In today’s digital age, data has emerged as a valuable, yet often overlooked, asset. It’s the lifeblood of businesses, fueling innovation, driving decision-making, and unlocking new opportunities. However, South Africa’s approach to intangible assets like data seems to be lagging behind.

1. The Intangible Asset Dilemma
2. The Economic Impact
3. Why is South Africa Falling Behind?
4. The Path Forward
   1. References:

The Intangible Asset Dilemma

A recent analysis by Codera Analytics reveals that South Africa’s value of intangible assets has remained relatively stagnant since 2005.

This contrasts sharply with trends in developed and emerging markets like the US, China, and India. This suggests that South African companies are failing to capitalize on the potential of intangible assets, such as software, data, intellectual property, and brands.

The Economic Impact

Research from McKinsey and the OECD highlights the significant economic benefits of investing in intangibles. Companies that prioritize these assets tend to grow faster and have higher total factor productivity. Data alone can contribute between 1% and 2.5% of a country’s GDP.

Why is South Africa Falling Behind?

Several factors are hindering South Africa’s progress in this area:

• Regulatory Barriers: A restrictive regulatory environment, including the Protection of Personal Information Act (Popia), can discourage investment and data sharing.
• Procurement Challenges: Procurement policies that favour established companies over tech startups can limit innovation and the adoption of new technologies.
• Exchange Controls: Restrictive exchange control regulations make it difficult for South African companies to raise foreign capital, hindering their ability to invest in intangible assets.
• Accounting Standards: Overly cautious application of accounting standards like IAS 38 can lead to under-valuation of intangible assets.

The Path Forward

To unlock the full potential of intangible assets and drive economic growth, South Africa needs to:

• Reform Regulations: Streamline regulatory processes and create a more conducive environment for innovation and data sharing.
• Promote Data-Driven Culture: Encourage the adoption of data-driven decision-making and foster a culture of data literacy.
• Invest in Infrastructure: Develop robust data infrastructure and connectivity to support the efficient collection, storage, and analysis of data. Areas of focus should concern data governance (to foster collaboration and optimal use of data) and data quality (to ensure trust and add value) as well as managing data privacy and security concerns while promoting access.
• Encourage Collaboration: Promote collaboration between public and private sectors to share data and develop innovative solutions.
• Re-evaluate Accounting Standards: Review and update accounting standards to better reflect the value of intangible assets.

By addressing these challenges and embracing the power of intangible assets, South Africa can position itself as a leader in the digital economy and drive sustainable economic growth.

References:

Moneyweb.co.za, SA’s value of intangible assets has flatlined for 20 years, October 2024