POLITICS

No clear relationship between BITs and FDI flows - Rob Davies

Minister says govt has consulted extensively with its investment partner governments on the issue of bilateral investment treaty termination

THE NATIONAL ASSEMBLY

QUESTION FOR WRITTEN REPLY

2959. Mr L S Ngonyama (Cope) to ask the Minister of Trade and Industry: [Interdepartmental transfer on 1 November 2013]

(1) Whether he has found that the process the Government has employed to terminate bilateral investment treaties has impacted negatively on foreign direct investment confidence; if not, what is the position in this regard; if so,

(2) whether the Government has taken steps to improve this process; if not, what is the position in this regard; if so, what are the relevant details;

Reply

Studies over many years indicate there is no clear relationship between BITs and FDI flows. The relationship is, at best, ambiguous and it is clear that BITs are neither necessary nor sufficient to attract FDI. The return to investment, the rule of law, macroeconomic and political stability are the key reasons foreign capital locates in a particular country. South Africa performs well on all these fronts. In its latest assessment of global FDI flows, UNCTAD that shows that growth of FDI to South Africa was 7th highest in the world over the first half of 2013. FDI into South Africa changed from an outflow of R1,4 billion in the fourth quarter of 2012 to an inflow of R12,9 billion in the first quarter of 2013 and R17,4 billion in the second quarter. FDI flows in 2012 to SA were up on 2011 by 7.7%, in a year when they were down globally by 18%. Mercedes Benz just decided to invest R3bn in South Africa.

The South African Government consulted extensively with its investment partner governments on the issue of BITs termination, It is recalled that the Cabinet decision to terminate BITs was published in July 2010. We reminded all investment partners of our intention during the UNCTAD Investment Conference in Qatar in May 2012, at the UNCTAD Trade and Development meeting in September 2012, and at the OECD investment meeting in November 2012. In October and November 2012, we held direct consultations with representatives of all the EU member states based in South Africa. DIRCO and DTI together held consultations with each of the affected members in August 2013 on a one-on-one basis.

Issued by Parliament, November 4 2013

 

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