Foreign investment Promotion and domestic Protection: a Balancing act

The document examines South Africa's transition from a liberal FDI regime to one focused on 'public interest' and sustainable development. It analyzes the role of the Competition Act and the Protection of Investment Act (PIA) in regulating mergers and acquisitions (M&As), using the Walmart-Massmart merger as a case study to illustrate the tension between investor interests and domestic socio-economic goals. The paper highlights risks associated with the PIA, such as the loss of international arbitration and subjective compensation standards, while suggesting improvements through a 'One-Stop Shop' for investors and support for small, medium and micro-sized enterprises (SMMEs) to integrate into regional value chains.

• South Africa is a unique destination in sub-Saharan Africa for FDI in the form of mergers and acquisitions (M&As), averaging nearly $3 billion in M&A sales between 2008 and 2014.
• The Competition Act of 1998 allows the government to prohibit or condition M&As based on 'public interest' grounds, such as effects on employment and the ability of historically disadvantaged firms to compete, even if the merger is competitive.
• The Walmart-Massmart M&A was approved by the Competition Tribunal with conditions, including a ZAR 47.2 million Supplier Development Fund and a temporary freeze on operationally based retrenchments, but the tribunal rejected requirements for local content as they would conflict with TRIMs.
• South Africa's use of local content requirements (LCRs) in public procurement and Industrial Policy Action Plans (IPAPs) is in violation of the WTO's Agreement on Trade-Related Investment Measures (TRIMs).
• The Protection of Investment Act (PIA) of 2015 replaces previous bilateral investment treaties (BITs) and shifts the compensation standard for expropriation from 'market value' to a more subjective 'equitable and just' standard.
• The PIA removes the right of foreign investors to seek international arbitration, mandating domestic adjudication instead, which may diminish investor confidence due to the perceived lack of independence from political pressure.
• The government is establishing a 'One-Stop Shop' (OSS) via InvestSA to streamline licensing, permits, and registration to improve South Africa's ranking in the World Bank's Ease of Doing Business index, where it ranked 74th in 2016.
• To mitigate the negative effects of large M&As on SMMEs, the Black Business Supplier Development Programme (BBSDP) should encourage the formation of co-operatives and focus on integrating suppliers into regional value chains (RVCs) rather than global value chains (GVCs).

APA

Markowitz, C., & langalanga, A. (2016). Foreign investment Promotion and domestic Protection: a Balancing act. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2016/12/Occasional-Paper-246.pdf

Chicago

Markowitz, Chelsea, and azwiMpheleli langalanga. Foreign investment Promotion and domestic Protection: a Balancing act. South African Institute of International Affairs, 2016. https://saiia.org.za/wp-content/uploads/2016/12/Occasional-Paper-246.pdf.

Wikipedia

{{cite report |last1=Markowitz |first1=Chelsea |last2=langalanga |first2=azwiMpheleli |title=Foreign investment Promotion and domestic Protection: a Balancing act |publisher=South African Institute of International Affairs |date=December 2016 |url=https://saiia.org.za/wp-content/uploads/2016/12/Occasional-Paper-246.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{markowitz2016foreign, author = {Markowitz, Chelsea and langalanga, azwiMpheleli}, title = {{Foreign investment Promotion and domestic Protection: a Balancing act}}, institution = {South African Institute of International Affairs}, year = {2016}, month = dec, url = {https://saiia.org.za/wp-content/uploads/2016/12/Occasional-Paper-246.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }