New investment act raises grave concerns

A lot of voices have been
raised in protest about
what has been described
as an “unattractive” new
investment act for this
country, and one which
does not offer sufficient
protection to foreign
investors.
In question are the
Promotion and Protection
of Investment Bill and its
sidekick, the Expropriation
Bill (amending the 1975
Expropriation Act) – both
currently before parliament
for discussion in their
redrafted formats.
SA’s change in approach
to the protection of foreign
investments will be
regulated
by these two
bills once
they become
formal acts,
said Matthew
Clark, an
associate
in the
Johannesburg
office of
lawyers
Norton Rose
Fulbright,
The Promo Bill, he added,
had been “substantially
revised” before this final
draft.
But that didn’t mean that
those behind the initial
adverse commentary about
the bill had been mollified.
The bill, according to
Professor Owen Dean of the
faculty of law at Stellenbosch
University, still “does not
provide the same standard
of protection for foreign
investors as provided under
SA’s various bi-lateral
investment treaties (BITs)”.
And government has been
cancelling BITs at a rate
of knots since the new
investment act was born.
But the way trade and
industry minister Rob
Davies sees it, SA is not
alone in this BIT process,
based on the premise that
such treaties infringe on
governments’ policy space.
The other great concern
amongst investors is
two-fold. It relates to
expropriation and how “just
and equitable” the necessary
compensation will be.
All the right words come
up in the Expropriation
Bill. It states that the
minister of public works may
expropriate
property “for
a purpose
connected
with the
execution
of his or her
mandate or
upon request
of an organ
of state” but
that this is
“subject to
the obligation
to pay compensation which
is just and equitable”.
Also, Davies pointed
out that the new bills
were based very much on
the constitution, which
provides that there cannot be
expropriation “without a law
of universal application or
just equitable compensation”.
In the event of
expropriation, investors
would no longer be assured
of compensation at full
market value. However, in
line with the constitution,
the compensation would
be fair and equitable. And
Davies was adamant that
compensation would take
into account “both market
value and a range of interest
concerns”.
But international
investors, market analysts,
diplomats and the like are
all still expressing concern
about exactly what that “ just
and equitable” might be.
However, Clark believes,
the only way to know
will be when the first
expropriation takes place,
and compensation is offered.
Until then it remains purely
one of the factors that
investors take into account
in deciding on where to
invest.
But Luke Doig, senior
economist of Credit
Guarantee Insurance
Corporation, disagreed.
“While there are examples
of similar investment
treaties in other countries,”
he said, “it is foolish to think
that this will not affect
investors’ views and ultimate
investment options when
considering the merits of
various countries.
“In a hyper-competitive
environment one would
have thought that we would
be bending over backwards
to be as attractive to
investors as possible.
“Yet this does appear to
be further evidence that
we are trying to wield a
big stick approach against
the imperialist powers that
appear to dog the minds
of the authorities both
at home and elsewhere
around the globe.”
INSERT & CAPTION
This appears to be
further evidence that
we are trying to wield
a big stick. “– Luke Doig