UBUNTU AND GUANXI

THE SOUTH AFRICA-CHINA

RELATIONSHIP WITH
REFERENCE TO DEVELOPMENT
FINANCE INVESTMENT

475 647
Nicholas Ndlovu
Bachelor of Arts, Law and International Relations (Wits)

Bachelor of Laws (LLB) Candidate

INDEPENDENT RESEARCH ESSAY – LAWS 4042

Commerce, Law and Management Faculty

Oliver Schreiner School of Law

University of the Witwatersrand, Johannesburg

21 September 2015

Supervisor: Dr Herbert Kawadza

ACKNOWLEDGMENTS

I would like to express my most sincere gratitude and appreciation to my supervisor

Dr Herbert Kawadza for his patience, understanding and pragmatic guidance. The
enhancement of the quality of this academic work would not be possible had it not
been for the advice and insight he imparted. His support, academic experience and
immense knowledge were invaluable at all times of the research process, ideas
formulation and the production of the essay. I could not have asked for a better or
more collegial academic advisor and supervisor for my Independent Research
Essay.

I would like to thank Ashford Nyatsumba of Norton Rose Fulbright for his continued
efforts in assisting me on general topics of investment and regulation on the African
continent and beyond. A greater thank you is for Ashford’s advice on the personal
and professional concerns of a budding legal professional.

I would also like to thank David Ansara of the Loan Market Association (LMA) for
providing me with an opportunity to assist him at the LMA conference on the theme
‘Funding Africa’s growth: the role of Chinese lenders’. That event opened my eyes to
the various perspectives of the possibilities of my research.

In addition, I would like to express my gratitude, love and respect to my academic

sponsors and family friends (and guardian angels), Graeme and Regan Berry for
their precious and continued support of my studies and for granting me the
opportunity to further my studies at the University of the Witwatersrand. You always
inspire me.

I thank my fellow peers and friends for the stimulating discussions and intellectually
challenging discourse that we often find ourselves engaged in.

Lastly, I thank my family and particularly my mother, Sarah, for her continued
support, encouragement and love throughout my life and my educational
development.

Page 2 of 32
ABSTRACT

Although, scholars, analysts and legal practitioners have had a positive conclusion
regarding China’s might and presence in the African economic development sphere,
there is a need for an analysis from a regulatory and standards compliance angle of
the China-South Africa relationship. To some extent, concern about the presence of
Chinese economic actors in Africa (and South Africa) is acceptable, but relaxed
regulatory frameworks for the purpose of governing certain commercial transactional
interactions between China and African states should be the responsibility of
Africans themselves. The alignment of the two states has yielded good results and
there is a good story to tell regarding China’s engagements in, and with, South
Africa. However, should there be a negotiated harmony of regulatory standards
vacuum, the risks are perilous; thus, leaving both states vulnerable to a decline in
growth. South Africa’s negotiating representatives should have adequate and
sufficient knowledge when they commence with negotiations concerning trade and
investment. A commercial transaction is not the same as an aid donation package,
because in the former instance China is negotiating not out of charity, but for
commercial interest and gain. This analysis will allow a better understanding of the
technical framework entailed in the relationship, encourage improvements, while
recognising the benefits, and may provide insights into achieving win-win outcomes
for both states.

Page 3 of 32
TABLE OF CONTENTS

I. INTRODUCTION 5-6

II. CHINESE DEVELOPMENT INVESTMENT AND

SOUTH AFRICA 6-17
(a) The Sino-South Africa Good Story 6-7
(b) People's Republic of China 7-9
(c) Corruption in China 9-12
(d) Republic of South Africa 12-13
(e) Corruption in South Africa 13-14
(f) Costs and Risks of Doing Business 14-17

III. REGULATIONS AND COMPLIANCE

STANDARDS 17-22
(a) Policy and Bi-lateral Representation 17-18
(b) Managing Impediments and Expectations 19-21
(c) The Promotion and Protection of Investment Bill
2013 21-22

IV. RECOMMENDATIONS 22-24

V. CONCLUSION 25

VI. BIBLIOGRAPHY 26

Page 4 of 32
I. INTRODUCTION
The relationship between the Republic of South Africa and the People’s Republic of
China is unique owing to the driving fundamental values of both nations. According
to guanxi1, the Chinese do not engage in genuine business relationships prior to
establishing a friendship based on common personal interests. The term ubuntu2
inspires the assistance of one another under the theme of communal strength and
survival, emphasising co-dependence and a common interest in mutual
development, growth and success. The common trend in the qualities of the
meaning of this South African principle and guanxi are evident. Thus, the South
Africa-Sino commercial and political relationship is contextually appropriate.
The People’s Republic of China enjoys a unique position in the global
economy and plays a vital role in the developmental mechanical make-up of the
global system. The academic and analytical literature has been focused on policy
analysis and recommendation, while being very critical of China’s presence and role
in Africa, particularly Sub-Saharan Africa. South Africa is China’s largest trade
partner in Africa and China is South Africa’s largest trading partner.3 South Africa
has signalled an intention to achieve a more sustainable trade balance, especially
now that the year 2015 has been dubbed the ‘Year of China in South Africa.’4 Recent
Chinese investment has seen a R1 billion investment from automobile manufacturer,
FAW Group Corporation, for the purposes of establishing an assembly plant; the
establishment of a Hisense Electric Corporation Limited factory; and a Jidong

1
Jin Guan ‘Guanxi: The Key to Achieving Success in China’ (2011) 217 Sino-Platonic Papers; Guan’s definition:
“the term refers to connections or relationships between people. Guanxi implies preferential treatment given
to the partners in an exchange, in the form of easy access to limited resources, increased access to controlled
information, credit grants, and protection from external competitors. Western scholars have looked at guanxi
as similar to networking, a form of social capital that has the potential to be converted into economic, political,
and symbolic (prestige and status) assets ... the Chinese concept of guanxi is actually different from this,
mainly due to the notion of reciprocal obligation and indebtedness. To the Chinese people, guanxi is a system
of renqing (favours), in which obligation and indebtedness are manufactured, and in which there is no time
limit for repayment. The Chinese always try to return any renqing and expect the other party to do the same
when a favour is given … one can look at renqing as the exchange currency for cultivating guanxi. The more
renqing one accumulates, the more likely the other party is to reciprocate when solicited later. Hence, renqing
can be seen as a yardstick by which one can measure how strong guanxi is between two parties.”
2
Andrew West ‘Ubuntu and Business Ethics: Problems, Perspectives and Prospects’ (2014) 121 Journal of
Business Ethics 47-61.
3
China Customs ‘China Exports to South Africa’ TRADING ECONOMICS, available at
http://www.tradingeconomics.com/china/exports-to-south-africa, accessed on 21 September 2015.
4
Embassy of the People’s Republic of China in the Republic of South Africa ‘China and South Africa Country
Year’ available at http://www.chinese-embassy.org.za/eng/zt/20140508/, accessed on 21 September 2015.

