The legal protection of foreign direct investment in the new millennium: a critical assessment with a focus on South Africa and Zimbabwe

Abstract

The increasing investment gap and reduction in foreign aid has made several developing countries to turn to foreign investment as a mechanism to circumvent their financial constraints among other things. There is substantial empirical evidence that foreign direct investment enhances economic development, employment creation, national competitiveness and diffusion of technology from foreign firms to local firms and workers of the host states. As a result, this study firstly argues that foreign investment is much needed in South Africa and Zimbabwe to improve economic growth and development, create employment and increase their competitiveness in the global market. However, these benefits do not accrue automatically but the host states need to create an enabling environment to exploit such benefits. The legal protection of foreign investment has become a fundamental issue in both international and national law. Efforts have been and are still being made in law as well as in practice to implement national investment legal regimes which are in line with international norms or standards. This study undertakes a contemporary assessment of the legal protection of foreign investment in South Africa and Zimbabwe with a view of examining their compliance with international minimum norms, standards and/or best practices. More recently, both South Africa and Zimbabwe have crafted and implemented investment laws and related policies which are perceived to be somewhat hostile towards foreign investment. To achieve this, selected investment laws and related policies in both jurisdictions are critically analysed. This study puts forward an argument and recommendations for policy makers in both South Africa and Zimbabwe for strategic refinements of investment laws and related policies such that they become flexible, friendly and certain to foreign investors while at the same time advancing their respective national policies aimed at the economic empowerment of local citizens.