Enabling regulatory frameworks
across Africa are vital for the continent to attract more foreign
direct investment (FDI).
As both developed and emerging
economies seek new markets for growth, there is much opportunity
for the continent to attract investment flows.
One area in which Africa can attract
more investment is the renewable energy space. While China
has established itself as a dominant player in the manufacture of
components of solar energy plants, Africa could compete by
attracting FDI in this area.
"Backed by lavish government
support, tax breaks and incentives, China is now responsible for
half of world production of solar energy components," says
Werksmans Attorneys director, Greg Nott.
He says countries such as South
Africa have established enabling legislation, including the
Integrated Resource Plan to attract investment into the green
economy, but politicians also needed to send the right message
about the country embracing FDI.
"Pre-conditions, such as BEE and localisation requirements,
must be consistently applied. Politicians, labour and business need
to send a unified message that they want to attract more FDI.
Investors want a clear and consistent framework in which to
Many African countries have
implemented regulatory reforms to specifically attract FDI.
Out of the 15 SADC member states, for example, 12 have a specific
law governing private investment, and/or foreign investment or have
established an investment promotion agency.
Countries such as South Africa,
Lesotho and Botswana have no specific FDI legislation, but have
liberal investment regimes. FDI legislation is under review
in Namibia, Seychelles and Zimbabwe, while Botswana's
Industrial Development Act, which deals with licensing, is also
"African countries are taking
FDI seriously and looking to promote investment where possible. But
overcoming negative perceptions about investing on the continent is
also vital to attracting more investment in future," says
According to a recent survey by
Ernst & Young capital inflows into the continent are expected
to reach US$150 billion by 2015, yet Africa still attracts less
than 5% of global FDI projects.
Nott says with Africa forecast to
grow at rates above 5% and as the continent makes strong progress
towards political reform, regulatory and economic stability and
social development, investors will increasingly look to invest in a
range of industries.
But he points out that investors
emphasise stability - both political and regulatory – as
a major consideration when making investment decisions.
"Investors want to know that no
matter whether governments rise or fall, their investments will be
protected by legal frameworks that have the backing of the courts
and that there is a genuine commitment to the rule of
With each of Africa's 54
countries having different legal frameworks in place, bi-lateral
investment treaties have proved successful in setting the ground
rules for attracting FDI.
Most of the major African countries,
including Botswana, Nigeria, and South Africa, have bi-lateral
treaties which set up specific conditions for investors in the host
country. For example, some treaties set the rules for how
disputes will be arbitrated, while others determine issues
regarding tax incentives, double taxation, local procurement and
As Africa seeks to attract FDI
beyond mining and extractive industries, it will also need to look
to broader economic reforms. "Reforms are required to meet the
demands on Africa's growing economy and to ward off the
inevitable strains which will be placed on African countries as a
consequence of the international economic woes experienced by some
of its main trading partners. South Africa's Minister of
Finance ended 2011 with a hopeful note for those wanting to invest
in South Africa. He announced that within a year to a year and half
a clear, legal regulatory framework will be in place so as to
provide foreign and local business a clear picture of how to go
about investing in South Africa. No doubt this necessary initiative
wil be welcomed by commentators and businesses alike. In addition
we will no doubt see moves afoot in other African states which are
in need of such regulatory reform." Concludes Nott.
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The Honourable Minister of Mineral Resources, Ms Susan Shabangu, reinforced during her 2012 budget speech on 10 May 2012, amongst other things, that the Department of Mineral Resources (DMR) remains determined to continue issuing stoppage notices in terms of section 54 of the Mine Health and Safety Act, No. 29 of 1996 (MHSA) to ensure compliance with the MHSA.
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