Page 5 of 32
Development Group and China-Africa Development Fund cement plant to the tune of
R1.8 billion.5
Due to the research findings compiled by the United Nations Economic
Commission on Africa in 2013 and the introduction of the Promotion and Protection
of Investment Bill, this discussion paper seeks to recommend that South Africa
should build a regulatory strategy with ideals based on practical mutual interest and
respect with China. The benefit of this is the promotion of employment growth and
structural transformation. Policy makers have highlighted labour and competition as
concerns as they debate the avoidance of a neo-colonial dependency type of
relationship between the two states.6 This can be resolved by negotiating favourable
trade concessions.

II. CHINESE DEVELOPMENT INVESTMENT AND SOUTH AFRICA

(a) The Sino-South African Good Story

Since 1998, the diplomatic relations between both states have grown immensely.
The relationship has evolved to the level of a comprehensive strategic partnership.7
The two states aim to enforce the Beijing Declaration to the China-South Africa Five-
to Ten-Year Framework on Cooperation.8 The key focus areas of the Declaration are
trade, investment and agriculture – particularly export produce from South Africa –
human resources, capacity development, value addition and the beneficiation of raw
materials.9
In 2009, China became South Africa’s largest trading partner and South Africa
has become China’s largest trading partner in Africa. Between 2008 and 2014, the
value of Chinese trade and investment into South Africa went from R121 billion to
R271 billion.10 Between the years 2003 and 2014, capital expenditure in the Chinese

5
Maite Nkoana-Mashabane ‘Agreements signed on Zuma’s state visit to China cement co-operation and will
bolster investment and growth’ International Relations and Cooperation 15 December 2014 available at
http://www.dfa.gov.za/docs/2014/chin1215.html, accessed on 11 April 2015.
6
Luo Jianbo and Zhang Xiaomin ‘Multilateral cooperation in Africa between China and Western countries:
from differences to consensus’ (2011) 37 Review of International Studies 1793-1813; Paul Tiyambe Zeleza
‘Dancing with the Dragon Africa’s Courtship with China’ (2008) 2 The Global South 171-187; Maxi Schoeman
‘China and Africa: Whose Challenge and Whose Opportunity?’ (2008) 43 Afrika Spectrum 403-413..
7
Nkoana-Mashabane op cit note 5.
8
Ibid.
9
Ibid.
10
Ibid.

Page 6 of 32
economy, by 11 South Africa corporations, amounted to R51.8 billion; in the same
period, 39 Chinese companies invested R14.7 billion in South Africa. 11 There are
Chinese owned and controlled South African entities in addition to those with
considerable Chinese shareholding as there have been ‘parachute’ or ‘lifeboat’ of
buyouts and acquisitions.12 There are numerous global trends of this kind of
behaviour by China.13

(b) People’s Republic of China

In early 2014, 30.5 per cent of the R87.4 billion total of Chinese investments in the
South African economy was in the minerals and metals industry. 14 China’s
commitment to collaborating with emerging economies and harnessing the South-
South relationships is evinced by its involvement in the Brazil, Russia, China, South
Africa (BRICS) partnership and the establishment of FOCAC – Forum on China-
Africa Cooperation.15 The New Development Bank (NDB), also dubbed the BRICS
Bank, with headquarters in Shanghai, may possibly have its African regional center
in South Africa.16
Although concerns may be welcome, warranted and accepted, the lack of a
developed and sustainable local regulatory framework will result in insufficient and
imbalanced benefits to South Africa whenever there are commercial transactions
with China.17 It is important to take note that China is ‘not here for charity – they are

11
Ibid.
12
Natasha Odendaal ‘Village buy-out by Chinese suitors given CompCom go-ahead’ Mining Weekly 1 April
2015 available at http://www.miningweekly.com/article/village-buy-out-by-chinese-suitors-given-compcom-
go-ahead-2015-04-01, accessed on 27 June 2015.
13
Trudi Makhaya ‘CompCom approves part II of acquisition of Independent Media’ Politicsweb 16 August 2013
available at http://www.politicsweb.co.za/party/compcom-approves-part-ii-of-acquisition-of-indepen,
accessed on 27 June 2015; Chinese acquisitions ‘China buys up the world’ The Economist 11 November 2010
available at http://www.economist.com/node/17463473, accessed on 14 September 2015.
14
Ross Harvey ‘Nationalism with Chinese Characteristics: How Does it Affect the Competitiveness of South
Africa’s Mining Industry?’ South African Institute of International Affairs Policy Briefing 93 Governance of
Africa’s Resources Programme 22 May 2014 available at http://www.saiia.org.za/doc_download/518-
nationalism-with-chinese-characteristics-how-does-it-affect-the-competitiveness-of-south-africa-s-mining-
industry, accessed on 11 April 2015.
15
Chris Alden & Yu-Shan Wu ‘South Africa and China: The Making of a Partnership’ South African Institute of
International Affairs Occasional Paper 199 Global Powers and Africa Programme 27 August 2014 available at
http://www.saiia.org.za/doc_download/578-south-africa-and-china-the-making-of-a-partnership, accessed on
9 April 2015.
16
BRIDGES ‘BRICS Countries Launch New Development Bank’ International Centre for Trade and Sustainable
Development 17 July 2014 available at http://www.ictsd.org/bridges-news/bridges/news/brics-countries-
launch-new-development-bank, accessed on 22 July 2015.
17
Khulekani Magubane & Edith Kamau ‘Ethics institute to probe perceptions about Chinese businesses in
Africa’ Business Day Live 26 July 2013 available at

