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US ambassador says tender spat, legislative uncertainties souring SA’s image

17th October 2014

By: Terence Creamer

Creamer Media Editor

  

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US ambassador to South Africa Patrick Gaspard expressed concern last week about alleged irregularities in the recent Eskom tender for the replacement of steam generators at the Koeberg nuclear power station in Cape Town.

The R4.3-billion contract was awarded to Areva, of France, in September. However, Westinghouse Electric Company, which is owned by Toshiba but headquartered in the US, subsequently launched an expedited review application in the South Gauteng High Court challenging the tender process.

Speaking at a business forum hosted jointly by the Nepad Business Foundation and Nedbank, Gaspard said he was committed to ensuring that US companies were treated fairly under South African law regarding tendering and procurement opportunities.

“We are concerned, for example, when a major foreign investor like Westinghouse brings legal action on a tender that recently happened on the awarding of a contract by Eskom to upgrade the Koeberg nuclear power plant. It’s just not the kind of message, the kind of image that any of us want in this partnership right now.”

Speaking from the same platform, US Chamber of Commerce African affairs and international operations VP Scott Eisner said the Eskom-Westinghouse dispute served to perpetuate the perception that “things aren’t as transparent” as they should be.

Gaspard argued that the dispute, together with recent legislative developments, was souring perceptions about South Africa’s investment climate.

The ambassador made specific reference to amendments to the Mineral and Petroleum Resources Development Act, the Private Security Regulatory Amendment Bill and the decision by the South African government to terminate bilateral investment treaties (BITs) in favour of the Promotion and Protection of Investment Bill.

While the US was not affected directly by the termination of the BITs, having never concluded such a framework with South Africa, Gaspard remained uneasy about the signal the terminations were sending.

Similar concerns had been raised by a number of European diplomats and business people, with the German embassy recently airing its discomfort over the termination of its treaty with South Africa, as well as with the lag between that nonrenewal and the introduction of the new legislation.

“We are working with the South African government to make them aware of these concerns, of course, and the picture that they are drawing for potential investors,” Gaspard added.

South Africa, he noted, was competing with many other countries, including other African countries, for foreign direct investment. And any “post-Madiba glow” (referring to former President Nelson Mandela’s clan name) would be a secondary consideration to “likely yields” when investment decisions were ultimately taken.

Eisner was even more forthright, saying that the Westinghouse dispute and a compendium of legislative and policy uncertainties were “all challenges that the American community and, quite frankly, Congress are not looking past any longer”.

He said the chamber continued to support the renewal of the Africa Growth and Opportunity Act, but stressed that the environment in the US had changed materially since it was first introduced 14 years ago.

American politicians and business people were increasingly expecting African governments to offer predictability and foreign private-sector interests to be considered, and consulted, when legislative changes were being contemplated.

Eisner indicated that US firms were particularly troubled by a trend in Africa towards “forced localisation”, which he described as short-sighted and out of kilter with global supply-chain realities. The focus should, instead, be on fostering sustainable growth and development, as well as job creation.

The South Africa government was prioritising localisation as part of a broader reindustrialisation thrust. But Trade and Industry Minister Dr Rob Davies had also stressed that, while South Africa was insisting upon local content in all public procurement, it did not preclude foreign investors from participation.

He told Japanese diplomats and business people recently that, if Japanese companies set up domestic productive capacity, “national treatment” would be given to such goods. “But if you want to put your goods on a boat and bring them over, you don’t count – come here and invest, create productive capacity here and you do count,” Davies added.

Gaspard argued that “clear, consistent” messages would help countries improve their reputations, as would open and transparent consultations with stakeholders ahead of major legislative or policy adjustments.

He added that South Africa still offered the “overall” best investment environment for US firms seeking to enter sub-Saharan Africa and that he intended to continue to engage with the South African government to deal with areas of concern.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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