Tabled Investment Bill says nothing new, only adds to uncertainty

28 July 2015

This morning the Minister of Trade and Industry finally tabled the so-called Promotion and Protection of Investment Bill. 

This follows an almost 18 month delay since the first version of the Bill was released - a version that was met with near unanimous criticism. 

What South Africa needs is a Bill that will make it unambiguously clear to all investors that South Africa needs and wants their investment, and will go the extra mile to ensure that we get that investment. Unfortunately, the Bill tabled today still does not offer anything by way of promoting investment, and still does not offer the kind of investment protection that the international investor community requires. 

The Bill is only 6 pages long, its wording is broad and generic, leaving important issues open to interpretation. The Bill also gives the Minister wide discretion over important areas of legal protection, like investor-state disputes. There are many crucial legal issues left out completely - the Bill is silent on intellectual property, for example. 

This Bill simply will not assuage the many valid concerns that international investors have about the direction of government policy in South Africa. It is poorly drafted and ambiguous, and it needs to be extensively ‘beefed up’ in the Parliamentary process. 

We welcome the fact that the new draft has removed the ominous ‘custodianship’ clause that was in the first version, and that the Constitutional guarantee to the security of property rights has been reinforced. 

But we have several other specific concerns about the text of the Bill: 

From an initial reading of the Bill, it would seem that the government must agree with an investor that the two parties are in dispute, before arbitration can take place. This allows the government to simply deny that there is a dispute and prevent arbitration. This needs far more specific definition and clarification. 

The Bill introduces some limited form of international arbitration, but this is only possible after the investor has “exhausted” all other means of dispute resolution. This is not defined or specified. 

International arbitration is only at a state-to-state level, which means the investor itself is not able to be involved in the dispute resolution. This is very unlikely to be adequate security for investors. 

The Bill covers all investments of “economic value”, but does not include intellectual property. This seems contradictory and wrong - and it will be a source of uncertainty for foreign investors whose greatest assets are often their intellectual property. 

The Bill seems to intimate, but does not make clear, that there will be a vetting procedure for foreign investments, which is unacceptable. 

Lastly, the Bill gives the Minister wide discretion in the appointment of arbitrators, rules for what information investors must declare, processes for dispute resolution, and more. These matters should be set down in the Act, and not left to political discretion.

The Department of Trade and Industry has squandered an opportunity to produce a world-class investment promotion Bill that re-affirms South Africa’s commitment to being an open, secure and attractive investment destination. 

This Bill does not achieve that - it adds to the uncertainty and concern that has resulted in a significant decline in FDI to South Africa over the last 18 months. 

The DA will work to significantly improve and strengthen the Bill in the Parliamentary committee process. 

Statement issued by Geordin Hill-Lewis MP, DA Shadow Minister of Trade and Industry, July 28 2015