Economic Development Minister Ebrahim Patel. Picture: FINANCIAL MAIL
Economic Development Minister Ebrahim Patel. Picture: FINANCIAL MAIL

Economic Development Minister Ebrahim Patel rarely gets good press, but the criticism of his Competition Amendment Bill has been particularly scathing.

In a nutshell, critics warn that the bill in its current form will give the minister significant powers, effectively allowing him to intervene on cross-border transactions, appeal against decisions by the Competition Tribunal, call for or halt market inquiries, and issue exemptions for the Competition Act to be applied to certain agreements or practices.

The power to intervene on cross-border transactions, in the interest of national security, has been particularly contentious, and lawyers warn that it will create even more uncertainty for already reluctant foreign investors.

In its current form, the proposal is that the president should set up a committee that will consider whether transactions might raise national security concerns. The problem is twofold: in its current form, the bill is vague about what would constitute a threat to national security, and leaving these decisions to a presidential committee opens up the decision-making process to political manipulation.

With Chinese deals facing increasing scrutiny around the world, one understands why Xi came to SA last week bearing gifts and urging close collaboration with Brazil, Russia and India.

This committee would then have 60 days to make a decision before making a referral to the competition authorities, simply adding to the delays, red tape and uncertainty that are already frustrating prospective investors in SA.

Of course, using "national security" as an excuse to implement protectionist measures is one of the oldest tricks in the politician’s playbook, and Patel is not the only one who is revisiting this specific page at the moment.

On Monday, China — whose President Xi Jinping just last week argued for open markets, closer collaboration and freer trade — published draft rules that will mean a broader range of investments by foreigners will fall under its national security review process in future.

Last week, it scuppered a $44bn bid by US chip maker Qualcomm for Dutch rival NXP by failing to approve the deal in time. Critics believe it was a deliberate delay — eight other regulators worldwide approved it on time — with Beijing using the merger review process as ammunition in its escalating trade war with the US.

The proposed Qualcomm/NXP tie-up came about after US authorities blocked Singaporean chip maker Broadcom’s attempt to buy Qualcomm for $140bn in March, citing national security concerns. In the US, legislators last week passed legislation giving greater powers to the committee on foreign investment, the agency that reviews inward investment for national security threats.

The UK has released its own white paper on national security and investment, which, if implemented, would increase the government’s ability to block or amend foreign acquisitions of "sensitive" British assets, all in the name of national security.

In 2017, Germany tightened its investment laws, giving ministers more power to block foreign acquisitions of 25% or more in German companies that operate in what it calls "critical" infrastructure. It used the law for the first time in July to block a transaction, thwarting the takeover of Leifeld Metal Spinning, which specialises in high-strength materials used in aerospace and the nuclear industry, by a Chinese firm.

With Chinese deals facing increasing scrutiny around the world, one understands why Xi came to SA last week bearing gifts and urging close collaboration with Brazil, Russia and India.

Of course, deals that really do threaten national security certainly require proper scrutiny, but the rules around this should be fair and transparent, and the process efficiently run. With unemployment at 27.2% and a $100bn foreign investment target to meet, Patel is in no position to needlessly scare off investors.