Page 7 of 32
here for business. [South] Africans need to have that in mind when they are agreeing
to deals with China.’18
China has a large appetite for iron-ore and related materials as these are
necessary for the government’s large-scale industrialization project.19 The state-
owned Hebei Iron and Steel Group, China’s single largest steel producer – which did
not exist before June 2008 – collaborated with the Industrial Development
Corporation in a commercial transaction resulting in the restructuring and purchase
of a 74.5 per cent share in the Palabora Mining Company from the world’s second
largest mining company, Rio Tinto.20 The move by Hebei21 to have a pronounced
presence in the local mining arena signals China’s resilience as it is ‘not constrained
by the rules of foreign security-exchange listings.’22 Following this, the China
Development Bank granted Wesizwe Platinum’s Bakubang project a loan of R6.5
billion to facilitate the Jinchuan Mining Group’s 45 per cent stake purchase in
Wesizwe.23
Chinese companies who collaborate with the Industrial Development
Corporation and other state-backed development finance institutions24 do not have to
contend with the same issues as the ‘rule of law’ private entities do. 25 In the absence
of compliance mechanisms envisaged by the rule of law, revenues are at risk of
being mismanaged and unscrupulous opportunists among the politically connected
become ideal business collaborators to Chinese investors. The legal matter involving
the takeover of Pamodzi Gold by Aurora Empowerment Systems, a company led by

http://www.bdlive.co.za/africa/africanbusiness/2013/07/26/ethics-institute-to-probe-perceptions-about-
chinese-businesses-in-africa, accessed on 11 April 2015.
18
Ibid.
19
SRK News ‘Due Diligence Review On Iron Ore Projects In China’ available at
http://www.srk.co.za/en/newsletter/focus-iron-ore/due-diligence-review-iron-ore-projects-china, accessed on
14 September 2015; Jasmine Ng ‘Cheap Australian iron ore feeding China steel glut ‘like a bad virus’ The
Sydney Morning Herald 21 August 2015 available at http://www.smh.com.au/business/mining-and-
resources/almost-free-australian-iron-ore-blamed-for-china-steel-export-surge-20150820-gj48ig.html,
accessed on 14 September 2015..
20
Chuin-Wei Yap ‘China’s Heibei Iron and Steel to Build Plant in South Africa’ The Wall Street Journal 12
September 2014 available at http://www.wsj.com/articles/chinas-hebei-iron-steel-to-build-plant-in-south-
africa-1410497371, accessed on 14 September 2015.
21
Sashnee Moodley ‘Commission gives conditional approval for Heibei, Duferco merger’ Engineering News 11
June 2015 available at http://www.engineeringnews.co.za/article/commission-gives-nod-for-hebei-duferco-
merger-2015-06-11, accessed on 27 June 2015.
22
Harvey op cit note 14.
23
Ibid.
24
Joie Ma ‘State-Owned Enterprises: Partners and Competitors’ Foreign Invested Enterprises, Laws &
Regulations 1 January 2012 available at http://www.chinabusinessreview.com/state-owned-enterprises-
partners-and-competitors/, accessed on 27 June 2015.
25
Harvey op cit note 14.

Page 8 of 32
Khulubuse Zuma and Zondwa Mandela, is one example.26 Necessary equipment
was sold, other machinery was regarded as scrap, and company resources and
funds were misappropriated. Following this blatant asset stripping, Zuma announced
that Shandong Gold would pay R800 million for a 65 per cent stake in Aurora;
instead, the assets were sold to China Africa Precious Metals for R150 million.27

(c) Corruption in China

Corruption is defined as ‘the use of public office for personal gain.’ 28 In China, this is
relevant because the state is in itself an economic role-player at a very large scale.
This has immense implications as the capital means of production, the ownership,
control, and use of national resources vests in the state. All activities that have the
potential of yielding profits that may benefit the Chinese economy are dependent on
the roles played by persons who hold public office.29 With the support of the leaders
of the Communist Party of China,30 President Xi Jinping has declared a war against
corruption.
Since 2012, when President Xi began his tenure at the helm of the ruling
party, the Central Commission for Discipline Inspection figures show that 414 000
corrupt individuals have been disciplined by the party, and 201 600 have been
prosecuted.31 Research has shown that countries with emerging economies are
always at a higher risk of facing high levels of corruption as opposed to established
and developed countries.32 This is due to the lax regulatory and legal institutions and
an ineffective national governance mechanism.33 Due to the vastness of the Chinese
territory and the large population, it too faces these systemic risks on a daily basis.
Corruption stifles the growth of the economy and political stability, however, the

26
Engelbrecht N.O and Others v Zuma and Others (25965/2012) [2015] ZAGPPHC 403.
27
Ibid.
28
Yukon Huang ‘The Truth About Chinese Corruption’ The Diplomat 29 May 2015 available at
http://thediplomat.com/2015/05/the-truth-about-chinese-corruption/, accessed on 25 July 2015.
29
Ibid.
30
Beina Xu & Eleanor Albert ‘The Chinese Communist Party’ Council on Foreign Relations 17 November 2014
available at http://www.cfr.org/china/chinese-communist-party/p29443, accessed on 5 August 2015.
31
Macabe Keliher & Hsinchao Wu ‘How to Discipline 90 Million People’ The Atlantic 7 April 2015 available at
http://www.theatlantic.com/international/archive/2015/04/xi-jinping-china-corruption-political-
culture/389787/, accessed on 25 July 2015.
32
Neissan Alessandro ‘Common Goals and Different Commitments: The Role of Emerging Economies in Global
Development’ German Development Institute available at http://www.die-
gdi.de/uploads/media/DP_26.2013.pdf, accessed 11 April 2015.
33
Ibid.

Page 9 of 32
efficacy of socio-economic development, strengthened by strong institutions may
diminish the negative impact of corruption on the economy.34
The anti-corruption campaign in China must encompass the laws and
regulations that currently exist in order to build and strengthen institutions through
the three phases of implementation.35 The first phase is at the tail end, with the result
being the arrests and successful prosecutions of Zhou Yongkang (former Minister of
State Security and Police and a retired member of the Politburo Standing
Committee) and Xu Caihou (former high-ranking official in the Military).36 President
Xi has tasked Wang Qishan, Chief of China’s Central Commission for Discipline
Inspection,37 to tackle corruption aggressively. It is often rumoured that government
officials fear engaging in corrupt activity because they fear Wang’s speculative office
and the power it wields.38 Others have joked among the political elite that in China,
an official would opt to face hell than the wrath of Wang.39
President Xi and Wang have made it clear that the force against corruption is
necessary as the second phase of this national campaign entails building institutions
staffed by personnel who deem the cause a necessary priority. 40 Citizens are also
encouraged to record acts of corruption and alert Wang’s office with this information.
The idea sought to be created is that there will be no room in the social space for
corruption to hide, that it is a patriotic duty and a social responsibility as a citizen to
be a civil ‘agent’ of the Central Commission for Discipline Inspection.41 This
approach is very popular among various classes and the Chinese youth. However,
more needs to be done and the institutions will need to be accessible all over China
and the efforts will require creativity to ensure that President Xi’s blunt and forthright
warning – ‘do not even think about engaging in corruption’ – is heard, respected and
adhered to.42

34
Huang op cit note 28.
35
Dingding Chen ‘China’s Anti-Corruption Campaign Enters Phase Two’ The Diplomat 2 July 2015 available at
http://thediplomat.com/2015/07/chinas-anti-corruption-campaign-enters-phase-two/, accessed on 25 July
2015.
36
Ibid.
37
Xu & Albert op cit note 30.
38
Chen op cit note 35.
39
Ibid.
40
Ibid.
41
Ibid.
42
Ibid.

