Following what the Department of Trade and Industry (DTI) describes as “an extensive public consultation process”, the draft Promotion and Protection of Investment Bill – which government says will seek to promote inward investment, clarify the level of protection for investors in South Africa and ensure that the country remains open to foreign investment – has been tabled in Parliament.

The Parliamentary Committee would now conduct a public process during which interested stakeholders would be invited to submit comments on the proposed Bill, which was criticised by opposition party, the Democratic Alliance (DA), over what it claimed were insufficient investment protection provisions.

Trade and Industry Minister Dr Rob Davies, however, continued to support the introduction of the legislation, noting in a statement on Wednesday that it aimed to confirm government’s right to pursue Constitutionally-driven national development objectives and recognised the right of governments to regulate in the public interest.

The DTI further argued that the Bill included provisions that expressed South Africa’s commitment to maintaining an open and transparent environment for foreign investors, while recognising the importance of ensuring sufficient scope for the government to regulate all investments to fulfil legitimate national policy objectives.

“In addition, it promotes a balance between the rights and obligations of investors and ensures the equal treatment between foreign and domestic investors. It also provides clarity for the standards of protection applied to investment,” he held.

According to Davies, the Bill built on “already robust” investor protection by clarifying standards of protection routinely found in international investment treaties and bringing these into alignmentwith South Africa’s legal framework.

This emerged amid a growing global discussion on the approach to investment regulation by governments, he said.

“In the 2015 World Investment Report (WIR), the United Nations Conference on Trade and Development argues that the process of reform of international investment agreements needs to be synchronised at national, bilateral, regional and multilateral levels.

“The draft Promotion and Protection of Investment Bill defines international investment law concepts such as national treatment, protection and security, and the transfer of funds in line with Constitutional principles and applicable norms. It further confirms the right to property,” he maintained.

The 2015 WIR presented various policy options, which included safeguarding the right to regulate in the public interest so that limits on State sovereignty imposed by international investments agreements did not constrain public policy making.

It further pointed to the reform of investment dispute settlement mechanisms to deal with the crisis in legitimacy of the current system and called for the expansion of investment promotion and facilitation in international investment agreements.

The report also identified the need to ensure “responsible” investment and enhance the systemic consistency of the international investment agreement regime to overcome gaps and overlaps, as well as establish coherent investment relationships.

“The provision on ‘national treatment’ ensures nondiscrimination between domestic and foreign investors that are in ‘like circumstances’. This further clarifies that government may undertake certain measures for inter alia, purposes of economic transformation and the advancement of certain categories of persons.

“Foreign investors can further expect a level of security as may be generally provided to domestic investors under the provision on ‘security of investment’. Investors further have their right to property reaffirmed in terms of Section 25 of the Constitution. The Bill, in no way, interferes with the protection afforded to investors under the existing bilateral investment treaties,” the Minister indicated.

He added that the rights of investors were entrenched in the Bill, with investors able, through a dispute resolution mechanism, to raise concerns over any government action that affected their rights.

“All investors will be able to submit disputes before national courts or relevant authorities and, subject to the exhaustion of domestic remedies, the government may consent to international arbitration in respect of investments covered by this Act, once promulgated,” he said.

Responding to the announcement this week that the Bill had been tabled, the DA described the proposed legislation as “broad and generic”, leaving critical issues open to interpretation and providing the Trade and Industry Minister wide discretion over important areas of legal protection, such as disputes between investors and the State.

It added that other investment issues, such as intellectual property, had been altogether omitted.

“This Bill simply will not assuage the many valid concerns that international investors have about the direction of government policy in South Africa. It is poorly drafted and ambiguous and it needs to be extensively ‘beefed up’ in the Parliamentary process.

“We welcome, [however], the fact that the new draft has removed the ominous ‘custodianship’ clause that was in the first version, and that the Constitutional guarantee to the security of property rights has been reinforced,” it stated.

The party further argued that the Bill added to uncertainty around South Africa as an investment destination, driving a decline in foreign direct investment over the last 18 months.

It committed to working to strengthen the Bill within the upcoming Parliamentary Committee consultation process.