German Ambassador to South Africa Dr Horst Freitag has again cau- tioned South Africa against pursuing strategies that failed to fully balance economic opportunity and legal certainty and called for an “open, transparent and inclusive dialogue” on the future of South Africa’s bilateral investment treaties (BITs).

Speaking at a ceremony earlier this month to mark the fortieth anniversary in South Africa of family-owned German process automation group Festo, Freitag also warned that it was “significantly more difficult to build trust and confidence than to dismantle it”.

South Africa and Germany had built “close and trustful relations”, with the stock of German investment in South Africa having grown steadily since 1998 to comprise more than 600 companies, which collectively represented €6-billion in investment. Many of these companies, which employed more than 91 000 people, were located in the manu- facturing sector.

The remarks were made against the backdrop of concerns that South Africa might not renew its BIT with Germany, having already moved to terminate such treaties with Belgium and Spain. Earlier this year, European Commissioner for Trade Karel de Gucht bluntly warned that South Africa’s current policy regarding investment agreements was counterproductive.

However, Trade and Industry Minister Dr Rob Davies has argued that the treaties are unbalanced and has also pointed out that the absence of such agreements had not deterred other major investor countries, including the US. South Africa was, there- fore, aiming to replace the BITs with domes- tic legislation, which it said would offer protection to foreign investors without constraining the country’s ability to pursue key policies aimed at furthering transformation.

South Africa’s ambivalence towards the BITs followed a 2010 review, which showed that some of the treaties posed risks to government’s ability to pursue its transformation agenda. Such risks, it has been argued, came to the fore when investors from Luxembourg and Italy brought a claim to the International Centre of Settlement of Investment Disputes, arguing that South Africa’s Mineral and Petroleum Resources Development Act amounted to expropriation.

Freitag described foreign direct invest- ment as a “precious good” in the current weak economic climate – one that could be undermined by the use of “blunt instruments” or “unilateral steps”.

“An investor from thousands of miles away is as shy as a deer and will always look for cover such as is provided by bilateral invest- ment agreements,” he said at a function attended by senior representatives of the Stoll family, led by supervisory board vice-chairperson Dr Ulrich Stoll, who represents the third generation of family owners of Festo.

Freitag argued that South Africa’s current challenges should not mask the real opportunities that would arise over the medium to long term. But “investment always bears risk” and legal certainty was “indispensible for an investor-friendly environment and for building investor confidence”.

“Balancing dynamic economic growth against the cohesion and stability of our societies is, perhaps, the most pressing responsibility of a nation in today’s globalised world. It is a delicate task and we all agree that using blunt instruments, or unilate- ral steps, is not an option to solve immensely complex and sensitive challenges.”