26/07/12 Minister of Trade and Industry Rob Davies during the launch of Investment Policy Framework held at Wist University JHB. (505) Photo: Leon Nicholas

The merits of “a new generation of investment policies” were highlighted yesterday by Trade and Industry Minister Rob Davies.

At the South African launch of the UN Conference on Trade and Development’s (Unctad’s) sustainable policy framework, he said the benefits of investment to host countries were not automatic. And he warned that the rights and obligations of investing firms needed to be carefully balanced.

He spoke of the need to prevent intrusion on the government’s “policy space” and he proposed regulations “to ensure that investments make a positive contribution to sustainable development in the host state”.

He cited the need for technology transfer, skills development, research and local economic linkages, saying these elements needed to be built into the investment regime, and not taken for granted. “New thinking and practice in international economic policy-making, notably with respect to the role of the state in economic development, finance and industry, also need to find expression in international investment.”

Davies said the cabinet had decided that all bilateral investment treaties, “which South Africa signed shortly after the democratic transition in 1994, many of which have now reached their termination dates, should be reviewed with a view to termination”. Alternatively they could be renegotiated on the basis of a new model “still to be developed”.

Commenting on this decision, Peter Draper, a senior research fellow at the SA Institute of International Affairs, said the government was “right to be wary of the implications of these early treaties”.

He said they had been signed at a time when South Africa needed to establish itself on the global investment stage and had often “given away too much”.

But he cautioned: “(The) government needs to be careful how it implements the desired changes.” He noted South Africa needed investment from abroad and there was already concern about changes in the policy environment and repeated threats of nationalisation.

Goolam Ballim, the chief economist at Standard Bank, said the “optimum level of foreign investment is difficult to determine”.

He said that while foreigners should not be encouraged to make excessive or inappropriate claims on local assets, a “tailored approach” to investment policies was needed and the benefits of globalisation should not be discarded.

Neren Rau, the chief executive of the SA Chamber of Commerce and Industry, said foreign investors “battle with the concept of broad-based black economic empowerment”. And he said local policymakers should be aware that emerging market peers were competing for the same slice of foreign direct investment. “And in many African countries it is much easier to do business.”

Davies’ theme was echoed by Unctad director James Zhan, who said the Unctad framework provided the guidelines for the new-generation policies. He said there had been a shift in this direction since 2003 but noted an exception last year.

Unctad’s 2012 World Investment Report stated: “Compared with 2010, the percentage of more restrictive policy measures showed a significant decrease, from approximately 32 percent to 22 percent.”

However, Zhan said, “we still see significant policy changes in the direction of regulation”.

In response to a question he conceded that the definition of “sustainable investment” was controversial and that protection could impose a “layer of complexity” on negotiations, making investment treaties more cumbersome.

But he argued that the prime consideration was ensuring that the benefits from investment were sustainable.