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Policy Advocacy – The liberal bottom up approach - published 7 Sep 2017

Thought Leadership 


Thembinkosi Maduna – CDC Operations Executive Support Services highlights aspects of the contemporary approach to policy advocacy.

 

Policy Advocacy – The liberal bottom up approach

 

According to the World Trade Organisation (WTO) a transparent, predictable and efficient regulatory and administrative framework leads to an effective Policy Advocacy. In a study by Dr. Tafadzwa Matiza on the development of an Afrocentric explanatory framework for the non-financial determinants of Foreign Direct Investment (FDI) to African countries, he argues that policy advocacy seeks to actively influence FDI-related policy-making within a country to be in line with the needs and expectations of both domestic and foreign direct investors, as well as conform with internationally competitive best practices.

 

Furthermore, Investment Promotion Agencies (IPAs), Industrial Development Zones (IDZs) and Special Economic Zones (SEZs) such as Coega, engage in a diversity of activities to improve a country’s investment climate.

 

It is thus, paramount that South African IPAs, IDZs and SEZs be cognisant that South Africa’s dominance in both the African and global FDI markets may be inconceivable unless investment promotion efforts are focused on engaging with the government and investors, with a specific focus on improving the FDI policy related frameworks within the South African economy.

 

South Africa has used mainly trade agreements to foster enabling and conducive investment environment for international trade with Africa and the rest of the world. These trade agreements are tools that give voice to South African foreign trade policies and within the investment promotion context set the “rules for engagement” with FDI.  These trade agreements vary from Free Trade Agreements (FTA), Preferential Trade Agreements (PTA) to Non-reciprocal Trade Arrangements.

 


Dr Matiza further highlights that meaningful policy advocacy within investment promotion looks to fine tune the processes of policy making which informs trade agreements through industry based empirical research conducted at a micro and market level (bottom up approach). This empirical research should ideally encompass both domestic and FDI-oriented issues.

 

In December 2015 the Protection of Investment Act No. 22 of 2015 was assented into law. The act in its present form advocates for amongst other things ‘for foreign and local investors’ to enjoy the same status” and most importantly (will) replace bilateral investment treaties concluded with mainly European countries. The intended change then, or so it may seem, represents a paradigm shift from bilateral to more liberal FDI policy. The act also allows for flexibility in its scope which includes investment promotion practices at a national level such as ‘looking to the east’ (Asia) thus, moving away from yearly amendments of individual bilateral agreements through regulations. Furthermore, the act encapsulates both interventionist and investor targeting approaches to investment promotion.

 

The liberal approach success, which embeds economic growth fuelled by FDI, may be dependent on the extent of policy advocacy derived from industry. Such industries found in SEZs in the country legislated by the SEZ Act no.16 of 2014. ‘Industrialized policy advocacy’ also gives rise to meaningful ‘development trade policy’ as termed by the Department of Trade and Industry’s Industrial Policy Action Plan (IPAP).  

 

Figure 1 provides a brief breakdown from the DTI of the transversal interventions that include various policies which support the IPAP such as the developmental trade policy supported by policy advocacy, competition policy, and the SEZ programme.

FIGURE 1: DTI IPAP TRANSVERSAL INTERVENTIONS

 

 

Source: Adapted from Department of Trade & Industry (2013:34)

 

Figure 1 indicates that within the IPAP there are four inputs to the IPAP interventions, namely, the public procurement, competition policy, innovation and technology, and skills for the economy. The policies are translated or implemented through the IPAP over a period of five years. The interventions manifest through the four ‘output’ components which are industrial financing administered by the IDC, Developmental Trade Policy administered by various government entities, Regional Integration and SEZ administered by the DTI. In the CDC context, the IPAP interventions manifest through the grant funding for attracting investment resulting in over 40 operational investors in the Coega IDZ with investment value of R6, 996 billion and an investment portfolio in excess of R181-billion.

 

 

It is important to note that lobbying and policy advocacy within the South African investment promotion context is a must. The recent passing of the investment protection bill is a possible sign of advancement of policy advocacy in the country, particularly the input of the private sector supported by the public sector. Trade agreements remain a catalyst for investment promotion however the construction of these agreements should not be without industrialized policy advocacy.

 

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