Page 10 of 32
 The veracious seriousness with which President Xi and his colleagues seek to
curtail corruption is evident in a Communist Party personnel reform policy, following
the eighteenth Party Congress.43 This policy allows for cadres in the party to be
demoted and stripped of titles, ranks and benefits while remaining in lower, public
offices.44 The essence of this reform allows for the reversal of the ranking and
promotion system that career politicians and ambitious officials rely on for rewarding
dedicated hard work in service of the state or the Communist Party. 45 This is vital
because in the past an incompetent official would resign from office, keeping their
rank and the benefits such as medical cover or a pension plan, as they would have
had if they remained in office.46 Evidently, President Xi must ensure that opponents
to these reforms as well as corrupt and incompetent officials among the echelons of
the Communist Party are treated the same way because if the top-level cadres are
not disciplined, the efficacy of the reforms sought will never be realised. In 2014,
15 450, a 30 percent increase from the 2013 figure, government employees in
Shanxi (a Chinese province known for its high levels of corruption) were convicted. 47
Since the campaign’s slogan is ‘killing tigers’ and ‘swatting flies’, Zhou would be a
tiger, as he is to date the most powerful, and highest ranking, official of the
Communist Party and in China to be convicted, and the large scale prosecutions and
convictions numbered in the thousands amounts to the paltry officials – the flies.
This campaign is not only for a legitimate and law respecting and enforcing
People’s Republic of China, it is meant to do the same within the Communist Party
and its 87.79 million members.48 Like in South Africa, corruption at local government
level is high.49 Moreover, the collusion between business owners and managers with
local government officials ‘to enrich themselves at the expense of the people’ reflects
badly on the ruling party.50 Mass protest and social unrest threaten political
legitimacy and socio-economic cohesion and reform. President Xi’s strong message
to the party and the nation that ‘govern with virtue and keep order through

43
Ibid.
44
Ibid.
45
Ibid.
46
Ibid.
47
Keliher & Wu op cit note 31.
48
Xu & Albert op cit note 30.
49
News24 ‘The A-Z of SA’s Fraud & Corruption Scandals’ 3 April 2014 available at
http://www.news24.com/MyNews24/The-A-Z-of-SAs-Fraud-Corruption-Scandals-20140403, accessed on 3
April 2015.
50
Keliher & Wu op cit note 31.

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punishments… those who know the law, first apply it to themselves and then to
others’51 signals a strong intent from the leaders of the world’s second largest
economy and most populous nation to actively tackle corruption.

(d) Republic of South Africa

South Africa continues to seek implementing its own economic objectives by
exploiting the existing bi-lateral relations.52 An emerging economy like South Africa is
an ideal candidate for growth-partnership. Trade and investment opportunities exist,
which requires strategic and pragmatic implementation in practicable ways to ensure
that the benefits to South Africa and South Africans are as fair, sound and even as
those attained by China.
South Africa hopes to make great strides in the fields of science and
technology, and from the development of industrial parks – as encouraged by
China.53 The Department of Trade and Industry (DTI) has had good feedback from
the Chinese in support of the Black Industrialist Program, which seeks to support the
creation and enhancement of a black found, owned, managed and operated
business sector industry.54 China has committed to assisting in the development of
railway parks and the localization of carriage manufacturing.55
Although states like China are more able than most to weather relatively
calamitous global and domestic economic tides, South Africa’s foreign direct
investment (FDI) intake is on the decline, especially from the European Union (EU). 56
The past two years has seen a 23 per cent decrease in FDI from Europe. 57 In Africa,
China is more favoured than Europe or the United States because it does not seek
to influence domestic policies or intervene in the internal workings of sovereign

51
Ibid.
52
Nkoana-Mashabane op cit note 5.
53
Cyril Ramaphosa ‘Opening remarks by Deputy President Cyril Ramaphosa at the South Africa-China State
Owned Enterprises Seminar, Beijing, China’ The Presidency Republic of South Africa 15 July 2015 available at
http://www.thepresidency.gov.za/pebble.asp?relid=20110, accessed on 25 July 2015.
54
Jacob Zuma ‘Address by President Zuma during the China-South Africa Business Forum Meeting, on the
occasion of the State Visit to the People’s Republic of China, Beijing’ Department of Communications on behalf
of the Presidency of the Republic of South Africa 5 December 2014 available at
http://www.thepresidency.gov.za/pebble.asp?relid=18593, accessed on 11 April 2015.
55
Ibid.
56
Peter Draper & Azwimpheleli Langalanga ‘Clear signal is needed to keep the investment gateway open’
Business Day Live 10 March 2015 available at http://www.bdlive.co.za/opinion/2015/03/10/clear-signal-is-
needed-to-keep-the-investment-gateway-open, accessed on 11 April 2015.
57
Ibid.

Page 12 of 32
states.58 Chinese money has an impact on domestic productivity, growth and daily
activity. This is because the elite who form policy are in most cases closely
connected to those who determine what the objectives are and how they will be met
using Chinese funding. This is a possible opportunity for corruption and predatory
behaviour to flourish.59
According to Rob Davies, the Minister of the Department of Trade and
Industry, ‘South Africa continues to compare well with other emerging markets.’ 60
The purpose this comment is meant to achieve is that South Africa remains open for
business and is one of the better locations for foreign direct investment. Research by
the World Trade Institute indicates that in 2013 over 130 transnational corporations
either entered the South African business market or expanded already existing
commercial operations.61
It is clear that the government is gearing up for more investment into the
economy. However, the highlighting of ‘broad yet strong blueprints for dealing with
structural issues’62 are not enough to coax or court confidence. Instead, this leaves a
vacuum that may be exploited immediately by government officials, as is already the
case, and foreign investors who seek to enrich themselves by taking advantage of
the lack of proactive and practicable application of existing institutional frameworks
that South Africa is so revered for.63

