By Linda Ensor
South Africa needs to create a favourable climate for foreign investment particularly by ensuring policy certainty‚ clarity and simplicity‚ the American Chamber of Commerce stressed on Wednesday (13/03/2013).
The chamber’s comments — made in a submission to Parliament’s trade and industry committee on proposed amendments to the Broad-based Black Economic Empowerment Bill — came after shocking reports of the deterioration of SA’s balance of payments last year and the increasing need for foreign capital inflows to rectify it.
The chamber said SA was competing globally for scarce foreign investment and though it was the highest ranked economy in Africa‚ foreign direct investment flows into the country had tumbled 43.6% in the first half of last year while FDI to the continent rose by 5%.
The chamber was concerned that definitions in the proposed bill were vague and unclear.
Also of concern was a clause allowing the minister of trade and industry to allow organs of state or public entities to determine their own transformation policies even if these were in conflict with the codes of good practice.
The chamber rejected this provision‚ stressing that SA needed an integrated and uniform approach when dealing with sectors of the state.
It warned that "additional legislated requirements cause confusion and increase the cost of doing business in the country. Sectoral charters are already in place‚ are successful and should take precedence‚” the chamber said.
It welcomed the creation of a BBBEE Commission which‚ it said‚ would ensure fairness and equity but suggested that the commissioner be subject to monitoring and evaluation to ensure that delivery took place.
However‚ the proposal that the minister have unfettered power to make regulations regarding the information which companies were obliged to submit to the commission would be problematic for American companies‚ the chamber said‚ as they were subject to international legislation which could limit their ability to comply with such a regulation if it prejudiced their international operations.
The chamber noted that a survey of 80 of the approximately 300 American companies in SA which was undertaken in 2012 found that they had a total investment of R233bn in SA in 2011‚ employed 70‚000 people directly and 75‚000 indirectly and created 7‚000 new jobs in 2012‚ spent R500m on skills and development‚ spent R320m on training and invested R445m on corporate social investment.
Banking Association SA CE Cas Coovadia said the association generally supported the bill but found the definition of fronting as being too broad and urged that it be made more precise to create certainty.
Another issue of major concern to the association was the provision allowing for the cancellation of contracts or authorisations by organs of state and public entities which are found to have been acquired through making false representations about the black empowerment status of a company.
"This proposed new section may have unintended consequences for financial institutions where a financial institution has provided debt or other financing against revenues expected to be generated from the contract in question. The right of cancellation creates a risk for third parties such as funders‚” Coovadia said.
"The consequence of this new section in its current form will be that financial institutions will have to be more risk averse in funding working capital which may have negative implications for empowerment financing‚” Coovadia said.
He proposed that the section be revised to provide for an equitable remedy that takes due recognition of the interests of all parties involved. It should provide for the alternative of levying of fine or penalty as opposed to cancellation of the contract. © BDlive 2013