Nicholas Kotch and Razina Munshi
FINANCE Minister Pravin Gordhan blamed lawyers serving the private sector for increasing uncertainty in South Africa’s investment environment‚ on the sidelines of the African Economic Conference at Montecasino in Johannesburg on Monday (28/10/2013).
Mr Gordhan was responding to the reaction to South Africa’s cancellation of its bilateral investment treaty with Germany last week‚ as part of its intention to reshape its investment policy framework.
Proposed legislation to govern investment treaties with other countries would create a transparent and predictable investment environment in South Africa‚ he said.
"It is very unfortunate that certain private-sector lawyers in South Africa are trying to increase uncertainty in an unfounded way‚” he told BDlive. He didn’t identify which lawyers he was referring to.
The German treaty is the fourth one with a member of the European Union (EU) to be cancelled‚ but it is by far the biggest and most significant.
The Cabinet approved the Promotion and Protection of Investment Bill last week‚ which Mr Gordhan said would protect the rights of investors as well as the country. He encouraged other African countries to pursue a similar investment framework‚ to create certainty for investors on the continent. It would safeguard the returns of African countries.
Mr Gordhan said: "Our intention is to upgrade the investment framework in South Africa to ensure that we have a modern piece of legislation that will provide certainty‚ predictability and a stable environment for any investor in South Africa.
"(Trade and Industry Minister) Rob Davies and his department are absolutely committed to working with all our partner countries to get seamlessly to this new piece of legislation.”
A mediation and arbitration mechanism would be built into new legislation‚ Mr Gordhan said.
The cancellation of the bilateral treaties — with Germany‚ Luxembourg‚ Spain and Belgium — is of concern to investors and rating agencies. Moreover‚ investors are concerned that their rights may not be as strongly protected in the future.
The South Africa-German Chamber of Commerce and Industry‚ representing about 600 companies‚ warned the move "could have a negative impact on general investor confidence” and that its members were concerned.
While existing investments will remain protected by the treaties for 20 years‚ new investors are in the interim‚ unsure of the terms of their property and legal rights.
"Bilateral investment treaties are of particular importance to small and medium-sized companies‚ which are the majority of German companies in South Africa‚” chamber director Matthias Boddenberg said. "The psychological effect on prospective investors should not be underestimated.”
The chamber said trade volumes between Germany and South Africa were among the highest of all South Africa’s bilateral relations‚ amounting to about R180bn. Further‚ Germany remains among the largest investors in South Africa with investments of more than R81bn. © BDlive 2013, with Carol Paton