South Africa’s Promotion and Protection of Investment Bill, which was signed into law by President Jacob Zuma in December, is likely to dull the appetite of potential German investors, as provisions contained within the newly enacted legislation effectively deprive the investor of any protection against discrimination by domestic legislation or administrative Acts, says the Southern African-German Chamber of Commerce and Industry (SAGCCI).

Addressing a gathering of German business leaders on Thursday, SAGCCI CEO Matthias Boddenberg said the chamber’s concerns over the then-proposed Bill were last year disregarded, when it, along with business chambers representing other European and US interests, requested certain amendments to the investment legislation to pacify rattled foreign funders.

The law would come into force on a date yet to be revealed by Zuma.

“Most of the companies [represented by the chamber] are unhappy about the new law, as there is a feeling that their investment is not properly safeguarded,” he commented during an address at the SAGCCI’s offices, in Forest Town.

Johannesburg-based think tank the Institute of Race Relations (IRR) last year described the proposed legislation as counterproductive, vague and in violation of South Africa’s trade commitments under the Southern African Development Community, or SADC, Protocol.

IRR policy research head Dr Anthea Jeffrey said in October that the dissolution of the Department of Trade and Industry’s various European bilateral investment treaties (Bits) and the shift towards a more protectionist investment policy signalled an intensification of government ideology that veered away from trade with the West and towards ramped-up trade with its Brazil, Russia, India and China, or Brics, partners and other emerging States.

Pointing to issues of concern, the SAGCCI last year called for further information on the circumstances – if any – under which the special treatment of foreign investors was justified, calling for this to be conclusively listed in the Act.

“It should be clarified that such different treatment may qualify as nationalisation, expropriation or an equivalent act and may thus entitle the investor to compensation,” the chamber outlined in its submission.

The SAGCCI further asserted that it should be clarified that foreign investors had a right to establishment – to the same extent as local investors and on the principle of equal treatment.

“The Bill provides for national/equal treatment only in ‘like circumstances’. We acknowledge that, in order to determine the scope of equal treatment, the circumstances under which the investments are made have to be evaluated.

“However, the fact that the investment is foreign cannot be considered in such evaluation, given that the purpose of the provision is to provide for national/equal treatment in like circumstances. ‘Regardless of nationality’ should thus be [included] and references to the fact that the investment is foreign should be removed,” held the chamber.

The Act also did not clearly state that acts having a similar effect as expropriation entitled the investor to compensation and, to encourage foreign investment, the Act should grant investors access to international arbitration in respect of investment disputes.

“We will see what effect [the Act] has, but we haven’t seen major new investment in the last two years [and we think] that new investment will be negatively affected by this law,” remarked Boddenberg.

He nevertheless noted that trade ties between South Africa and Germany remained solid in 2015, with trade volumes hitting €15-billion – equalling trade flows between Germany and Canada, Mexico and Japan respectively.

While German exports to South Africa increased by 18% over the year, South Africa’s export of goods and services to the European State expanded by 20% year-on-year to reach €5.4-billion.