Canning SA-EU treaties ‘will raise cost of investment’

RELATIONS between the European Union (EU) and SA have soured since the government indicated last month that it was cancelling bilateral investment treaties with the bloc’s member states.

The government argues that the treaties restrict its ability to transform SA’s economy.

But its largest trade and investment partner says cancelling them will raise the cost of investment in SA. The EU fears it is a victim of political bias, and feels shunned by SA’s growing relationship with China and other Brics nations.

Roeland van de Geer, head of the EU delegation to SA, said yesterday that the bloc had told SA to “diversify” its trade and resist the notion it did not need Europe.

“We have also said to SA, ‘improve your investment climate for foreign direct investment’,” Mr van de Geer said.

The killing of miners by police at Marikana in August had caused “huge” ructions in Europe, and constant talk of nationalisation in SA had fuelled investor uncertainty, Mr van de Geer said.

The EU accounted for more than 80% of foreign direct investment in SA, valued at 34% of gross domestic product in 2010, about R916bn.

Axel Pougin de La Maisonneuve, first counsellor of the EU delegation, said foreign direct investment into SA was only one-third of that going to Chile, and lagged far behind other emerging markets.

The EU accounted for about 30% of SA’s trade, with SA exporting R152bn worth of goods to the bloc last year, and importing R223bn worth of EU products.

China accounted for 4% of foreign direct investment in SA in 2010, with SA exporting R85bn in goods to China last year, while importing R103bn in Chinese goods. Trade among SA, Russia and Brazil last year was less than R20bn.