(e) Corruption in South Africa

Despite the impressive global data indicating the strengths of South Africa’s stability
and economic performance in recent years, there is an alarming and increasing
trend of fraud and corruption scandals.64 These major scandals are often linked to

58
Domingos Jardo Muekalia ‘Africa and China’s Strategic Partnership’ (2014) 13 African Security Review 7.
59
Douda Cissé ‘Corruption here and there in China and Africa’ Centre for Chinese Studies Sellenbosch University
25 September 2014 available at http://www.ccs.org.za/wp-
content/uploads/2014/09/CCS_Commentary_Corruption_DC_2014.pdf, accessed on 24 July 2015.
60
Rob Davies ‘South Africa: the “most open country for FDI in the world”’ SouthAfrica.info 20 January 2015
available at http://www.sanews.gov.za/south-africa/south-africa-most-open-country-foreign-direct-
investment-world, accessed on 24 July 2015.
61
Ibid.
62
Ibid.
63
News24 ‘The A-Z of SA’s Fraud & Corruption Scandals’ 3 April 2014 available at
http://www.news24.com/MyNews24/The-A-Z-of-SAs-Fraud-Corruption-Scandals-20140403, accessed on 3
April 2015.
64
Naledi Shange ’15 SAPS employees in court for fraud and corruption’ 30 April 2015 available at
http://www.news24.com/SouthAfrica/News/15-SAPS-employees-in-court-for-fraud-and-corruption-20150430,
accessed on 25 July 2015.

Page 13 of 32
government officials or individuals who are closely connected to the political elite.
The infamous Arms Deal of 1999 is an example of allowing these certain individuals
to negotiate on behalf and to the detriment of South Africa.65
This trend has not ceased as police officials in the highest ranks, senior
members of the Cabinet, Mayors of municipalities, and other bearers of key public
offices who should be in office to serve and advance the developmental and socio-
economic objectives and goals of the nation are engaged in corrupt and improper
activity.66 This type of behaviour demeans and undermines the respect for the nation
and its institutions.67 It creates the perfect opportunity for predatory negotiation to the
disadvantage of South Africa because corruption will thrive where it finds corruptible
people.68 It reflects badly as it creates a sentiment that Africa is not only seen as a
well of natural resources, but also a pit of corruptible personnel. The total disregard
for the law, together with a lack of transparency, is the single most detrimental
epidemic that South Africa is faced with today. South Africa has effective and
occasionally efficient institutions; these will not be enough to quell the threat brought
to bear by greed.69
There are often vague and broad comments about state plans, but there are
no concrete points that the government is engaged in to spur on growth and
encourage development by effectively and speedily fighting corruption among the
ranks. Although South Africa is open for business, confidence in the efficacy of its
institutions is weakening.

(f) Costs and Risks of Doing Business

The Ethics Institute of South Africa has conducted a survey with the intention of
using the findings as a broader information base for negotiations and engagements

65
News24 op cit note 63.
66
Ibid.
67
Herbert Kawadza ‘Analysis of Financial Services Sector Transparency Through Whistle Blowing: The Case of
South Africa and Switzerland’ World Trade Institute of the University of Bern & the Swiss Secretariat for
Economic Affairs (SECO) Working Paper 30 October 2014 available at
http://www.wti.org/fileadmin/user_upload/wti.org/7_SECO-
WTI_Project/Publications/SECO_WORKING_PAPER__REVISITING_FINANCIAL_SERVICES_SECTOR_.pdf, accessed
on 11 April 2015.
68
Ibid.
69
Ibid.

Page 14 of 32
between South Africa and China.70 There have been concerns that China has no
interest in corporate responsibility in South Africa and that Chinese investments tend
to be one-dimensional.71
For years, it has been reported that China is engaged in anti-competitive
behaviour in African markets and one of the ways it does this is through the dumping
of low production cost items in markets that are adequately supplied.72 In some
instances the classification of Chinese export practices have been incorrectly
labelled as dumping.73 The form of price discrimination known as dumping takes
place ‘when an exporting country sells a product at a lower price than it sells the
same product in its domestic market’74 or when products are sold by the exporting
nation below their production cost.75
This differs from a situation where an exporting country sells goods at
economical prices under fair and competitive economic conditions in the importing
country.76 Dominant players in transnational industries tend to engage in dumping
because they want to compete for a finite market through offers of appealing prices
to the consumers, and they wish to obtain a large share of the market in a foreign
jurisdiction thus becoming a monopoly.77 The latter constitutes as predatory dumping
because once the market becomes monopolised the exporting country will attempt to
raise prices.78

70
Deon Rossouw et al ‘Africans’ perception of Chinese Business in Africa: A Survey’ Ethics Institute of South
Africa August 2014 available at
http://www.ethicsa.org/phocadownloadpap/Research_Reports/AfricanPerceptionSurveyChineseBusinessWEBS
ITEVERSION.pdf, accessed on 25 July 2015.
71
Sanusha Naidu ‘South Africa’s relations with the People’s Republic of China: mutual opportunities or hidden
threats’ in Sakhela Buhlungu et al (ed) State of the Nation: South Africa, 2005-2006 (2005) 457.
72
Rosena Nhlabatsi ‘Cheap Chinese imports in Africa: Implications and remedies’ Consultancy Africa
Intelligence 5 March 2014 available at
http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=1656:cheap-chinese-
imports-in-africa-implications-and-remedies&catid=58:asia-dimension-discussion-papers&Itemid=264,
accessed on 24 July 2015.
73
Ibid.
74
World Trade Organization ‘Technical Information on Anti-dumping’ available at
https://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm, accessed on 5 August 2015.
75
Ibid.
76
Nhlabatsi op cit note 72.
77
Mark Allix ‘Arcelormittal considers closing some plants’ Business Day Live 23 July 2015 available at
http://www.bdlive.co.za/business/industrials/2015/07/23/arcelormittal-considers-closing-some-plants,
accessed on 24 July 2015.
78
World Trade Organization op cit note 74.

