Tag Archive | investment

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

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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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Auto sector leads investment, saysDTI

Benz and GM lead in auto sector…

lionel octoberIn presenting its annual budget report to the trade and industry portfolio committee, director general Lionel October of the department of trade and industry (DTI) listed one of the past year’s highlights as the investment of R16bn that had been attracted into the auto sector in South Africa.

Mercedes-Benz SA, he said, had raised its total investment in SA to more than R5bn by increasing in its local output to 100 000 units a year, creating 800 new jobs in the process. Furthermore, it busy starting production of its new C-Class which would go from 250 units to 420 units a day.  In the same sector, he said, General Motors SA, together with component manufacturer Tenneco SA, was now about to export catalytic converters to the value of R6bn.

Volvo and MAN join in

On the subject of transport generally and important to include because of localised content factors, he said, was the contract in concluded in the year under review with Volvo SA to provide 40 new buses for MyCiti bus routes in the City of Cape Town for is commuter network; with Mercedes-Benz SA for 134 buses for the next phase of Johannesburg’s Rea Vaya system and with MAN for 80 new buses for the Limpopo area.

Of note, October said, was the fact that the energy sector had seen progress with the start of the independent power producer (IPP) programme.  Significant progress had been made with a number of smaller IPP projects already.

Movies and milling

In a vastly different sector, parliamentarians were surprised to hear that the movie Long Walk to Freedom, costing R239m to make in SA, had been premiered and had grossed more than R23m already locally.

In agro-processing, DTI in collaboration with German milling plant manufacturers Bühler,  launched an innovative semi-portable maize milling plant known as Isigayo, as a pilot for entrepreneurial maize milling development.

Settling down

October claimed that in the clothing industry, which had experienced such bad times, the DTI clothing and textile competitiveness programme had “stabilised” the clothing sector.

Over forty applications involving R645m had been received with R77.7m already disbursed.   Under DTI’s production incentive programme in the clothing industry, nearly 800 approvals had been granted to the value of R2.2bn.  DTI estimated that in that sector so far 63,311 jobs had been saved and 8,459 created.

Of note during the year, DTI said it had designated Saldanha Bay as an IDZ with pre-feasibility studies completed for Tubatse in Limpopo and Upington in the Northern Cape.  Another four IDZs in outlying areas were being planned whilst an application for designation had been submitted to the Manufacturing Development Board in respect of Dube Trade Port on the East Coast.

Industrial focus areas

Of importance, October said, was the passing by Parliament in the last year of the Special Economic Zones Bill which will “take the IDZ principle into new territory enabling the creation of new industrial hubs to bring previously marginalised regions into the mainstream economy.”

On the domestic economy, Lionel October spent some considerable time reviewing the year in detail, most of which has been well covered in the media.  He noted that real GDP grew by an annualised quarter-on-quarter rate of 0.6% in the second quarter and the little growth had been led by government services, finance, real estate, business services, transport, storage and communication services.

The Marikana effect

Overall, the manufacturing sector had contracted by slightly more than 2 % in the second quarter of 2014 due to low production in autos, chemical products, rubber and plastics, glass and non-metallic mineral products, he said, but in an overall sense the contraction was mainly due to the prolonged strike in the platinum sector.

On the subject of legislation, October noted that the Lotteries Amendment Act and the Intellectual Laws Property Amendment Act, involving the protection of traditional knowledge, had been assented to and were awaiting implementation.

The National Credit Amendment Bill had been adopted by Parliament, he said, and a draft policy frameworks on IP and gambling had been developed. A new Licensing of Businesses Bill had been drawn up and public consultations conducted on the Liquor Act, with a new draft policy adopted.

Getting all in line

On trade matters generally, DTI reported that during the year under review SADC services negotiations had been undertaken, South Africa making initial offers on financial and communication services.  Steps were now to be taken, October said, “to encourage compliance by certain SADC members in terms of their commitments under the SADC trade protocol.”

Consensus had been reached in the year on the need for high level bilateral engagement within the Southern Africa Customs Union (SACU) towards more and better integration and SACU had now developed, with other countries, a number of partnerships and free trade agreements. Progress had been made to some extent with tariff negotiations, notably tariff offers to East Africa and Egypt.

Summing up he said the hosting of an Africa-India ministerial trade conference was underway and MOUs on economic cooperation had been tabled with Ghana, Benin and Nigeria. As far as Nigeria was concerned, a draft MOU specifically on automotive cooperation had been completed. Also commenced was the South Africa-Cuba agreement on economic assistance.

