Does research and development (R&D) investment lead to economic growth? Evidence from the South African peach and nectarine industry

Abstract

Agricultural research programmes in Africa have experienced waning state financial allocations. Efforts to change these funding trends have been fettered by the limited evidence of research investment benefits and the long lags associated with these returns. In a bid to provide such information, this article seeks to calculate the benefits of investments in the Agricultural Research Council’s peach and nectarine research programme – one of Africa’s successful and oldest research programmes. It uses the supply response function to model South Africa’s peach and nectarine industry and estimates the effect of deciduous fruit prices, production costs, research investment and weather on production. A lag distribution of research and development (R&D) investment is estimated using the polynomial distribution function and the derived elasticities are used to calculate the marginal internal rate of return. The study’s results reveal that investment in the peach and nectarine programme is associated with a marginal internal rate of return of 55.9%. This means that every R100 invested yields a R55.9 increase in value in the peach and nectarine industry. In light of these findings, it is concluded that R&D investment is worthwhile and recommends that the funding allocated to this programme be increased.