Johannesburg - South Africa’s National Assembly approved a bill to protect foreign investment that’s drawn criticism from business groups.
“The bilateral investment treaties were signed before the present constitution and we decided to let them lapse and then have this piece of legislation that guarantees their right to be treated like any other company operating in South Africa,” Trade and Industry Minister Rob Davies told reporters in Cape Town on Tuesday.
The Promotion and Protection of Investments Bill ensures “fair and equitable” compensation for any assets expropriated by the state, rather than the “fair market value” in most of the bilateral agreements. It also scraps an obligation by the state to submit disputes to international arbitration. Companies can argue their case in the nation’s courts and the law allows for state-to-state arbitration, at the South African government’s discretion.
The American Chamber of Commerce in South Africa was among business groups that criticised the law, saying removing the obligation to international arbitration may make investors less confident that their investment is secure.
“This bill is part of a worrying trend that South Africa’s protection of private property is weakening,” Carol O’Brien, executive director for the chamber, said by phone on Tuesday.
The bill must still be considered by Parliament’s second house before being sent to President Jacob Zuma for approval.
BLOOMBERG