The protracted negotiations and delay in signing a preferential trade agreement (PTA) between India and the Southern Africa Customs Union (SACU) was proving to be a major impediment to Indian mining companies committing foreign direct investments (FDI) in South Africa, India’s Mines Ministry has communicated in an inter-ministerial note.
South Africa has emerged as the most favorable investment destination for Indian resource companies and FDI could be put on the fast track by an early conclusion of a PTA, which would also ensure such investments the cover of Foreign Investment Promotion and Protection Agreement (FIPA), the Mines Ministry pointed out.
Apart from coal and gold, which constituted 70% of South African exports to India, faster and larger Indian FDI in SACU countries would help establish long term bilateral investment commitment as well as ensure raw material security to resource hungry Indian economy, an official in the Mines Ministry said.
Five rounds of negotiations on India-SACU PTA have been held since 2007, however no timeframe has been set for signing of an agreement, barring signing of a memorandum of understanding (MoU) by representatives of India and SACU confirming to facilitate an agreement.
SACU comprises the independent nations of South Africa, Bostwana, Lesotho, Swaziland and Namibia.
India-Southern Africa bilateral trade was currently pegged at $11-billion and forecast to rise to $15-billion over the next three years while South Africa the fourth-largest destination for total Indian FDI, amounting to around $15-billion.
However, the Mining Ministry said on Friday that an institutional framework was necessary to maximise bilateral trade and investment.
Over the past few years, the Indian economy has developed the strongest linkages with Australia and South Africa to meet its resource needs for energy and metals sectors. PTAs were necessary to ensure muscle to these linkages, according to a trade analyst with Indian Institute for Foreign Trade.
“PTAs cannot be concluded in days, months or even years. But realities of rising energy and raw material needs of core manufacturing sector, the case for urgency in facilitating investment flows were very strong,” he said.
A number of Indian government mining companies, including NMDC Limited, Coal India Limited, MOIL Limited and Singareni Collieries Company Limited, all had South Africa on their radar for mineral asset acquisition, while Tata Steel, Osho South Africa Coal Mining and JSW Limited have already acquired assets in that country.
Edited by: Esmarie Swanepoel