South Africa’s Protection of Investment Act of 2015 – passed in parliament in November last year – provides protection to foreign investors in a manner that is consistent with the Constitution, asserts the Department of Trade and Industry (dti).
In a statement, the dti said the bill – which has come under fire recently – is “in accordance with international best practice and international customary law”.
The Minister of Finance, Pravin Gordhan, has also defended President Jacob Zuma’s decision to sign the Promotion and Protection of Investment Bill into law, saying it won’t be a deal-breaker for foreign investment.
The bill is designed to level the playing field between foreign and local investors, but critics claim it will hamper the inflow of much-needed investment into South Africa. Detractors include the American Chamber of Commerce in South Africa (AmCham), as well as the Democratic Alliance.
The bill has also been criticised for providing less legal protection to foreign investors as it does not contain all the provisions of previous bilateral investment treaties (BITs).
“It should be noted that the introduction of such investment protection legislation is consistent with recent global trends. Countries such as Canada, Australia, India, Brazil and Indonesia have all undertaken reviews of their BITs with a view to enacting reforms,” said dti spokesperson, Sidwell Medupe.
Medupe added that the United Nations Conference on Trade and Development (Unctad) and many international legal scholars agreed with the government’s view that the excluded provisions – such as “fair and equitable treatment” and “investor state dispute settlement” - could unduly limit government’s right to regulate in the public interest and unnecessarily open the government to potential claims of violation of investor rights.
“This may result in millions of rands of pecuniary damages being incurred by the government at an international arbitration,” said Medupi.
Medupi ascribes the 74% decrease in FDI in South Africa last year simply to a decrease in global demand for commodities, pointing to an Unctad report that says that “flows faltered in Africa, Latin America and the Caribbean ... reflecting the plummeting prices of their principal commodities exports”.
“The decline in FDI in 2015 was therefore due to the challenging global conditions. South Africa needs to focus on diversification of its manufacturing base through the implementation of industrial policy going forward,” he added.
