Collection: Benchmarking Foreign Direct Investment in Southern Africa

Foreign direct investment (FDI) has been a hot topic in South Africa, following the government’s unilateral cancellation of bilateral investment treaties (BITs) with the European Union and the release of the draft Promotion and Protection of Investment Bill. But what is FDI, and why is it important? What are the other issues at play in the region when it comes to investment?

The South African Institute of International Affairs (SAIIA), through its Economic Diplomacy Programme has been monitoring the South African government’s approach to regulating the protection of foreign investments and investors. This was sparked by the South African government’s decision to terminate, or not renew, bilateral investment treaties (BITs) with certain European Union (EU) countries followed by the drafting in November 2013 of a domestic instrument to replace the BITs. The domestic statute intended to replace the BIT framework is the Promotion and Protection of Investment Bill (PPIB) of 2013.

Along with other legislative measures being contemplated, the result of implementing the PPIB could be a significant deterioration in South Africa’s investment attractiveness. Some of the other statutes which are currently being considered and have a bearing on the country’s investment attractiveness include the Minerals and Petroleum Resources Development Act Amendment Bill that seeks to grant the State more involvement in the sector by, for instance, claiming a 20% interest in the sector’s enterprises. The Private Security Industry Regulation Amendment Bill is another piece of legislation in the pipeline which will mandate the divestment of 51% share equity to local firms. Included in this cohort of legal instruments are the Valuation Bill and the Expropriation Bill including discussions relating to restriction of foreign land ownership.

Perhaps one of the major concerns has indeed been the fact that South Africa has decided to wholly locate its FDI regulatory regime within a domestic framework. This has been precipitated by the fact that South Africa, like many other countries, has become disillusioned with the international investment regime anchored on the investor-state dispute settlement (ISDS) system which itself is facing a compelling legitimacy crisis.

SAIIA’s Economic Diplomacy Program has been engaged in cutting-edge policy research on South Africa’s rapidly changing FDI regulatory regime and locating it in an equally dynamic international investment law and policy framework.

This work has been funded by the British High Commission

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Events

  • International experiences in foreign direct investment (FDI): Lessons for South Africa, event by SAIIA’s Economic Diplomacy Team

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