German Investment May Reap R900m in Incentives

Trade and Industry Minister Rob Davies has revealed that a planned new R3billion investment in East London by German auto giant Mercedes Benz may cost ZA R900 million in investment incentives. The minister was addressing the media today on government’s new Promotion and Protection of Investment Bill, which was published for comment on Friday. He defended the government against criticism of the unilateral manner in which South Africa is scrapping a series of bilateral investment accords, which the new legislation is intended to replace. Davies denied that the announcements of the termination of the treaties had been made without the relevant partners having been properly informed – as had been claimed. He said the new legislation will be more universal, as it will cover investors from countries which do not currently have bilateral treaties with ZA, such as the USA and Japan. And he denied that investor protection would be watered down, saying that the bill will be introduced in the context of the ZA Constitution. "For all practical purposes, the Constitution provides robust protection for investors. I can confirm that South Africa remains open to foreign investment," he said. And he suggested that the current investment treaties belong to an earlier era, soon after democracy and before the Constitution came into force. Moreover he said that there has been no correlation between the existence of a bilateral investment protection treaty and the flow of investment from any country to ZA.
Minister Davies cited the recent announcement of the R3billion Mercedes Benz investment as an example of the confidence investors should have in ZA, noting that it comes as his government has announced the scrapping of the bilateral investment treaty with Germany, something the auto giant is "well aware about." When asked about the scale of investment incentives available, he said they amount to 20% of the value of the investment, with a possible extra 10% if the investment involves significant local content. Trade and Industry Department Director General Lionel October said that the company had applied for the full 30%, as it plans to bring 10 new suppliers to set up in South Africa. This would amount to an incentive of R900m.

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