The role of Government in Business- Facilitation through Bi-lateral Agreements.

1. The role of Government in Business- Facilitation through Bi-lateral Agreements. 19th July 2011 Makgabo H Tsiri Deputy Director: West Africa Economic Bilateral International Trade and Economic Development Division, the dti.

2. Natively, the role of government is to enact policies that will ensure a conducive environment for business to thrive and; That end-users of goods and services have value for their money. The fall of the Berlin Wall, meant the triumph of the Bretton Wood Institutions. Increased international trade and investment activities that calls for a diplomatic fitness and fineness. Moderate shift from political diplomacy to economic diplomacy and subsequently commercial diplomacy. In SA the above role is co-shared by the DIRCO and the dti’s ITED & TISA Divisions. Role of government in business (context).

3. ITED’s purpose is to promote trade & investment links with key economies in a manner that will encourage economic development, through negotiating preferential trade agreements. At the Multilateral Level supporting a strong, equitable multi-trading system(of the WTO) and fostering economic integration with the continent within the NEPAD framework, i.e. EAC, COMESA & SADC proposed FTA. At the bilateral, especially in Africa Facilitate the African Development Agenda, through developmental foreign economic relations. The International Trade and Economic Development.

4. Negotiation of bilateral treaties that will grant SA a preferential market access for its exports and investments. African continent is an important destination for South Africa’s value added and diversified exports. South Africa is a significant source of investment for other African countries – largest investor on the continent. However, trading with the continent should not be a mere business transaction. Widening trade gap in favour of South Africa- potential to brew tensions. South Africa’s developmental foreign economic policy towards the continent.

5. Market development and managing the widening trade imbalance; Build infrastructure inter-connectors to enhance intra-regional trade & investment; Trade facilitation through removing non-tariff barriers & lowering transaction costs; Strengthen local stakeholders in country to which we export and investment, Mobilize and leverage domestic resources to support for development; ie, forge Joint Venture partnerships, Corporate Social Investments and promotion of local content policies. Encourage SA firms to adopt backward or forward linkages to develop local business to encourage diversification of markets by adding value, increase production and competitiveness. South Africa in the pursuit of the African Agenda.

6. South African growth and economic development can have an even more profound impact in African development (Recent studies from the IMF indicate that South Africa’s growth has a positive effect on Africa’s growth). Trade (direct and indirect effects-spillovers) – an increase in intra-Africa trade. Market and product diversification. Strengthening of institutions and the harmonisation of policies, standards and customs. Enhancing bilateral relations (BIPPA’s, MOU’s, technical assistance, secondments and capacity building). From umbilical to mutual beneficial & developmental relations with the continent

7. Key and strategic partners TUNISIA MOROCCO A L G E R I A Western Sahara L I B Y A EGYPT RED SEA MAURITANIA M A L I C Verde NIGER Senegal Gambia Eritrea CHAD S U D A N Guinea- Bissau Guinea BURKINA FASO GULF OF Djibouti ADEN BENIN Sierra Leone NIGERIA Ivory Coast Ethiopia TOGO GHANA C.A.R Liberia Cameroon Sao Tome & Principe S O M A L I A Uganda DRC Eq. Guinea KENYA C O N G O Gabon Rwanda Burundi SEYCHELLE TANZANIA COMOROS MAYOTTE ANGOLA Z A M B I A Malawi M A D A G A S C A R M O Z A M B I Q U E ZIMBABWE NAMIBIA BOTSWANA LESOTHO SWAZILAND SOUTH AFRICA MAURITIUS

8. Instruments for promoting, Political, Economic and Commercial diplomacy in Africa? Govt-to-govt engagement platforms: The DIRCO remained a pathfinder in establishing and strengthening formal diplomatic ties- initiating government to government relations platforms. Bi-National Commissions (BNCs), PJCCs, ect. Why? Structures governing relations, deepening bilateral relations, setting work programmes with benchmarks, locking-in commitments. 2. Outward investment facilitation: Fact-finding missions Sector-specific technical team missions Project-specific outward investment missions Investor and trade conferences.

9. South Africa Trade with the continent

10. South Africa Trade with the continent. • Could this trend be attributed to the signing of BITs with continent?

11. South Africa Trade with the continent…cont. • Or is these the combination of other external factors, i.e. the demise of apartheid, the fall of the Berlin Wall and its impacts on Africa?

12. Promoting economic diplomacy through BTIs? 3. Investment enabling agreements: Negotiations of Preferential Trade Agreements (PTAs), Bi-lateral Investment Treaties (BITs) and MoUs on Economic Co-operation. Why BITs? facilitate a conducive environment and protection of investments through internationally enforceable dispute settlement mechanisms. Create investor confidence. Why MoUs? overall framework for the dti activities. Coverage: technical capacity-building, industry collaboration, spatial development initiative program implementation, investment facilitation.

13. To BITs or not to BITs?..cont.. Since 1994, SA signed several BITs both as a net recipient of FDI and as a net exporter of FDI to the African continent. West Africa region Nigeria, Ghana & Senegal. Southern Africa region Mauritius, Zimbabwe, Mozambique, Tanzania & Angola East and Central Africa region - Rwanda, Equatorial Guinea, DRC, Ethopia & Sudan North Africa region - Algeria, Tunisia & Libya

14. To BITs or not to BITs?..cont.. While BTIs are important in the protection and promotion of investments, Decision to invest and not to investment rest solely with some of the following: Size of the market, purchasing power and nature of consumer. Access to other markets,i.e horizontal FDI Incentives, i.e Vertical FDI However, investor still consider agreements that the potential host country have with others for exploitation of economies of scale.

15. Experience in the facilitation of business in Africa. Bilateral agreements are necessary but not sufficient. Absence and inconsistencies in the application and enforcing the rule of law. Inconsistent imposition of bans on importation of certain products, which often lead to non-tariff barrier. Cumbersome and even inconsistent port clearance process, despite customs administration and standards harmonisation agreements in place. More often, political capital to facilitate business. Government to government relations are often slow, owing to change in administrations, which often affect engagements.

16. Government’s stance on signing BTIs. Since 2007 government place a moratorium on negotiating further BITs. Adopted a new framework for negotiating BITs in 2010. Protection of all investors, while preserving sovereign right to pursue its developmental agenda. Decision to BITs or not to BITs will vary from case to case. Pursue developmental public policy objectives. Potential challenge in renegotiating or terminating the existing BITs. SA boast an international reputation and record of excellence and independence judiciary. Empower domestic adjudication of investment disputes.

17. Government’s experience on of signing BTIs. They tend to overly protect foreign investors. Does not give government a space to pursue its developmental agenda: Swiss investor challenged the Government on the basis of the Full Protection and Security clause contained in the BIT between South Africa and Switzerland. Foresti v Govt of RSA case where the Government was sued by Italian investor on the basis of the BIT between RSA and Italy. Recently, Mr. Michael Duerr, a German investor in the South African Reserve Bank, also use BIT signed with Germany as a collateral to advance his argument. 

18. Thank you!