Much Ado About Nothing? Not enough Ado About Something!

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By Denis Stupan

The headline of this article might be confusing. This is in keeping with a draft bill currently discussed at the National Economic Development and Labour Council (NEDLAC): the draft “Promotion and Protection of Investment Bill”. As it stands, it will affect any business and any citizen – and yet there is not much noise about it…
Why is that? The Department of Trade and Industry managed very well to uncouple heading and content. I am not saying that the bill is not dealing with investment issues – it does for sure – but it goes beyond that.
If you run, let’s say, a small window cleaning business, would you pay attention to a draft bill on investments? Presumably you wouldn’t, because you feel there is no link to investments and your business. Unfortunately, you better pay attention to this draft bill!

Who’s an investor?
As usual the devil is in the details. First thing a small business owner should know is that the draft bill does not distinguish between foreign and domestic investors. The definition of “investors” includes investments of South African business owners in South Africa. It does not matter if a small window cleaning business buys a new bakkie and appliances for window cleaning, or a corporate giant invests in mines – everything is regarded as an investment in terms of the draft bill. The draft bill targets “any person who holds an investment in the Republic…” This includes each resident and each business in any sector, independently of size of the business, including movable and immovable assets.

Who owns business assets?
Please continue reading, as the cherry on the cake is just about to come. Having clarified that the bakkie of the small South African-owned window cleaning business is an investment, the bill suggests that government officials can expropriate this bakkie from the business if the state action is justified by “public interest”. As neither the constitution nor the draft bill defines what “public interest” is, those businesses with spare money will go the legal route. What about the owner of the small window cleaning business who could lose a bakkie to the state without funding for a court fight?

Custodianship: No compensation for business assets
Unfortunately, the story is not finished yet. In 2013, the Constitutional court ruled that no expropriation takes place if the state “only” deprives property and acts as custodian without getting ownership. Coming back to the bakkie, this means if the state expropriates the bakkie from the small window cleaning business without claiming legal ownership, this will not be regarded as expropriation.
Even though only the state authorities will be using the bakkie which, from a legal perspective, still belongs to the small window cleaning business, it will not be serving the business. That’s like an expropriation without compensation.

Isn’t the heading of the draft “Promotion and Protection of Investment Bill” cleverly disguising some proposals and definitions? Thus, do you still think the draft bill does not affect your business?

About the author:
Denis Stupan has vast professional experience in public and government. He is founder of CNC – Communication and Network Consulting, a public affairs company. Contact him on email: denis@cncconsulting.co.za, www.cncconsulting.co.za