South Africa Policy, Plans and Priorities
Investment Protection and Dispute Settlement
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- 1.19International Agreements and Obligations – Trade and other Agreements, BITs, DTTs
1.18 Investment Protection and Dispute SettlementConstitution of the Republic of South Africa No. 108 of 1996 Section 3 Equality
Section 25 Property (1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.
Expropriation (Establishment of Undertakings) Act, No. 39 of 1951 provides for the expropriation of land and the taking of the right to use land temporarily for, or in connection with, the objects or undertakings of national importance. Dispute Settlement The legal and judicial system in South Africa is well developed. Disputes may be resolved by arbitration. The Arbitration Act 1965 regulates arbitration and does not distinguish between international or South Africa arbitration. The Act is not based on the UNCITRAL Model Law although it has many similar provisions and is less prescriptive than the model law. The High Court has jurisdiction to enforce awards. 1.19International Agreements and Obligations – Trade and other Agreements, BITs, DTTsWTO South Africa is a founder member of the General Agreement on Tariffs and Trade (GATT), which was replaced by World Trade Organisation (WTO), and is a member of WTO since 1 January 1995. SA-EU TDCA SA – EU Trade Development and Cooperation Agreement (TDCA) 1999 signed in Pretoria on 11 October 1999 aims, among other things, to establish a free trade area over a 12 year period covering 90% of bilateral trade. The implementation of this agreement is overseen by the Joint Co-operation Council which also functions as a forum for overall dialogue between the EU and South Africa. South Africa, while part of the ACP group of countries, was not party to the same preferential trade arrangements granted to the ACP under the Cotonou Agreement (2000). For the Economic Partnership Agreements (EPAs) which are the trade pillar of the Cotonou Agreement, South Africa joined the negotiations with the SADC EPA group in February 2007. 5 of the 7 countries in the SADC EPA Group have initialled and are close to signing an interim or "stepping stone" EPA, South Africa has opted not to join at this stage as its trade relations with the EU are governed by the TDCA. RSA has stated that it is in favour of joining a full EPA in the future and will continue to participate in negotiations with the goal of increasing regional integration and boosting competitiveness of the SADC economies. Other Trade Agreements WTO (2009) states that South Africa has bilateral trade agreements with Malawi and Zimbabwe, and that it grants non-reciprocal preferential treatment on a number of products from Mozambique. The 1964 trade agreement with Zimbabwe (a member of COMESA and SADC) is subject to various conditions. The duty-free regime or preferential tariff quotas apply to items including dairy products, potatoes, birds, eggs, some cereals, oil seeds, and oleaginous fruits. Live horses, asses, mules, cotton waste, and metal bedsteads are duty-free, and specified types of woven fabrics of cotton are subject to concessionary tariff rates, when they meet specified levels of Zimbabwean content (75% in most cases). Concessionary customs duties are granted by Zimbabwe on certain products exported by South Africa. Under the 1990 agreement with Malawi (a member of COMESA and SADC), South Africa allows duty-free imports to its market for all goods grown, produced or manufactured in Malawi, subject to a minimum domestic value-added of 25%. Preferential quotas apply to some products, such as tea (10,000 tonnes annually). The agreement also contains anti-dumping and countervailing provisions. South Africa products are eligible for non-reciprocal preferences, including lower tariffs or preferential tariff quotas under the U.S. African Growth and Opportunity Act (AGOA), and the GSP schemes of the EC, as well as of Canada, Japan, Norway, Switzerland, and the United States. SACU-USA TIDCA SACU – USA Trade Investment Development Cooperation Agreement (TIDCA) 2008 provides that the Parties affirm their desire to promote an attractive investment climate and to expand and diversify trade between SACU and the United States. It establishes a Consultative Group on Trade and Investment comprising representatives of each Party to work towards this objective. The Consultative Group is to endeavour to conclude mutually beneficial trade and investment enhancing agreements between the United States and SACU, such as memoranda of understanding, mutual assistance agreements, and cooperation agreements in areas of common interest;
Announcement of Intended Changes RSA intends to enter Preferential Trade Agreements with India and China. In August 2010 National Treasury announced that it is to renegotiate Double Tax Agreements with low tax countries and to complete this exercise by 1 January 2013. The Taxation Laws Amendment Bill 2010 proposes changes in taxation law to promote the establishment of regional holding companies and regional investment fund management in RSA that would invest and carry out activities outside of RSA. DTI BIT Review 2009 In 2009 DTI published a review of Bilateral Investment Treaties. The review was commenced because it was felt that, in the years after 1994, RSA had entered into agreements that were unduly favourable to investors without safeguards to preserve flexibility in a number of critical policy areas. The review suggests that the RSA’s investment approach to both inward and outward FDI has not been informed by a holistic policy perspective but rather a patchwork of general policy considerations. The formal legal basis for FDI policy is scattered across various line function departments that do not always coordinate policy interventions. It is proposed that the legal basis for both inward and outward FDI be placed on a more secure footing by developing an overarching policy on FDI with more direct mechanisms for cooperation. A much closer link must be established between investment promotion activities, industrial policy and trade policy. The Review concluded that RSA should review its BIT practices, with a view to developing a model BIT which is in line with its development needs, balancing the need for investor certainty on the one hand, but also ensuring that its own legitimate interests are not compromised. Further domestic legislative intervention may be needed to ensure that such a balance is achieved. See below list of BITs and DTTs Other Agreements and Laws Convention on Agency in the International Sale of Goods Act, No. 4 of 1986 To provide for the application in the Republic of the Convention on Agency in the International Sale of Goods adopted by the International Institute of the United Nations (UN) organisation, for the unification of Private Law. Protection of Businesses Act, No. 99 of 1978 seeks to restrict the enforcement in the Republic of certain foreign judgements, orders, directions, arbitration awards and letters of request, and prohibit the furnishing of information relating to businesses in compliance with foreign orders, directions or letters of request.