Lionel October noted with pleasure that DTI had been given the top ranking by business as the best performing national government department in SA.

Other articles in this category or as background
http://parlyreportsa.co.za/finance-economic/%EF%BB%BFdti-gives-warning-investment-climate/
http://parlyreportsa.co.za/uncategorized/dti-tables-two-bills-for-its-co-operative-strategy-for-sa/
http://parlyreportsa.co.za/finance-economic/minister-davies-continues-ipap-6/
http://parlyreportsa.co.za/cabinetpresidential/davies-presses-the-button-on-nuclear-development/

 

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DTI gives warning on investment climate

High administered prices a threat…

42X90693In an apparent warning to the economic cluster, a deputy DG at department of trade and industry (DTI), Garth Strachan, warned that South Africa was reaching “a tipping point” where administered prices, either levied or taxed by the various state departments, were so high that it was making the cost of doing business in South Africa totally impractical.

 

There was neither an attractive climate for investors because of high state administered prices, he said, nor did it make any easier DTI’s developmental programme in support of the NDP and attracting investors.

In a frank presentation to the portfolio committee on trade and industry, he qualified DTI’s position during his candid commentary with the caveat that as far as the regulation of administered prices were concerned, such as electricity, port and rail freight charges, road transport costs and water tariffs, that these were not the core competencies of DTI although they were adversely affecting DTI’s current IPAP 6.

Undermining investment climate

He noted later in his talk that in the successive implementation of various IPAPs, including the current industrial plan, DTI had found that administered prices constituted a total impediment to economic development.   In fact, now in 2014, they were providing a “serious economic shock”, as he put it, to the viability and competitiveness of the manufacturing sector.

Garth Strachan commented that the addition of carbon tax could push South Africa to the ‘tipping point’, unless the proposals were with “carefully calibrated policy interventions.”

As far as electricity was concerned, it was DTI’s view that the actual problem lay in the funding structures of local government, especially where no allowance was made for infrastructure upgrading and maintenance. Water shutdowns were also an increasing problem, he said.

He told parliamentarians that in one instance a global investor had experienced 140 electricity and water shutdowns. He did not indicate over what period.

International comparisons

He said that on electricity tariffs, whereas in 2009 when compared to China, the USA, Canada/Quebec, Abu Dhabi, Kazakhstan, India and Russia to give a fair geographic spread, South Africa had been with a group that had the lowest in prices, it now had the “gold medal” for being the highest of all and by 2020 the situation would be exacerbated unless something dramatic took place.

Strachan said that in the World Bank Report of 2013, SA port charges were amongst the highest in the world; container charges being 710% more than the global norm and automotive cargoes costing a premium of 874% more than the global norm. This detrimental fact was compounded by port and rail freight inefficiencies to local destinations.

He told parliamentarians that in DTI’s view it was extraordinary that exports were virtually subsiding raw material exports such as iron and coal.  In the case of coal, this was 50% below the global norm and iron ore approximately 10%, according to 2012 figures, these being the latest DTI could get.

This led, Strachan said, to the unfortunate situation where the country exported iron ore at a net loss to the country but imported girders, cranes and containers, for example, at possibly the highest in the world.  It was impractical to have subsidies passed on to exporters of primary products penalising importers of necessary needs, he said.

On carbon tax, he dismissed any “one size fits all” programme as contributing to the overall problem by making things worse and on climate change generally, he said that DTI was already working towards the protocols agreed by South Africa “through a range of measures to support energy efficient systems and investment in energy.”    These were part of DTI’s manufacturing enhancement programme, he noted.

He said there should be a shift in pricing “in favour of less carbon intensive sectors which are more labour intensive and value adding”. He quoted particularly steel, polymers and aluminium, which he said should be considerably below import parity levels.

Nullifying NDP objectives

Garth Strachan concluded that with manufacturers already going out of business, the issue of administered prices was probably the most important issue facing South Africa at the moment in the search to create more jobs.

Parliamentarians noted with concern what DDG Strachan had illustrated in his review. Many called for a joint portfolio meeting on the subject with public enterprises, transport and energy, despite the subject of administered prices also not being a core function of the trade and industry committee. For example, it was noted, they had no parliamentary right to influence such bodies as Transnet and Eskom, nor deal with treasury on tax and tariffs.

 

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