog/south-africa-must-shift-focus-from-mineral-exports-to-intellectual-property-ownership-to-thrive-in-future-economy