German-South Africa Business Forum

The 4th German-South Africa Business Forum conference, organised by the German-African Business Association (Afrika-Verein) and the Southern African-German Chamber of Commerce and Industry (AHK), recently took place in Johannesburg. High-level representatives of German and South African business, and senior South African government officials, attended. The goal of the conference was twofold, serving as a networking opportunity and as a catalyst for discussions aimed to improve German-South African business relations.

The morning’s opening remarks by Clive Kellow, president of AHK, and Dr Stefan Liebing, Chairman of the Afrika-Verein, set the tone for panels to come: Germany and South Africa are on good terms, and as such discussing issues of concern should benefit both parties. Specific issues of concern they raised included, inter alia, the new BBBEE requirements, “deindustrialization”, and the Promotion and Protection of Investment Bill (PPIB) in the wake of the Department of Trade and Industry’s (the dti) cancellation of South Africa’s Bilateral Investment Treaty with Germany. The dti’s Director General, Dr Lionel October, in reply to the concerns raised, ended his keynote speech with reassurance that German investments in South Africa are protected under the South African constitution. However the bulk of Dr October’s speech focused on the successes of post-apartheid South Africa and, somewhat paradoxically, reflected on the strong economic ties that South Africa has forged, most notably with the BRICS group.

Since South Africa’s termination of BITs with European countries the investment climate has become disconcerting for German companies even more so as the draft policies and amendments set to replace them lean toward inward-looking trade and industry policies. This begs the question, is the new wave of investment-related regulations creating a more favourable environment for foreign investors? Our recent involvement with the Private Security Industry suggests otherwise.

The panel on success stories in German-South African business, moderated by Tutwa Director Peter Draper, showcased what was achieved under the South African-German BIT from both large and SME companies. The presenters claimed that compliance to BEE requirements, procurement regulations, and skills development is already high and, working closely with stakeholders in terms of education/skills development, these programs resulted in favourable outcomes.  Unfortunately due to time constraints panellists were only able to scratch the surface of the issues of concern raised in the opening statements of the conference. Nonetheless, this panel seemed to reflect that issues surrounding the emerging investment environment warrant attention, especially from German investors’ perspective.

As South Africa has a comparatively favourable economic environment, compared to rest of the continent, it is regarded as the gateway to the region for trade and investment. Reason holds that the key to further regional expansion for companies lies in getting a foothold in South Africa. However, as evident from Mr October’s speech and reiterated panellist Goolam Ballim, Chief Economist and Head of Research at the Standard Bank Group, there are alternatives to South Africa and more are set to join them.

South Africa could, and probably will, continue to pursue its inward-looking trade and industry policies, but that could have a detrimental impact on efforts to include South Africa into global value chains (GVC’s) as noted by Sabine Dall’Omo, Chief Executive Officer Siemens Southern and Eastern Africa.

A revised version of the PPID is set to be released for public comment in October 2014 and should give insight into South Africa’s intended direction regarding the evolving investment environment. Tutwa will be following developments closely as this will not only shape South Africa’s approach to investment but could also influence neighbouring countries’ attitudes towards investment.