Page 15 of 32
 Chinese imports have contributed to the loss of employment and the
productivity decline in the South African manufacturing sector.79 There is an
International Trade and Administration Commission case which found that China had
undercut its prices by 338 per cent in the Southern African Customs Union; this was
considered a prima facie case of undercutting.80
Investment has two objectives: ‘long-run production’ investments and ‘short-
term’ rent extraction.81 These objectives may be of assistance in assessing three
different types of attitudes under investment conditions. The first is the ‘rule of law’
attitude, which is based on accountability, transparency, compliance with the law,
industry regulation and the prescripts of the Securities Exchange.82 A large number
of the mining companies operating in South Africa are within this bracket. Second is
the ‘opportunists’ who are politically connected persons who have ‘few constraints.’ 83
This type of attitude in the commercial space defeats and demeans the existence
and purpose of legal institutions. Last and third are the types of entities with ‘a
relatively indiscriminate approach’ to their particular brand of blank ethics (or a
façade thereof) at the onset of a commercial venture – the impressively finance-
backed ‘resource-for-infrastructure’ attitude.84
South Africa’s Competition Act 89 of 1998 and the Companies Act 71 of 2008
have been effective at ‘ensuring that there are competition laws and policies in place
to prevent the abuse of market dominance.’85 Academic research shows that the
failure of negotiators to ensure the protection of local jobs and access to Chinese
markets has resulted in an asymmetrical business relationship between both
states.86 An example of this is the massive loss of jobs in the South African textiles

79
Lawrence Edwards & Rhys Jenkins ‘The Impact of Chinese Import Penetration on the South African
Manufacturing Sector’ South Africa Labour and Development Research Unit University of Cape Town Working
Paper No. 102 July 2013 available at
http://opensaldru.uct.ac.za/bitstream/handle/11090/618/2013_102.pdf?sequence=1, accessed on 5 August
2015.
80
Siyabulela Tsengwe ‘Report No. 438 Increase in the Rate of Customs Duty on Graphite Electrodes’
International Trade Administration Commission of South Africa 7 October 2013 available at
http://www.itac.org.za/upload/document_files/20140923020547_Report-no-438.pdf, accessed on 5 August
2015.
81
Harvey op cit note 14.
82
Ibid.
83
Ibid.
84
Ibid.
85
Garth Shelton & Claude Kabemba (eds) Win-Win Partnership? China, Southern Africa and the Extractive
Industries 1 ed (2012).
86
Ibid.

Page 16 of 32
industry and the influx of foreign products from Pakistan, Malaysia, Mauritius and
Vietnam.87
According to the rules of free trade in a globalised world economy, trade
imbalances, in a particular industry, generally tend to shift in the favour of a more
competitive economy like China from a less competitive one (South Africa) in the
absence of an equally and efficiently negotiated Free Trade or Economic Partnership
Agreement.88 The government’s policies need to advance in this direction if there is
any hope of increasing exports to China while creating jobs in the local economy.89

II. REGULATIONS AND COMPLIANCE STANDARDS

(a) Policy and Bi-lateral Representation

Economies in Africa are often in need of financial injection to boost growth, create
employment, and facilitate economic development and global or regional
competitiveness.90 The common understanding is that due to the reduced number of
intended investment directed at Africa, whatever investment that does exist will be
welcomed with open arms and without conditions or consideration.91 That is to be
expected in states that are in dire need of capital and face declining confidence. It
would be wise for an African state to have standards or factors to be tested against
when scrutinising the elements of investments from any investing state into the
receiving state.92
When the holder of capital assesses a possible investment opportunity,
assessment of risks is common and expected. Therefore, investment protection will
have a great influence on investor sentiments. The government of South Africa has

87
Ibid.
88
Ron Sandrey and Hans Grinsted Jensen ‘Revisiting the South African-China trading relationship’ Trade Law
Centre of Southern Africa Working Paper No. 6 March 2007 available at
http://www.tralac.org/images/docs/4246/wp062007-sandrey-revisiting-sa-china-relationship-revised-
20071205.pdf , accessed on 11 April 2015.
89
Ibid.
90
United Nations Economic Commission for Africa ‘Africa–BRICS Cooperation: Implications for Growth,
Employment and Structural Transformation in Africa’ available at
http://www.uneca.org/sites/default/files/publications/africa-brics_cooperation_eng.pdf, accessed on 11 April
2015.
91
Jardo Muekalia op cit note 58.
92
Omar E García-Bolívar ‘Defining an ICSID Investment: Why Economic Development Should be the Core
Element’ International Institute for Sustainable Development Investment Treaty News 13 April 2012 available
at https://www.iisd.org/itn/2012/04/13/defining-an-icsid-investment-why-economic-development-should-be-
the-core-element/, accessed on 12 April 2015.

Page 17 of 32
decided that bilateral investment (promotion and protection) treaties (BIT or BITs)
are to be terminated.93 Instead, the government seeks to use a more central and
generic method or system.
BITs were favoured because of their bespoke, individualistic approach as well
as the certainty they brought to foreign investment protection. However, in order to
afford greater protection, renegotiation opportunities, and cater for a wide range of
interests, a legal framework in the form of a statute was deemed necessary by the
South African government; thus, the need for the Promotion and Protection of
Investment Bill (the Bill).94
South Africa is not the only developing country that is pulling the plug on BITs;
Indonesia, Venezuela, Bolivia and Ecuador have signalled a similar intent.95 The aim
is to ensure that trade and investment conditions may be easily reconsidered as
conditions change for a capital receiving country or for a development finance
providing state.96 97
Interested parties98 99
have raised concerns regarding the Bill,
but in reality, and for practical purposes, emerging economies need to free up their
options to developmental trade investment to avoid having less bargaining power. 100

93
Jeffrey Kron & Matthew Clark ‘South Africa’s changing approach to investment protection’ Norton Rose
Fulbright International Arbitration Report 2015 – Issue 4 April 2015 available at
http://www.nortonrosefulbright.com/files/south-africas-changing-approach-to-investment-protection-
127893.pdf, accessed on 11 April 2015.
94
Ibid.
95
Ibid.
96
Pieter Steyn ‘The New Promotion and Protection of Investment Bill – An Assessment of its Implications for
Local and Foreign Investors in South Africa’ Werksmans Attorneys available at
http://www.werksmans.com/wp-content/uploads/2013/12/Investment-standalone-legal-brief-December.pdf,
accessed on 12 April 2015.
97
Peter Draper & Azwimpheleli Langalanga ‘Does the draft investment bill threaten foreign investors’ rights?’ 2
April 2014 available at http://www.saiia.org.za/opinion-analysis/draft-investment-bill-requires-amendment,
accessed on 11 April 2015.
98
SAIIA ‘South Africa’s Draft Promotion and Protection of Investment Bill’ A Submission by the South African
Institute of International Affairs 1 November 2013 available at http://www.saiia.org.za/doc_download/799-
saiia-submission-investment-protection-and-promotion-bill, accessed on 27 June 2015.
99
South African Institute of Race Relations ‘Submission to the DTI regarding the Promotion and Protection of
Investment Bill of 2013’ 31 January 2015 available at http://irr.org.za/reports-and-publications/submissions-
on-proposed-legislation/submission-to-the-dti-regarding-the-promotion-and-protection-of-investment-bill-of-
2013-2013-31-january-2015, accessed on 12 April 2015.
100
Alessandro op cit note 32.

