Eyewitness News can reveal a controversial Bill that’s rung alarm bells with investors has been quietly signed into law by President Jacob Zuma.
The Promotion and Protection of Investment Bill was roundly criticised by the European and American Chambers of Commerce in South Africa before being passed by Parliament late last year amid heated debate.
Zuma’s decision to assent to the bill was published in the government gazette on 15 December.
His assent to the bill went unannounced by the Presidency - it took place just ahead of his decision last month to fire Finance Minister Nhlanhla Nene.
The Protection of Investment Act has been stoutly defended by Trade and Industry Minister Rob Davies. But the Executive Director of the American Chamber of Commerce in South Africa, Carol O’Brien, expects it to deter foreign investors. O'Brien told EWN a recent investment by BMW was held up as evidence that investors were not being deterred. “But it has to be borne in mind that decisions of that nature are made five, eight years before the time, so we will really see the results of this in the years to come, not immediately.”
The American Chamber says it expects investors to think twice before deciding to plough money into the local economy.O’Brien believes it will impact on the inflow of much-needed foreign investment. “We think that the companies that are in South Africa don’t really have a problem, but we do think that new investment will certainly look twice at South Africa, especially if you twin it with the expropriation bill; those two bills together are ominous.”
O’Brien says the effects may only be felt down the line. "I think everybody is watching and waiting. The fact that BMW brought in investment recently, which was held up as an example that companies aren’t afraid to still invest in South Africa, one has to bear in mind that decisions like that are made five to eight years ahead of time.”
The Act will come into operation on a date yet to be proclaimed by Zuma, who is currently in Davos, selling South Africa as a top investment destination.
HEATED DEBATE IN PARLY OVER INVESTMENT BILL
The investment Bill was passed by the National Assembly, but only after heated debate in Novemeber last year.
The Bill will replace bilateral investment treaties concluded in the late 1990s with mostly European countries, which are expiring and not being renewed. Davies stoutly defended the Bill, but it had come under opposition attack.
He said the bill would ensure that foreign investors don’t get preferential treatment over local investors, as it would apply to all of them equally. “South Africa, through this Bill, is indicating that we will provide and continue to provide strong and reasonable protection to investments in accordance with the Constitution.” But the Democratic Alliance, along with the IFP and UDM, slammed the Bill as likely to choke off foreign investment at a time when the economy is already struggling.
DA Member of Parliament Geordin Hill Lewis said, “This Bill is no welcoming invitation to the world. This is a big neon sign, on the shop front window of South Africa that screams: 'Closed for business'.” When it came to the vote, 181 were in favour, 33 against and there was one abstention.
The Bill was then passed and sent to the National Council of Provinces for concurrence before signed into law by Zuma.
THE BILL IN A NUTSHELL
It provides for all investors in South Africa, foreign and local, to enjoy the same status and protection. After 1994, a number of bilateral investment treaties were signed between SA and mostly European countries that afforded investors various rights and privileges. This was because the new Constitution had yet to be finalised and adopted.
As these various BITs, as they’re known, started reaching their expiry date, the government decided not to renew them but instead to have the act replace them.
The act’s aim is to protect all investment in line with the Constitution “in a manner which balances the public interest and the rights and obligations of investors”. It “affirms the Republic’s sovereign right to regulate investments in the public interest” and applies to all investments in SA.
The act says that foreign investors, or their investments, must not be treated less favourably than South African investors and that they have a right to property in terms of Section 25 of the Constitution (the property rights clause).
It provides for foreign investors and their investments to “be accorded a level of physical security as may be generally provided to domestic investors in accordance with minimum standards of customary international law and subject to available resources and capacity”.
It also says the government, or any organ of state, may take measures that include “redressing historical, social and economic inequalities and injustices”; achieving the progressive realisation of socio-economic rights, protecting the environment and sustainable use of natural resources and promoting and preserving cultural heritage and practices, indigenous knowledge and biological resources.
The act provides for disputes to be dealt with domestically, and allows for mediation, and says the government “may consent to international arbitration" but only once domestic remedies are exhausted. (The BITs provided for international arbitrators to decide disputes).
It also allows for the Minister of Trade and Industry to make any regulations necessary.