A leading government official offered German companies – which had collectively invested R25.7-billion into South Africa since the financial crisis alone – an assurance that they had “nothing to fear” as a result of government’s decision to terminate its bilateral investment treaty (BIT) with the country.

Addressing the fourth German-South African Business Forum in Johannesburg, Department of Trade and Industry director-general Lionel October stressed that the Constitution already offered protection to foreign investors, but that these protections would be codified in a new all-encompassing law.

The Promotion and Protection of Investment Bill was currently being negotiated in the National Economic Development and Labour Council and would later enter Parliament’s legislative process.

However, the German Embassy’s economic and global issues minister, Andreas Künne, indicated ongoing discomfort over the termination of the treaty, as well as with the lag between that nonrenewal and the introduction of the new legislation.

He agreed that there had still been sizeable German investment since the termination, included a R5-billion investment by Mercedes-Benz to support the production of the new C-Class vehicle. But Künne stressed that most of those investment decisions had predated the BIT termination and that move had not been seen as a “good sign”.

The German government, nevertheless, was committed to engage constructively with South Africa on the new law. However, it also felt that the gap between the BIT termination and the introduction of the new legislation, which would arise from the end of October, needed to be closed urgently.

October stressed that, while South Africa had not renewed the German BIT, as well as the others it had with selected European countries, existing investors would continue to enjoy BIT protection until the new national legislative framework was in place.

He also highlighted the fact that it had no similar treaties in place with countries such as the US and Japan, whose companies were also large foreign direct investors in South Africa.

German-African Business Association chairperson Dr Stefan Liebing also urged South Africa to focus on supporting a “new wave” of bilateral business ties with Germany, which required a shift in focus to the prospects for investment by smaller German businesses.

Liebing noted that Germany, which remained South Africa’s leading industrial investor and fourth-largest trading partner, had 3.5-million registered businesses and that as many as 500 000 of those had outward-investment potential. At present there were about 600 German firms active across the African continent.

But many of those companies would eschew markets that insisted on the disposal of equity to local partners, which meant that South Africa’s broad-based black-economic empowerment (BBBEE) stipulations could become a constraint.

October responded by saying that South Africa was committed to transforming the racial composition of the South African economy and that its BBBEE rules were sufficiently flexible to enable compliance without the sale of equity.

He was also firm that South Africa would continue to insist on higher and higher levels of local content for items procured by the public sector, which was another possible constraint flagged.

In fact, Künne highlighted localisation and South Africa’s new immigration regime as areas of concern for German business. But he stressed that progress was being made on the immigration issue and that Germany would continue to engage to ensure the realities of global supply-chains were taken into account in South Africa’s evolving procurement regime.

Liebing, meanwhile, said that it was incumbent on the German government to take account of the rising competition for African markets arising from Asia and elsewhere. He, thus, urged it to increase the level of resources available for financial instruments and guarantees.