Page 18 of 32
(b) Managing Impediments and Expectations
Among the territorial and internal challenges that African states must endure, sub-
Saharan Africa battles poor infrastructure, bribery and corruption, transportation
infrastructure impediments, no respect for the rule of law, and a lacklustre regulatory
environment.101 These factors contribute to the difficulty of doing business in
southern Africa as the cost of investment begins to exceed the benefits of capital
input and impedes productivity and profitability. 102 The long-term investments103
made and the aid package deals provided are clear and undeniable evidence that
the fate of China and that of its regional counterparts rests in the growth and
development of Africa’s emerging and sustained economies.104
The need to get genuine information from the experiences that the Africa-
China relationship impacts upon has been sufficiently met by the Ethics Institute of
South Africa’s survey which focuses on the perceptions held by Africans –
particularly Nigerians, Kenyans and South Africans – in relation to Chinese business
activity on the continent.105
The core points or factors assessed were Chinese business reputation, the
quality of products and services, social responsibility, economic responsibility
(national economic development interest consideration), environmental
protection/responsibility, employment and labour practices, and the working
conditions in Chinese businesses.106 Due to the subject matter of this essay, specific
attention is given to the South African survey responses.
South Africa has more negative than positive feedback about the reputation of
Chinese business activity. This is because a large number of people do not see or
believe that there are personal or communal benefits that accrue to South Africans
from Chinese commercial activity. Evidence of this is the 22.4 per cent of South
Africans’ positive perception compared to Kenya’s 56 per cent positive response to
China’s reputation.107

101
Chris Alden China in Africa: Partner, Competitor or Hegemon? (2007) 71.
102
Fiona Dwinger ‘Africa: Asia’s one-stop shop’ Consultancy Africa Intelligence 26 July 2013 available at
http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=598:africa-asias-one-
stop-shop&catid=58:asia-dimension-discussion-papers&Itemid=264, accessed on 24 July 2015.
103
Alden op cit note 101.
104
Dwinger op cit note 102.
105
Rossouw et al op cit note 70.
106
Ibid.
107
Ibid.

Page 19 of 32
 Although 60 per cent of surveyed South Africans were familiar with at least
three Chinese brands, only 11 per cent consider China to have a good reputation in
their country.108 Moreover, 77 per cent of Kenyans and 46 per cent of Nigerians
surveyed believe that their respective national development goals are impacted
positively by China, but only 29 per cent of South Africans agree. 109 Across Africa,
China is not seen as an equal business partner to a particular state, with 65 per cent
of those surveyed responding in the negative to this question.110 This means that the
number of Africans who believe that China and African states are equal partners is at
or near 35 per cent, and in South Africa, this figure is 14 per cent.111
The sentiments concerning products from China in South Africa are not good
either. Only 13.7 per cent think positively about Chinese product quality because
they believe that these products are of lower standards and lower quality. 112
However, this can be a good thing as it allows more consumers to access certain
products in various markets, thus 26.4 per cent consider these products to be value
for money.113 Low-income earners are able to afford these products and they benefit
the most from the low costs of Chinese products.
South Africa has a well established and respected engineering and
construction sector. Some of the entities in this field are global competitors. This
explains why only 10.1 per cent of South Africans are pleased with Chinese
infrastructural development projects compared to Nigeria’s 27.1 per cent and
Kenya’s 87.8 per cent.114
Across the spectrum, an average of 8 per cent of South Africans agree that
Chinese businesses are socially responsible. Furthermore, 32 per cent of South
Africans are of the view that Chinese business investments contribute to state
economic development. The sentiments get worse when considering environmental
responsibility – 56.6 per cent do not believe that Chinese businesses in South Africa
are environmentally responsible.115
More survey data from South Africans shows the following:

108
Ibid.
109
Ibid.
110
Ibid.
111
Ibid.
112
Ibid.
113
Ibid.
114
Ibid.
115
Ibid.

Page 20 of 32
 5 per cent agree that Chinese businesses have decent working conditions;
 9 per cent agree that staff members are treated respectfully;
 5 per cent agree that health and safety are considered in the workplace;
 6 per cent agree that basic workers’ rights are considered and observed;
 36 per cent agree that companies from China employ Chinese.116

Chinese businesses’ employment practices are, without a doubt,

questionable. The survey shows that an alarming majority of South Africans, who
have had engagements with Chinese businesses, believe that these businesses
have a great disregard for the vital considerations of the people. It is evident that
people do not come before profit.

(c) The Promotion and Protection of Investment Bill 2013

There have been good trade and investment relations with countries that do not have
existing BITs with South Africa, such as the United States of America, India and
Japan. These commercial relationships have yielded great results and benefits for
the parties concerned.117 At the moment, monetary or market related thresholds exist
in order to mandate investors to comply with state regulatory procedures through
statutes like the Competition Act and the Companies Act. The legislation applies to
both local and foreign investors, acquirers and traders. Typical kinds of foreign
investments do not have to meet tailored standards set up by the government; the
only standard to observe is the rule of law in South Africa.
According to the Department of Trade and Industry, the Promotion and
Protection of Investment Bill, will usher in a modernized legal framework in South
Africa in cases of foreign direct investment.118 Section 3 of the Bill highlights a public
interest concept, the weighing up of rights and correlative obligations of investors,
and depending on existing laws, treating foreign and local entities equally. 119 All of
this will be administered within South Africa and there will be no allowance for extra-

116
Ibid.
117
Steyn op cit note 96.
118
Ibid.
119
Ibid.

Page 21 of 32
judicial institutions to intervene as would be the case in the presence of the BIT
system.120
When looking at an investment, various sentiments collide, as is often the
case when risks are pitted against interests. A vital element should be ‘the aim of
furthering the economic development of the host state.’121 The purpose of
engagement between the two states should not be observed from a generally vague,
typically political point of view, especially by the South African negotiators.122 In
determining whether South Africa’s economic development has been harnessed, the
following factors must be put to the test: public interest, transfer of knowledge,
productivity enhancement, and increased quality of living and working standards and
conditions.123
It is the high standard and quality of the South African legal system that
makes its engagements with Beijing unique in their broad and complex structure. 124
Due to the mixed and particularly unpleasant responses to China’s presence in
South Africa, there is a need for policy and legal reforms to regulate Chinese
investment in South Africa in a practicable and creative manner.125 This approach
should not be intended to punish or stifle Chinese commercial interest. Chinese
investment has a limited influence on development contribution because, aside from
inadequate negotiation, law and policy remain open for exploitation through
predatory behaviour.126

