New bill to cross foreign investment

The dti published a draft “Promotion and Protection of Investment Bill” (Investment Bill) on 1 November 2013. The bill is up for public comment until 31 January 2014. The government argues to replace the regimes of Bilateral Investment Treaties (BIT) by an overall investment bill. The bill mirrors the level of protection of investment as provided for in the constitution.

The government stresses this approach not being a reversal of the protection of foreign investment but a step to modernise the legislative framework and to apply equal rules to foreign and domestic investors.

The Investment Bill will substantially change the environment for foreign investors and diminishes their rights in comparison to BITs:

• Expropriation

The bill does not not exceed what is prescribed in the constitution. (Foreign) investors are not guaranteed compensation in full market value any longer. In terms of the draft bill the compensation must be just and equitable. Next to market value, public purpose and public interest come into consideration. This will lower the compensation level offered in most BITs.

•  Protection against changing conditions

(Foreign) investors will no longer be treated fair and equitable, i.e. investors can no longer rely on protection or seek compensation if the conditions (regulations) change which applied at the time of investment (this is generally contained in BITs).

• International arbitration scrapped

(Foreign) investors can no longer recourse to international arbitration, like the World Bank’s International Centre for Settlement of Investment Disputes. This is contrary to the typical provisions in BITs.

In the event of a dispute, the Bill confers jurisdiction to any South African court, competent independent tribunal or statutory body for settlement. Investors can ask dti for mediation. The latter is rather theoretical as dti/the government would be party of a dispute.

Further regulations on the settlement of disputes will be drafted by the relevant minister.

It is hard to see this bill promoting foreign investments. Additionally, BITs provide protection to South African investors in treaty countries. Are these investments sufficiently protected by exclusively the international framework regime?

[Investment Bill Gazette 1Nov2013]

Procurement of renewable energy a success

The Department of Energy (DoE) reported to the parliamentary Portfolio Committee on Energy on the progress on the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

17 out of 93 applicants qualified as preferred bidder in the third bidding window which will take 1456 MW. There have been no bids for each small hydro and biogas. Bids fail mainly because of the qualification criteria set in the procurement documents could not be matched. This also happened to two small hydro projects.

Illustration: Different types of renewable energy. (Photo credit: Wikipedia)

Another observation is that across technologies, the indexed prices have decreased from 1^st till 3^rd bidding window. For example PV felt from R3.098 to R0.990 per kwh and wind sits now at R0.737 coming from R1.284 per kwh.

Concerning the determination on cogeneration (800 MW) DoE informed that the procurement documents are being developed to request for proposals early next year.

As it comes to the determination from gas of coal base load (475 MW) DoE underlined that they want to follow a “holistic approach” and therefore have opted for a study on gas which delays the development of procurement documents.

A success story is definitely the job creation coming along with the IPPs as approximately 13308 jobs will be created overall with 7300 new opportunities given to unemployed youth.

[List of bidders window 1 and 2]

Youth Employment Incentive

The Youth Employment Incentive has been adopted to boost youth employment and to tackle the persistently high levels of youth unemployment in South Africa. The incentive to hire young people comes into effect on January 1, 2014 and will last for two years.

Finance Minister Pravin Gordhan said the revised bill is intended to encourage job creation in special economic zones and to provide work to more young people. All private employers registered to pay employees’ tax to the South African Revenue Service (SARS) qualify. Employers will be able to deduct the youth employment incentive amount for which they qualify from the employees’ tax they would have to pay to SARS.

Employees who qualify must:

• be between 18 and 29 years old;
• work for an employer in a special economic zone as indicated by the finance minister in the Government Gazette; or
• work in an industry which has been indicated by the finance minister in consultation with the ministers of labour and trade and industry; and
• have an identity document or an asylum seeker permit.

This incentive is not applicable to domestic workers.

During the first year the amount for which could be qualified is half of what the employee earns for employees who earn R2 000 per month or less and R1 000 for employees earning between R2 000 and R4 000. For employees earning between R4 000 and R6 000 the amount declines, according to a formula, the higher the wage is.

For example, R500 can be claimed for someone earning R5 000. For someone earning R6 000 or more nothing can be claimed.

During the second year the incentive declines by half. An employer is not allowed to receive the incentive after January 1 2017.

[Read full article]

Business Guide to a successful tender

It takes a lot of effort preparing a tender or bid. From studying the bid requirements, to collecting the needed information, to determining your capacity needs, to costing, to confirming the source of supplies, to writing a compelling document, to collecting all the needed certificates and compliance documents, to presenting it all in a tender pack.

In taking all the effort, it is important to ensure that your business has a good chance of being awarded the tender. But it is seemingly very common for business owners to make mistakes in the preparation of their bid.

There are some common shortcomings and mistakes that can cost you a tender, which business owners repeat over-and-over. So if you’re going to take the time to prepare and submit a bid, look out for these things to avoid, which we can call the “seven deadly sins of tendering”:

1. Not attending to the tendering brief
2. Not having the required documents
3. Late submission
4. Poor presentation and layout
5. Misrepresenting your company or capability
6. Nor following the tender requirements
7. Not triple-checking your document pack

And remember: Even if you have the tender document, it’s always a good idea to keep a copy of the original advert from the newspaper, as sometimes the requirements for delivery of the tender, such as the relevant official and what it must say on the envelope, are only mentioned in this advert and not on the actual tender document.

[Read full article]