Money and Markets

Ramaphosa just activated a law that scares foreign investors – and makes it harder for them to fight expropriation

Business Insider SA
  • President Cyril Ramaphosa on Friday put into operation a 2015 law, the Protection of Investment Act, by notice in the Government Gazette.
  • The law was controversial from the start, with foreign governments and companies complaining it will reduce their protection in SA – and may make them disinclined to invest.
  • The law subjects foreign investors to the same rules on land expropriation as anyone else, and keeps legal argument entirely local, unless the government allows otherwise.

President Cyril Ramaphosa on Friday activated a controversial Zuma-era law, the Protection of Investment Act, by publication of a notice in the Government Gazette.

The law had a rough ride through Parliament, with fierce opposition from the DA and intense lobbying by foreign governments and organisations such as the EU Chamber of Commerce and Industry in Southern Africa - which warned it "promotes discomfort leading to discouragement related to new investments".

It was quietly – and initially unnoticed – signed into law by then President Jacob Zuma in late 2015.

But it only came into force by the publication of Ramaphosa's commencement notice on Friday, even though he signed that notice exactly a month before.

See also: A foreign mining investor on why he won’t put money in SA

The law in effect replaces bilateral investment treaties between SA and various countries, which often included special protections – including of property rights – for companies from those countries.

The new law instead specifically gives foreign investors only those rights and protections available to their South African peers.

In doing so it excludes foreign arbitration for dispute. Foreign investors are now required to exhaust all domestic possibilities first before there is an option of international arbitration, and then only if the South African government chooses to allow it.

That provision drew criticism from American organisations and the government of the Netherlands, among others, but more recent developments may move the focus to another aspect of the law.

Under the Protection of Investment Act "investors have the right to property in terms of section 25 of the Constitution."

See also: These are the 3 ways South Africa could go by 2030: iSbhujwa, Nayi le Walk – or Gwara Gwara

That is the clause of the Constitution currently being debated to determine if it should be altered to allow for easier expropriation of land without compensation.

The new law bluntly states that foreign investors should receive no special treatment when it comes government decisions "designed to protect or advance persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability."

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