Details are starting to emerge about how the government is planning to manage foreign direct investment.
According to sources close to the process who spoke to the Mail & Guardian on condition of anonymity, the departments of trade and industry, economic development and national treasury are working on a new framework for foreign investment.
This process is expected to link to national treasury’s process to draw up a review framework for all foreign direct investment. One of these sources claim that this could include an investment Act and potentially an investment commission.
However, when the M&G contacted numerous officials in these departments this week, details were sketchy with some claiming no knowledge whatsoever.
This intergovernment co-operation may be under threat — Deputy Minister of Agriculture, Forestry and Fisheries Pieter Mulder stated this week that there was infighting in Cabinet over policy and that a faction was pushing for more socialist policies but coming up against colleagues who favoured a more free-market approach.
Mulder’s statement followed his department’s call for a Competition Appeal Court review of the Competition Tribunal’s decision to approve the Walmart-Massmart merger.
The call was echoed by the departments of economic development and trade and industry. All three departments believe the tribunal did not have all the facts when it made its decision and that the process was procedurally unfair, especially as it related to the discovery of documents and the scheduling of witnesses.
Mulder singled out the call for a review of the tribunal’s decision as a public demonstration of the squabbling in Cabinet.
But when contacted by the M&G, the economic sector government departments suggested that they were all singing from the same page.
Treasury’s discussion document, “A Review Framework for Cross-border Direct Investment into South Africa”, released in February this year, states the importance of “consistency in policy” across all government departments regarding foreign direct investment.
When contacted this week about treasury’s review framework for foreign direct investment, a treasury official said that different departments had different responsibilities in terms of such investment.
“Consistency and coherence in policy does not necessarily mean one policy,” said Unathi Kamlana, the head of the treasury’s financial stability and banking unit.
“Our policy framework will be a co-ordinated framework so that we have different voices from across government.”
The department of economic development said that treasury was driving the process for the new policy framework and that, in its presentation to the parliamentary public hearings on the Walmart-Massmart merger, it had cited the example of Canada, which has legislation — the Investment Canada Act — regulating foreign direct investment on public-interest grounds.
“The economic cluster of ministers and directors general discusses these matters and presents them as a collective to Cabinet meetings and Cabinet lekgotlas,” said the department.
Business Leadership chief executive Michael Spicer said a policy framework was not unusual but needed to be “clear, stable and objective”.
“Foreign direct investment is absolutely fundamental to South Africa’s future. We are receiving less and less of it and, in some measure, this is attributable to the obscurity and contestation within the government, which played out in the recent Walmart-Massmart case.”
Spicer said the lack of transparency and clarity from the government was being interpreted as “government making decisions on the hoof”.
The treasury’s discussion document singles out three major concerns.
The first is that the regulation of cross-border mergers and acquisitions is opaque and does not rely on a clear statement of public-interest objectives and processes.
The second concern is that there is no transparency about the international relocation of South African companies because scenarios are dealt with on a case-by-case basis.
Third is that the policies regarding foreign investment in strategic sectors are not well defined.
“An important aspect of the proposed review framework would be an overarching statement of regulatory principles that will apply to cross-border direct investment, aimed at enhancing certainty for foreign investors and domestic companies while also providing transparent mechanisms for intervention to protect public interest where warranted,” the discussion document states.
“In line with the existing policy of the government, the broader approach to foreign direct investment is based on the principle that most forms of it are expected to have net economic benefits for South Africa and that, across most sectors of the economy, a non-discrimination approach to regulation should apply — an open environment in this context means that foreign investors are not systematically disadvantaged relative to domestic investors.”
Critics of the government’s interventions in the Walmart-Massmart merger have stated that the economic development department’s attempts to get Walmart to agree to procurement quotas were an example of trying to impose an uneven playing field on an international investor, because its domestic competitors would not be subject to the same conditions.
The document says the public-interest concerns that could be included in the framework are the risks to macroeconomic stability, South African companies and the financial systems in South Africa, as well as the need to protect the tax base.
The discussion document is still open for public comment.
The deadline for public input is August 31.