Tag Archive | American Chamber of Commerce in SA

AGOA : Parliament this week 3 Nov 2015

cropped-sa-parliament-2.jpg

 

Editorial…….

AGOA : What and who to believe….

Reported to clients 5 November……On June 10 2015, a meeting took place in Parliament between the Department of Trade and Industry (DTI) and the Portfolio Committee on Trade and Industry, chaired by Ms. Joanna Fubbs, during which DTI was reporting back on its progress with B-BBEE.

The meeting was interrupted by the appearance of Faizel Ismail, the special SA Trade Ambassador to thefaisel ismail AGOA talks, who dramatically made an announcement with the Chair’s agreement despite nothing on the agenda, to all members of the Committee. To sum up the statement he said that the negotiations on the AGOA trade agreement could be considered a success. There was considerable joy amongst MPs generally.

Then on September 8, Lionel October, Director General of the Department of Trade and Industry (DTI), surely “Mr. Big” when it comes to knowledge of trade relationships and policy with other countries, made the following rather obtuse statement to the PC on Trade and Industry when asked for the current position with regard to the AGOA.

He answered, “As for SA’s US relationship, no one relationship would save SA. The US has decided to re-industrialise with an emphasis on energy development in Africa after a previous emphasis on the service industry. The AGOA had been reviewed, and meat trade issues needed to be resolved but in general the AGOA had grown in its relationships.”

What this was supposed to mean was difficult to interpret. But then discussions were on-going at the time between SA representatives and the US congress over poultry, meat and pork issues and relationships were admittedly difficult. Dumping by the US was the accusation. Lack of certification of SA exports was the reply. Most were downcast.

The context

The occasion for DG October’s remark was DTI’s presentation of its annual report to Parliament, with Minister Rob Davies present, and it was in answer to an Opposition member on the subject. It was apparent to all at the time that the AGOA had not been mentioned as one of the “achievements” of DTI for the year 2014/5 and the first quarter of the present year. That’s as close as Parliament can get to being up-to-date.

Then newspapers announced that South Africa’s inclusion had been agreed to by Congress and the AGOA Bill had been sent to President Obama for signature. The poultry and meat issue had been resolved apparently.

lionel october 3Everybody relaxed and Lionel October told Parliament in a further PC Trade and Industry meeting, this time on the Protection of Investment Bill, that indeed the Bill had indeed gone for signature and all was done and dusted.

Reverse gear

The we heard from the media, not DTI, that everything is held up again after DTI had admitted under pressure that they had failed to meet a poultry declaration deadline under the AGOA. A war of words started on whose fault that was, DTI claiming that the fault was mutual between the US and South Africa.

In the meanwhile we had put the AGOA behind us, the focus having shifted in the meanwhile to watching the Portfolio Committees of Police and awaiting the return of Private Security Industry Bill, President Zuma staying “mum” on the subject and the Cabinet saying nothing in their regular statements from GCIS.

Clearly the preamble to the AGOA agreement had fallen foul with the US Constitution finding this particular Bill objectionable in terms of international obligations on expropriation, presumably connecting AGOA to US investments in the security sector industry where US owned interests stood to lose control of their investments in South Africa. This time it was the US media reporting, not the negotiating parties.

Just recently, Ms. Joanna Fubbs, chairperson of the Trade and Industry Committee, refused Oppositionjoan fubbs members the right to discuss the issue of the Private Security Industry Bill in her Committee, stating that the subject matter was the domain of another Committee. The subject at the time was the Protection of Investment Bill, now passed at committee level, and whether this Bill would contribute further to poor US relationships, as was apparent with the Security Industry Bill already.

 Passing the cushion

But that was not the full truth. The PC Committee on Police, as far as we can establish, has never discussed in depth the implications of the Private Security Industry Bill as far as the AGOA is concerned. Meanwhile President Zuma, who had the Bill and still has, must be perfectly aware of the implications as must the whole Cabinet, since it is not just the poultry industry that is affected but the security industry, the automotive industry and a whole lot more.

This is especially in the light of the fact that, according to reports, this Bill has been mentioned in Congress in front of the SA Ambassador called to Congress to answer on the subject. Nobody knows therefore, if Parliament will again verbalise on the Bill because nobody will come clean on why the Private Security Industry Bill is stuck where it is in the Presidential office.