IV. RECOMMENDATIONS
China has access to a market and an economy that is wealthy with ‘good
infrastructure, political stability, the absence of civil unrest or religious conflict, [and
is] rich [in] mineral and human resources.’127 The Chinese have complained about
the high levels of crime and ‘restrictive labour laws, poor communications, logistical

120
Ibid.
121
García-Bolívar op cit note 92.
122
Francisco Little ‘A Multifaceted Friendship’ Q&A with President Jacob Zuma Beijing Review Online Exclusive
2 December 2014 available at http://www.bjreview.com.cn/quotes/txt/2014-12/02/content_656206.htm,
accessed on 11 April 2015.
123
García-Bolívar op cit note 92.
124
Shelton & Kabemba op cit note 85.
125
Ibid.
126
Harvey op cit note 14.
127
Shelton & Kabemba op cit note 85.

Page 22 of 32
problems, lack of worker skills, low productivity, and language barriers’128 as
impediments to sustainable commercial activity.
Policy and legal regulatory reforms should not be stagnant as the commercial,
labour practices, and environmental protection needs develop and evolve with the
growing developmental demands of the continent and the country. 129 Chinese
business and investment pursuits are approached with the consideration of that
country’s own national interests at the core of its rational and pragmatic approach to
South Africa.130 It is the responsibility of South Africans with the decision-making
powers and privileges to improve their own governance as they focus on the
business practices adopted by China in Africa.131
The South African government should enhance the business practices of
state owned entities and address the electricity supply issues as the high costs of
electricity and the lack of adequate electricity supply contributes to high production
and operating costs, in addition to the high costs of labour.132 This contends with the
view of Minister Davies that South Africa is open for business.
A lesson can be drawn from China’s response to corruption within all levels of
government. These mechanisms vary, but the most effective one is the approach
that signals to other members of the Communist Party, government employees, and
the public, that no one is above the law, no one will escape prosecution and no
social, educational, economic or political rank is immune to the aggressive war on,
and reforms against, corruption.133
There is a need to consider a stakeholder benefits system for workers. Such a
scheme would ensure that employees receive sustainable long-term income as
owners in the business and economic sectors.134 This sort of approach would make
Chinese investment more valuable and increase productivity, quality skills training

128
Ibid.
129
Ibid.
130
Qi Zheng ‘China-Africa: An Evolving Relationship but Invariable Principles’ (2014) 3 GREAT Insights 1.
131
Shelton & Kabemba op cit note 86.
132
Petronel Smit ‘Positive outlook for mining in South Africa’ Mining Weekly 6 November 2009 available at
http://www.miningweekly.com/article/positive-outlook-for-mining-in-sa-2009-11-06, accessed on 11 April
2015.
133
Huang op cit note 28.
134
Jonas Mosia ‘When is Foreign Direct Investment Beneficial to a Country and When Is It Not? The Case of
South Africa’ South African Institute of International Affairs Policy Briefing 44 Economic Diplomacy Programme
23 February 2012 available at http://www.saiia.org.za/doc_download/189-when-is-foreign-direct-investment-
beneficial-to-a-country-and-when-is-it-not-the-case-of-south-africa, accessed on 9 April 2015.

Page 23 of 32
and labour capacity.135 This strategy is particularly unique for South Africa owing to
the balance of the population figures in correlation to the economic growth sought.
Although a great deal of risk will have to be assumed by the relevant parties, it is a
necessary risk and valuable lessons may be drawn.
The introduction of screening systems, where the Department of Trade and
Industry has the discretion to deny economic entrance to investments that do not
benefit national interests should be considered. There remains a certain risk concern
when investing in a jurisdiction like South Africa.
The existing bilateral forums and multilateral councils do not serve the
‘ground-level’ South African needs. South Africa should consider a unique
ombudsman or regulatory body set up with the sole purpose of enhancing and
addressing the trade and investment relationship with the People’s Republic of
China. The laws in both countries and their development, together with an
understanding of these jurisdictions will be an important focus for this entity. Insights
on international investment and trade law, while taking national goals for
development and socio-economic objectives into account will be considered when
formulating advice for the purposes of business and government engagements, and
efficient negotiation of transactions.
There are many portals of information and many ways that may be used as
lenses of engagement, however, they are far too vast and broad. Some of these are
in the form of commentaries and policy papers by academics, and legal opinions by
practitioners, but they are not centralized and they are not supported at the highest
level of national government. The skills required for this type of entity are available
from the expertise held by respective university lecturers, legal and professional
firms, existing state institutions and the already existing small and large business
community. A focal point of an entity of this type is that it must be independent of any
political party affiliations that could lead to it being exploited for illicit ends. Merit and
the rule of law should be among the foundational principles of a developmental trade
and investment finance legal centre. An institution of this nature could achieve the
win-win ideals sought while ensuring effective regulation and strengthened
institutions.

135
Ibid.

Page 24 of 32
V. CONCLUSION
There are examples of China’s skill and ability at favourably negotiating its own
interests while South Africa holds onto pseudo-success at achieving its own goals.
There need not be a witch-hunt seeking to purge Chinese businesses when the
ethics of business practice are assessed – especially where the politics of nations
are concerned. South African local institutions, and not the capital providing Chinese,
should bear the responsibility of enforcing good business practices and regulatory
compliance.
Bearing South Africa’s economic goals and objectives in mind, pragmatic
application or implementation of the Promotion and Protection of Investment Bill will
ensure that Chinese entities do not get favourable treatment compared to local
entities in various sectors of the economy.
Regulatory instruments are necessary because bilateral investment treaties
run the risk of interfering with or impeding the practices of national legislation that
would be in place to protect national interests.
The Bill must practicably address matters such as these and policies based
on these standards should be the principles upon which South African negotiators
engage with the Chinese. There is also a great need for diligence and the
understanding to be forthright about the expectations based on the purpose of
investments.
South Africa needs a uniform regulatory and compliance system that
considers the interests of the investing state and entity in relation to the national
interests – which is to attract more foreign direct investment – and the consequences
of these investments at the ground level. The possibility of a definite and exceptional
system of this nature is now realizable, and once the concerns regarding
interpretation and the lacuna causing uncertainty are dealt with, this regime has the
potential of easing the burden carried by development finance institutions in South
Africa.

Word count: 7660

Page 25 of 32
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