The DTI Medium Term Strategic Framework 2009 states that South Africa plans to play a leading role in efforts aimed at strengthening the SADC region. The focus in the medium term will be:
South Africa, Angola, Botswana, the Democratic Republic of Congo (DRC), and Namibia, signed a Memorandum of Understanding (MoU) on the Western Power Corridor Project in October 2004. The MoU, under the auspices of NEPAD, is to pilot the use of hydroelectric energy from the Inga rapids site to ensure a constant supply of electricity in the SADC region. A joint venture company has been established to study the project's viability, and to build, own, and operate the infrastructure. DTI A South Africa Trade Policy & Strategy Framework May 2010 This Framework reviewed RSA trade policy and strategy, tariff reform and trade performance since 1994 and recommended an approach on trade and tariff policy and strategy and brings greater clarity to linkages with industrial policy. Strategy Framework and Regional Integration The key principles of South Africa’s strategy for global trade integration are set out in the Framework. It states that “South Africa is deeply committed to development integration in Southern Africa that combines trade integration with infrastructural development and sectoral policy coordination. Our approach privileges the policy interventions required to build regional productive capacity and infrastructure as experience has demonstrated that the main barriers to increasing intra-regional trade are often not tariffs. Despite significant liberalisation, there is no discernible growth in intra-regional trade. As such, neither further liberalisation nor the construction of customs unions will necessarily lead to increased, mutually-beneficial and equitable, intra-regional trade. We will require purposeful interventions that address underdeveloped production structures and develop infrastructure and institutions across the region. Trade integration must therefore be complemented by sectoral cooperation and greatly enhanced policy coordination programmes to address real economy capacity constraints.” South Africa Trade Policy and Strategy Framework states “The regional agenda will also need to respond to the Economic Partnership Agreements (EPAs) between the European Union (EU) and SADC countries. As the EPAs will establish a series of different and sometimes incompatible trade regimes between the EU and members of SADC, it is likely to undermine deeper integration in Southern Africa. Member states of SADC and SACU will need to respond collectively to this new challenge to the region’s integration and development strategy.” “South Africa has pursued regional arrangements in Southern Africa through the SADC Trade Protocol and SACU, with the EU under the TDCA, through the SACU-EFTA FTA and through the SACU-MERCOSUR preferential trade agreement (PTA). We have learned important lessons that will inform our future bilateral engagements. First, as compared to free trade agreements (FTAs) more focused preferential trade agreements (PTAs) allows for a more strategic integration process among developing countries. Second, it is increasingly apparent that tariffs are not always the most important barrier faced in foreign markets and hence negotiating outcomes must deal more effectively with non-tariff barriers. Third, we will need to give attention to forging mutually beneficial sectoral cooperation agreements that can support South Africa’s broader development objectives. Further consideration should be given to designing appropriate trade and economic arrangements that suit our economic objectives. This should include an assessment of investment treaties that impact on developmental policy space.” “Importantly, our work on regional integration places emphasis on developing supply-side capacity that will enable countries in the region to diversify their economies as well as to take advantage of opportunities for more dynamic and diverse exports. A more integrated development strategy that includes Spatial Development Initiatives (SDIs), investment promotion into the region, and region-wide industrial development linkages will give strong effect to ‘developmental regionalism’ that South Africa pursues.” DTI Functions and Regional Integration A function of ITED in DTI is to promote regional integration in SACU and SADC, as a platform for integration into the global economy, through development integration that combines: trade integration, policy coordination and sectoral cooperation:
Review of Bilateral Investment Treaties In a Review of Bilateral Investment Treaties July 2009, the DTI states “In the SADC region the Protocol on Finance and Investment (FIP) creates a framework for investment in the SADC region. This instrument seems only to cater for inward FDI and does not cater for intra-SADC investment. There seems to be little or no integration between the FIP and investment protection and promotion policies followed by the RSA. Given the sizeable intra-Africa investments made by RSA companies, the RSA ought to assess how best such investments by its citizens may be safeguarded. Already the issue of diplomatic protection has been raised in the context where no BIT was in place to protect such interests. Different considerations apply in situations where either inward or outward FDI is contemplated. This raises some difficult questions with relation to the appropriate model for investment protection since clearly different needs may be articulated by RSA companies that invest in the African continent or elsewhere and investment entering the RSA. Many countries, particularly developing countries who seek to promote sustainable development, have an investment law which regulates issues pertaining to sectoral interventions, incentives and the role of an Investment Promotion Agency. Clear policy guidelines must inform approaches to both inward and outward investment.” Recommendations on Emerging Trends in BITs The review also contains a legal analysis of various provisions found in BITs. Policy recommendations are made with regard to the emerging legal trends and issues that have come to dominate investment treaties. “In respect of SADC, reference was made to the Protocol on Finance and Investment (FIP), in particular to Annex 1 which deals with co-operation on investment. The Annex aims to create the framework for broader FDI promotion in the SADC and in some aspects emulates the provisions of a typical BIT. The FIP has not been harmonised within current RSA treaty making practice since it appears that standard clauses in RSA BITs differ substantially from equivalent provisions to be found in the FIP. The effect of the Annex appears to be that of promoting the SADC region as an attractive destination for FDI and as such does not really cater for intra-SADC investment, the latter being a factor which is directly relevant to the RSA in respect of its de facto intra-African investment stance and the sizeable investments which the RSA companies are making in SADC and Africa. In this regard, the SADC desk has confirmed that the RSA has entered into five BITs with states in the SADC and that there are several more being negotiated. It was specifically indicated that these BITs were driven by the RSA, largely influenced by private sector interest in SADC countries.”
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