 AGOA vs Security Bill

Is AGOA on the altar of ideology, one must ask therefore.

courtesy iol

courtesy iol

During a very recent briefing to the PC on Trade and Industry on AGOA progress, Minister Davies told parliamentarians that everything “was in the hands of veterinarians, both on the US side and in South Africa, both parties taking the issues of animal disease and sickness very seriously“. He continued, “It has been more than we dare do in DTI to interfere or intervene in this process. It is supposed to be an independent process. Avian ‘flu in the US is a repeating disease but, however, all is now resolved from an SA perspective.”

The Minister added, “Furthermore on our side we, the Department of Agriculture and Fisheries and their veterinarians have written to the US side to say we are ready to implement all conditions so President Obama can sign. All the deals are done in both the US and SA industries and we just await the US response”, he concluded with Faizel Ismail present.

Dave MacPherson (DA) pointed to the fact that the whole of AGOA would be torpedoed anyway if the Private Security Industry Bill were to go through. Minister Davies responded that the Private Security had not come up once in the AGOA talks with the US. “Too much of this has been a media debate”, he said.

Under pressure

Consequently Minister Davies is fully aware the situation but dealing with the issues as if they were not connected, which could be considered slightly disingenuous. It is known that Minister Davies very much wants the AGOA deal signed but Oppositions members conclude, when asked, that they also cannot think of a single reason for pushing through the Private Security Industry Bill if it is at the expense of the AGOA and growth.

Unless it can be put down to disharmony within the Cabinet or intransigence on the part of the Minister of Police, they say.

As for the future of the AGOA then, for the moment don’t hold your breath but rather cross your fingers that Cabinet as a whole will come out of its ideological bubble, if this is the case.

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Promotion and Protection of Investment Bill re-tabled

Revised Investment Bill gives some ground…..

Rob+DaviesA crucially re-amended version of the Promotion and Protection of Investment Bill has been re-tabled in Parliament by DTI that gives ground to some degree on the question of rights of investors regarding international arbitration regarding disputes in terms of the new ground breaking  legislation.

During his budget vote speech, Trade and Industry Minister, Rob Davies, stated that the Promotion and Protection of Investment Bill would finally be retabled in Parliament, meaning that it will definitely not be signed into law as it was and that it would be subject to changes.

That Bill has now been re- tabled and no doubt being studied by all.

Past bilaterals respectedPromotion and Protection of Investment Bill 

Promoted by Minister Davies specifically, the Bill as it was voted through but not signed by the President ignored existing bilateral investment treaties (BITs) between South Africa and other countries in the EU whilst extending protection to new investors from all other countries. The new Bill as amended clarifies that this does not apply retrospectively.

Minister Davies said at the time, which was worrying to many foreign companies, that there was a trend he felt amongst developing countries to ignore such treaties although they might have been agreed to by previous governments.

Impediment to investment

Africa-map-with-coinsUnder BITs at present, trading investors are allowed to have arbitration proceedings as laid down by World Bank rules.   International arbitration, for obvious reasons, is preferred by investors as it is impartial and not in the hands of the country invested in, as is promoted the Promotion and Protection of Investment Bill making it localised.

Minister Davies is on record as saying that that “South Africa had significant foreign direct investment from the US, Japan, Malaysia, India and other countries, and we have no bilateral investment treaties with them”. He commented in Parliament, some time before this budget vote speech, that such bi-lateral agreements on the whole were “irrelevant”.

The Bill as it stood allowed for acquisition by the state in the ownership of foreign companies “in a just and equitable manner”.  Such nebulous wording was rejected by the international business community in South Africa. Minister Davies said at the time when the Bill was passing through the portfolio committee on trade and industry, that “protection for overseas investors will be in terms of South Africa’s Constitution”, which he said, “provided significant and robust protection for investors and for property, both domestic and foreign.”

A “Bit” better

legalWhat the re-written Bill contains is a clause granting an investor the right to be treated no less favourably than South African investors as long as their investments are ‘‘in like circumstances’’. This is qualified by the clause which states, “The Bill provides for the security of investors and their investments. It seeks to clarify that the Republic bears no greater obligation to foreign investors than to its own investors in respect of their investments.”

