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South Africa can learn from SADC neighbours about policy – Leon

Herbert Smith Freehills Africa practice cochairperson and partner Peter Leon

Herbert Smith Freehills Africa practice cochairperson and partner Peter Leon

Photo by Duane Daws

12th December 2016

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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Despite being a small, agriculturally marginal, predominantly semi-arid, landlocked nation, Botswana has experienced rapid economic development, owing to the correct policies being in place.

This, Herbert Smith Freehills Africa practice cochairperson and partner Peter Leon said, showed what can be done with the right institutions supporting such policies, noting that South Africa could learn several lessons from its Southern African Development Community (SADC) counterparts.

Speaking at the first yearly Southern African international arbitration conference, at the University of Pretoria, he noted that a welcoming investment climate for domestic and foreign investors required clear and consistent policies, as well as the robust protection of property rights.

“Essential to these are independent institutions which promote as much as protect good governance, staffed by suitably qualified personnel who uphold the rule of law.”

He added that inclusive economic institutions foster economic activity, productivity, growth and economic prosperity.

“Secure private property rights are central, since only those with such rights will be willing to invest and increase productivity. A businessperson who expects his output to be stolen, expropriated, or entirely taxed away will have little incentive to work, let alone any incentive to undertake investments and innovations. But such rights must exist for the majority of people in society,” Leon highlighted.

SADC PROTOCOL

In 2006, the SADC member States adopted a protocol on finance and investment, which was enforced in 2010. The protocol requires that all SADC States must harmonise their investment regimes, including policies, laws and practices, in accordance with international best practice while establishing predictability, confidence, trust and integrity by adhering to and enforcing open and transparent investment policies, practices, regulations and procedures.

Further, the protocol called for the creation of favourable conditions to attract investments in its territory through suitable administrative measures and expeditious clearance of authorisations; no expropriation or nationalisation of property without a public purpose; affording foreign investors fair and equitable treatment, no less favourable than that granted to investors from any other State, as well as facilitating the repatriation of investments and returns, and encouraging the free movement of capital.

Citing the example of Mauritius, Leon pointed out that after its adoption of the SADC protocol, the country took an immediate lead in improving its investment climate.

Since 2007, Mauritius has concluded at least 12 new bilateral investment treaties (BITs), of which at least six have been implemented. The island nation also enacted an International Arbitration Act, adopting the United Nations Commission on International Trade Law, or Uncitral, Model Law, "the global gold standard for the resolution of commercial disputes".

Further, Mauritius also effectively replaced South Africa as the Hague-based Permanent Court of Arbitration’s Regional Facility for Africa.

In 2011, the government announced a “new economic diplomacy initiative to position Mauritius as the preferred gateway for investment into Africa” and since then, the island nation has updated its Investment Promotion Act of 2000, establishing a dedicated board of investment, to improve the investment environment and promote Mauritius as an attractive base for investments.

At the regional level, the harmonised implementation of the SADC protocol entailed two streams of work: the development of an SADC model BIT and the development of an SADC investment policy framework (IPF).

In June 2012, the drafting committee completed the SADC model BIT template to be used by SADC States “as a basis for developing their own specific model investment treaty or as a guide through any given investment treaty negotiation”.

Also in 2012, SADC engaged the assistance of the Organisation for Economic Cooperation and Development in developing an IPF.  Workshops over the next three years yielded basic norms including strengthening security and protection of investors’ property rights; providing well-defined rights for land access and use; reducing and refining restrictions on foreign investment; facilitating private participation in infrastructure investments and promoting good governance of State-owned enterprises; building a coherent and transparent investment environment; and ensuring responsible and inclusive investment for development.

SOUTH AFRICA'S INTRANSIGENCE

“Both streams of work have, however, been undermined by the South African government, which has unilaterally undertaken measures that are irreconcilable with the SADC protocol,” Leon said.

Despite the SADC Model BIT being completed in June 2012, for the very purpose of negotiating and renegotiating more balanced BITs, South Africa instead, only two months later, started a campaign of unilaterally terminating all of its BITs with European Union member States, as well as Switzerland.

And, despite the SADC IPF being due for completion in November 2015, South Africa inexplicably rushed the Protection of Investment Bill through Parliament in September and October 2015.

“The Bill, which became an Act after signature by President Jacob Zuma in December 2015 is in conflict with key provisions of the SADC protocol,” Leon stated.

The government admitted this and asserted that the protocol would thus be amended to accord with South Africa’s domestic law. “As a result, the SADC IPF apparently no longer has any foreseeable date for completion and the project of harmonising the region’s investment regimes has been halted indefinitely,” he pointed out.

Leon added that, in the ten years since the SADC protocol was adopted, South Africa has been left far behind by Mauritius as the top African economy on a number of competitiveness indices.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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