Jul 26, 2012
SA’s new investment policy to forge minerals, industrialisation linkBack
SECURITY|Africa|Industrial|Massmart|Resources|Security|Wal-Mart|Africa|Asia|Egypt|Libya|South Africa|USD|Security|Manufacturing|Mining|Products|Security|Environmental|James Zhan|Rob Davies|Security|Sub-Saharan Africa
© Reuse this
Speaking at the launch of the United Nations Conference on Trade and Development’s (Unctad’s) ‘Investment Policy Framework for Sustainable Development’, or IPFSD, held at the University of the Witwatersrand, Davies said South Africa would refrain from entering into new bilateral investment treaties (BITs) until the new framework had been finalised. However, it would conclude BITs in cases of “compelling economic and political circumstances”.
A recent review of investment agreements signed since 1994 found the relationship between the agreements and foreign direct investment (FDI) to be “ambiguous at best”. It also found that some of the agreements posed risks, by limiting the ability of government to pursue its transformation agenda.
All these ‘first generation’ BITs were being reviewed with a view to termination, or possible renegotiation on the basis of a “new-model BIT to be developed”.
“South Africa’s updated approach would aim to achieve an appropriate balance between the rights and obligations of investors and the need to provide adequate protection to foreign investors, while ensuring that Constitutional obligations are upheld, and that government retains the policy space to regulate in the public interest.”
South Africa’s legislation in respect of the protection offered to foreign investors would be overhauled by codifying typical BIT provisions into domestic law, while clarifying their meaning in line with the Constitution.
“We would also seek to incorporate legitimate exceptions to investor protection where warranted by public policy considerations such as, for example, for national security, health and environmental reasons or for measures to address historical injustice and/or promote development,” Davies averred.
The inter-Ministerial committee dealing with investment, international relations and economic development would oversee all decision-making in respect of future investment deals.
Director of Unctad’s investment and enterprise division, Dr James Zhan, said a number of countries were undertaking similar exercises and expressed the hope that the IPFSD would offer a basis for greater global consensus on the matter.
The framework offered something of a middle way between the liberalisation of investment frameworks pursued during the 1990s and the move towards tighter regulation, pursued since the economic crisis of 2008.
Zhan indicated that the framework recognised the potential for FDI to support a country’s growth and development aspiration, but also created room for countries to pursue national policy choices, including active industrial policies.
Davies argued that South Africa and Africa were on the “cusp” of a new wave of investment, and that well-crafted investment policies were required to ensure that development flowed from such FDI.
South Africa recorded a sharp turnaround in FDI inflows during 2011, which rose to $5.8-billion, or 13.6% of Africa’s total, during the period. The rebound from $1.2-billion in 2010 was underpinned by Wal-Mart’s acquisition of a stake in Massmart, as well as mining-related corporate activity.
The performance of Africa’s largest economy also accentuated the recovery in the FDI inflows to sub-Saharan Africa as a region, which recovered from $29-billion in 2010 to $37-billion in 2011 – a level comparable with the 2008 peak. Inflows to Africa as a whole declined, meanwhile, for the third successive year, to $42.7-billion from $43.1-billion in 2010. However, the decline was caused largely by the fall-off in investment to Egypt and Libya.
Unctad said the outlook for Africa was “promising”, owing to improved investor perceptions, which were driven by relatively strong growth, higher commodity prices and economic reforms.
Davies was particularly keen for Africa, or for the Southern African Development Community, to adopt a common investment framework in the area of natural resources. In light of commodity demand from emerging Asia, the Minister was of the view that there was potential for a new competitive advantage to be created around access to Africa’s mineral assets.
“South Africa needs to construct a competitive advantage for our own manufacturing around access to mineral products. [But] that is going to require a policy intervention and it is here where the investment regime will prove important.”
South Africa was already pursuing this ambition on a bilateral basis, but “we will do better if we had a common understanding across Africa”.
The aim would be to capture investor commitments that went beyond technology transfer, skills development and competitiveness improvements and which began to include stipulations on value addition.
“South Africa has to make the transition from being a producer and supplier of ‘dirt out of the ground’ to producer and supplier of a higher level of beneficiated products,” he said, noting the material selling price differential between, for instance, mineral sands ($440/t) and titanium alloy ($100 000/t).
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Infrastructure News
Updated 53 minutes ago There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
Updated 53 minutes ago The R41-million pumpstation for the Ludeke dam, in the Eastern Cape, is in the process of being commissioned and will soon help alleviate the water shortages being experienced in the Mbizana region.
Updated 7 hours ago South Africa’s economic transformation and inclusive growth will not result from a single intervention but rather a range of mutually supporting initiatives, Deputy President Cyril Ramaphosa said on Thursday, adding that in many cases this did not require new...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
Updated 1 hour 5 minutes ago South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
Updated 1 hour 5 minutes ago There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
Updated 1 hour 5 minutes ago The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
Updated 1 hour 5 minutes ago UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Updated 1 hour 5 minutes ago Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...