However, on the rights under BITs agreements for arbitration or mediation internationally on new investment, it would appear that DTI have relented to some degree. After describing the whole process of local mediation which has to be undertaken first, the re-drafted Bill still insisting on this, a clause has been inserted that “the government may consent to international arbitration in respect of investments covered by this Act, subject to the exhaustion of domestic remedies. Such arbitration will be conducted between the Republic and the home state of the applicable investor.”

The Bill is now being digested and presumably Parliament will announce new hearings and call for further submissions.

Other Bills coming

ack bdlive

ack bdlive

In his budget vote speech a few weeks ago, Minister Davies confirmed that a Copyright Amendment Bill would also come before Parliament in the current financial year, together with a National Gambling Amendment Bill (as distinct from the Remote Gambling Amendment Bill before Parliament at present).

He also referred to a Liquor Amendment Bill which is suspected of being somewhat draconian. The whereabouts of the Intellectual Property Rights policy paper is also long outstanding from the Department of Trade and Industry.

Other articles in this category or as background
Promotion and Protection of Investment Bill opens up major row – ParlyReportSA
Private Security Industry Bill comes closer – ParlyReportSA

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South Africa’s IP policy still hidden away

Drug impasse on IP (intellectual property) rights……

patents graphicThe simplistic public platform which is pervading the pharmaceutical debate on the long awaited IP policy – that persistent argument that  South Africa could be a ‘rogue’ state with scant regard for property rights – is constantly coupled with the call by local and international activists for drugs which are affordable to poorer families.

All has been re-heated considerably by protests in Pretoria but nothing has yet reached Parliament in the form of a serious proposal on IP that can be considered by pharmaceutical companies in order to bring certainty.

What now seems to be the situation is that both manufacturers and activists are calling for a fair and legally correct policy document on intellectual property rights which gives certainty but nothing is forthcoming.   At the same time, the claim was made in Parliament some time ago that South Africa just “rubber stamps” patent applications at a vast rate, only 1% going to local innovators.

And yet all know the incredible cost to find a successful HIV/AIDS vaccine. These costs must be recoverable, say pharmaceuticals, or innovation and research will stop. South Africa, like so many countries, is about to step into the unknown.

Problem not with CIPC

According to CIPC the questions of registration of patents is proceeding with new vigour but complainants make the point that no actual testing takes place. Ms Astrid Ludin, current CEO and IT guru was not in Parliament to make any presentations on the specific subject of IP and who remains “on suspension” it appears for some transgression on awarding contracts.

Ludin has an excellent reputation with DTI and in all probability she just wanted to get a job done, at high speed and quickly chose what she thought was the best thing to do. Unfortunately, that is not how red tape works.

Most critical : Invention or intervention?

It appeared some time ago that stakeholders were past the endless argument that South Africa wouldmedicines, pills make the market place unsustainable for pharmaceutical companies with important and much needed drugs if there is disregard for patents lodged after years of painstaking research. But this once again re-emerging.

Over 100 submissions, it is rumoured, were made on the original Policy IP document when it was first submitted for comment, so one assumes that Dr Rob Davies has a fair assessment on how stakeholders are feeling… but his department still refusing to tackle the issue, it appears.

Keeping the same show running

Meanwhile, activists have re-opened their claims that “tweaking” of an expired but well established drug takes place and new patent periods sought for twenty years on the same item, which cuts out the possibility of cheaper generics and innovation. Facts presented at recent conferences on the subject have also re-awakened the premise that South Africa is paying more than most developing countries for drugs.

The background of the delay is provided by a divisive scenario between two government departments – health and trade and industry – the latter department being responsible for the production of the new intellectual property policy stating South Africa’s position.

Too many pokers in fire perhaps

medicine bottleDespite the minister of trade and industry (DTI), Dr Rob Davies, trying to calm waters with the “going nowhere” statement of “We are moving in a direction in striking a balance between innovation, affordable medicines and to modernise our IP regime”, South Africa’s new intellectual policy (IP) policy seems to be sticking at cabinet level.

