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Cape Town - South Africa will temporarily have a two-tier system of investment protection, Trade and Industry Minister Rob Davies said on Monday.
He said this would happen while bilateral accords were being phased out and the new bill replacing them took effect.
Davies was defending government termination of bilateral pacts signed mostly with European nations in the post-1994 period in favour of a standard approach contained in the promotion and protection of investment bill. It was gazetted on Friday.
The cancellation of accords has drawn criticism from credit ratings agencies and foreign trade partners, who say it creates uncertainty over the security of future investments in South Africa.
Davies told reporters in Cape Town that where agreements had ended before the bill became law, there would be no protection protocol for new investors in countries previously covered by bilateral accords.
"We came up with the hard reality that these agreements come with an expiry date," he said.
"All of them have a survival clause so there is none of them [where] existing investors, for a period of between 10 and 20 years, would not be covered by the provisions of those agreements.
"If there are new investments and the thing has lapsed, it is not actually covered, but the existing investments are all covered for a period of 10 years... I suppose it does provide a two-tier."
Davies said South Africa was withdrawing from all its bilateral trade agreements - many which he said had yielded very little benefit - in an orderly manner, with as little upheaval as possible.
"We envisage no lacuna between regimes of protection."
Lawyers have said the bill would erode the rights of foreign investors by removing the guarantee of compensation at full market value in case of expropriation, as well as the obligation of the government to enter into international arbitration in the event of a dispute with an investor.
Davies said he believed investors had nothing to fear on either score as the bill was in line with property rights enshrined in the Constitution, and arbitration remained on the table, though the state did not see it as a first resort.
"First of all we would like an amicable interaction. The ultimate is you go to the courts and the courts... in this country have been ranked as pretty robust defenders of the rights of investors, property and things like that."
Arbitration remained an option, as set out in terms of South Africa's Arbitration Act, which provides for foreign arbitration.
But Davies added: "We are not about to spend a fortune on going to international arbitral panels, we have a broader set of considerations than that."
He said the department would be creating the capacity and a mechanism for dealing with disputes with investors.
"The first line of any dispute is we would try to attempt to assist in resolving it in the department and that obviously means we have to create a capacity to do that. So that if some investor complains about something we see if we can resolve it amicably."
Davies said there was no divergence of views between his department and Treasury on the bill, or on broader policy. He however struck a different, more sanguine tone on a recent foreign investment setback, notably BMW's decision to halt expansion plans because of worker strikes.
Davies said it remained unclear how firm the expansion moves by the world's biggest luxury car-maker had been in the first place and, on the whole, investors were not pulling out of South Africa.
"That yes, BMW did say that there was an investment. I think the possibilities of that are subject to some discussion, whether it was a real imminent investment or a possibility," he said.
"But nobody has indicated that they are going to move out."
He cited plans announced by rival car-maker Mercedes-Benz two weeks ago to invest up to R3 billion in South Africa.
"I think Mercedes-Benz is doing that because they know very, very well that there is no threat to their investment coming from this government."
Davies said reports that South Africa was being challenged by Nigeria as a destination for foreign car manufacturers were skewed as the department supported that development and the country stood to profit from it.
"There was a huge red herring about the investment in Nigeria," he said.
"We are looking for a bilateral agreement with Nigeria, the gist of which will be that we will provide technical support for them to develop their own industry programme."
