Reg­u­la­tory frame­works vi­tal for FDI

There is much op­por­tu­nity for Africa to at­tract in­vest­ment flows

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - GREG NOTT

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.

Coun­tries such as SA 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 Black Eco­nomic Em­pow­er­ment (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 work.

Many African coun­tries have im­ple­mented reg­u­la­tory re­forms to specif­i­cally at­tract FDI. Out of the 15 South­ern African De­vel­op­ment Com­mu­nity (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 SA, 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 un­der re­view.

African coun­tries are tak­ing FDI se­ri­ously and look­ing to pro­mote in­vest­ment where pos­si­ble. How­ever, over­com­ing neg­a­tive per­cep­tions about in­vest­ing on the con­ti­nent is also vi­tal to at­tract­ing more in­vest­ment in fu­ture.

Ac­cord­ing to a re­cent sur­vey car­ried out by Ernst & Young, cap­i­tal in-

Re­forms are re­quired to meet the de­mands on the con­ti­nent’s grow­ing econ­omy and to ward off the in­evitable strains which will be placed on coun­tries as a con­se­quence of the in­ter­na­tional eco­nomic woes ex­pe­ri­enced by some of its main trad­ing part­ners.

SA’S Min­is­ter of Fi­nance ended 2011 with a hopeful note for those want­ing to in­vest in the coun­try. He an­nounced that within a year to a year-and-half a clear, le­gal reg­u­la­tory frame­work will be in place to pro­vide for­eign and lo­cal busi­ness a clear picture of how to go about in­vest­ing in SA. No doubt this nec­es­sary ini­tia­tive will be wel­comed by com­men­ta­tors and busi­nesses alike. In ad­di­tion we will see moves afoot in other African states which are in need of such reg­u­la­tory re­form.

Many African coun­tries have im­ple­mented reg­u­la­tory re­forms to specif­i­cally at­tract FDI Out of the 15 South­ern African De­vel­op­ment Com­mu­nity (SADC) mem­ber states, for ex­am­ple, 12 have a spe­cific law gov­ern­ing pri­vate in­vest­ment, and/or for­eign...

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