It is difficult to disregard the much earlier scandal involving the rumoured attempt by a Washington-based PR company to delay and modify the draft IP Policy, a move which infuriated both the minister and the department of health. The anger of minister of health, Dr Aaron Motsoaledi, was patently obvious at the time and there is no doubt that a sour taste in the mouth is left with many in that department.

Has to come to a head

medicines sans frontWith Treatment Action Campaign and Médecins Sans Frontières ratcheting up their campaigns – the latter specifically naming Pfizer on TB drugs that cost R10 in India and R600 in SA – and DTI’s minister Davies at present in the USA arguing on GAT agreements, the much needed IP policy will probably remain on the backburner for a short while longer.

Two things will happen eventually. Either the government publishes a gazette calling for comment on yet a further draft IP policy or an ATC notice is issued by Parliament announcing its tabling as a paper for debate.

Either way, minister Davies is likely to call a media briefing first.

Other articles in this category or as background
Intellectual property law still in limbo – ParlyReportSA
Intellectual Property Laws Bill goes forward – ParlyReportSA
Medical and food intellectual property tackled – ParlyReportSA
Medicines Bill: focus on foodstuffs – ParlyReportSA

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Private Security Industry Bill gets more criticism

Private Security Bill awaits assent…

Bill is like scoring an SA own goal, say many…

security industryThe Private Security Industry Regulations Amendment Bill, tabled in last year’s parliamentary sessions by former Minister of Police Nathi Mthethwa and now sitting with the President Zuma for enactment, has been the subject of an outcry from a number of sources including legal experts.

When the Bill went to a vote in the National Assembly, the main opposition voted against the Bill, not on the basis of short comings in the security industry but that the Bill, in itself, with its call for the state to be able to fall back on law enabling it to acquire majority holding in a private business, sent the wrong kind of message to the investment world.  They said, “the smell of expropriation was in the air”.

Offending clause

American Chamber of Commerce in SA (Amcham) has now also urged government to remove the clause in the Bill that requires that 51% of foreign owned security companies be handed to South African citizens.

Who the South Africans are that will receive this largesse remains vague, they say.

amcham logoSays Carol O’Brien, Amcham’s Executive Director, “This Bill has sent a chill through those investing and future investors. The line given out by the authorities is that these companies collect intellectual information which can be used against the South African government is hard to believe since the  law as it exists demands that the leadership of security companies must be South Africans.”  Also, she adds,  the vast majority of employees are also South Africans.

Investor damage

O’Brien points out that the foreign owned portion of the security industry only makes up 10% of the security industry as a whole in South Africa.   “Our concern goes further; this clause will violate important international trade treaties (GATT and GSP) and may put the renewal of AGOA for South Africa at risk.  We urge government to withdraw this clause before it does any further damage to investor perception of South Africa” .

Minister Mthethwa told Parliament when he tabled the Bill last year that a review of past anchor legislation for the industry was undertaken to “address gaps that are caused by the lack of effective regulation of the private security industry and added to the surprise of opposition members, “in particular, the threat to national security posed by the participation of foreigners”. He went no further, nor would his department under questioning by opposition members.

Bill hammered through

The controversial clause in the bill proposed was the result, he said.  Opposition members were convinced the offending clauses would be overturned before the Bill was voted through in the National Assembly.   This was not to be the case.  The ANC used their hefty majority to push the Bill through at the last minute before Parliament closed.

Minister Mthethwa never amplified on his remarks whilst in office and new minister of police, Nkosinathi Nhleko, has remained silent on the issue.

previous articles and background

http://parlyreportsa.co.za//securitypolicedefence-2/private-security-industry-regulation-bill-unconstitutional/

 

 

 

 

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Promotion and Protection of Investment Bill opens up major row

New DTI Investment Bill disliked as damaging to FDI……

A draft Promotion and Protection of Investment Bill has come under serious fire from not only South African business groups but from foreign firms operating in South employing large numbers of local employees. Most have described the proposals as adding woes to an already damaged South African investment picture, adding yet further risk to the current economic downturn

Promoted by minister of trade and industry, Dr Rob Davies, the Bill will enable South Africa to trade ignoring existing bilateral investment treaties (BITs) between South Africa and other countries in the EU whilst extending protection to new investors from all other countries.

Davis says bi ltateral treaties irrelevant

Davis says that the new Bill if passed as it stands “will enable a comprehensive and uniform legal framework to govern investments in the country”.  He said a review of South Africa’s bilateral investment treaties had found that there was no correlation between the existence or absence of a bilateral treaty with a particular country and the flow of foreign direct investment (FDI) from the country.

Minister Davies has been warning for some time that such a review would take place and the draft, just closed for public comment, indeed makes a number of radical changes to South Africa’s  trading relations, which many trade law experts say brings further uncertainty to the investment climate when least wanted by the country.

Listing the uncertainties to FDI

The first of the many changes is that investors no longer have recourse to international arbitration. Under BITs at present, trading investors are allowed to have arbitration proceedings as laid down by World Bank rules.   International arbitration, for obvious reasons, is preferred by investors as it is impartial and not in the hands of the country invested in, as is promoted the Promotion and Protection of Investment Bill making it local.

The second major change relates to the compensation paid in the event of expropriation. The new Bill simplistically says that  “compensation must be just and equitable”, clearly creating uncertainty in the light of known statements by cabinet ministers and senior ANC politicians in South Africa on the subject of expropriation.

Events in other parts of Africa will no doubt leave investors uneasy despite the promises of minister Rob Davies that “protection for overseas investors will be in terms of South Africa’s Constitution”, which he said “provides significant and robust protection for investors and for property both domestic and foreign.

All local foreign investors, even those with a half acquired knowledge of South Africa’s political development, will have watched the appointment of a state market valuator to handle land reform expropriation.

Finally, an uneasy point for many is that the new draft Bill fails to provide the normal provision of a BIT with what is considered by most internationals as the necessary affirmation that investors will enjoy fair and equitable treatment. Therefore they might feel that without the full protection that is enjoyed by any South African investor in the country, they might feel in jeopardy without the normal assurances of equal competition or against local protection.

amchamlogo2One such critic of the new Bill is the South African structured American Chamber of Commerce (AmCham) instituted by South Africans in Johannesburg some thirty years ago. AmCham represents some 250 American multinationals registered to do business in South Africa, eighty of the biggest contributing R233bn to the SA economy in 2011, and employing some 150 000 employees, either directly and indirectly.

They say they know where the minister is coming from but agree with all the points made by trade law experts, confirming their deep concern that the draft Bill states compensation will be an “equitable balance between the public interest” and the party that is involved.

This is totally unsatisfactory, they say. Reducing compensation or describing compensation in a manner as proposed in the Bill will increase the risk for investors, the paper says. The AmCham submission, available on their website, says that the state’s ability to undertake acts harmful to an investment’s profitability or property rights in the manner described appears to provide less protection than the Constitution itself affords.

They add that there is a perception given by the proposals that fair and reasonable treatment between local and international business issues will not be provided. AmCham goes on to state “any investment that violates domestic legislation or foreign agreements should be dealt with through legal channels available, without limiting the rights or protections of the investment.”

Jeff Nemeth

Jeff Nemeth – President AmCham

AmCham says, “Clear assurances that capital relating to investment and returns can be repatriated is not given and the investor should not lose their basic rights as is proposed under this law”. They add, “Investors are jittery of the slightest possibility of expropriation of assets by government which is perceived, rightly or wrongly, to be a very real possibility in relation to the South African government’s priority objectives of industrial development; public welfare objectives and black economic empowerment.”

“This perception should be decisively addressed by government and should be firmly dealt with in the Protection of Investment Bill.  In its current form, the draft Bill does not offer investors assurance that predictable and stable policies are a government priority”, AmCham concludes.

Davies said both his ministry and department of international relations “have been engaging with those European countries with whom South Africa has bilateral investment treaties to inform them about the country’s plan to introduce the Bill and the termination of the BTI only takes place six to 12 months after, depending on the agreement in place.”

The minister recently told a meeting that South Africa had significant  foreign direct investment from the US, Japan, Malaysia, India and other countries, “and we have no bilateral investment treaties with them”.

AmCham and others say this is not the point and now is not the time to tinker with the investment climate, thus providing less clarity and less security for FDI given the current downturn in economic factors.

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