A ruinous amendment?

July 2014 News

Since its inception in August 2003, the Security Industry Alliance (SIA) has always been at the forefront when it comes to uniting the private security companies together and bridging the gap between the sector and the South African government. This includes both locally and internationally owned private security companies.

Steve Conradie, CEO of the Security Industry Alliance (SIA).
Steve Conradie, CEO of the Security Industry Alliance (SIA).

The mountainous task has been carried through under the stewardship of its first and current CEO, Steve Conradie. Hi-Tech Security Solutions speaks to Conradie about SIA’s position on issues around the current Private Security Industry Regulation Amendment Bill passed in February this year, which The National Council of Provinces (NCOP) also adopted in March. The Bill has now been sent to the President for review and signing.

“The private security industry believes the majority of the Bill will improve regulation and functioning of the industry. However, without prior notice or discussion, a clause was reintroduced into the Bill on the day it was to be voted on in the Portfolio Committee on Police. This clause requires at least 51% local (SA) ownership of foreign-owned private security companies,” said Conradie.

“Furthermore, the definition of the security businesses has been expanded to include companies which are ‘manufacturers, importers and distributors’ of security equipment such as security cameras and access control. This means they will also be subject to the same limitations on ownership.”

Minster of Police’s rationale for the introduction of this local ownership provision is chiefly based on the grounds of national security. However, such claims have not been substantiated.

“SIA believes that many aspects of the Private Security Regulation Amendment Bill can have a positive impact on the industry, but are deeply concerned about the clause relating to dilution of foreign ownership,” Conradie continued. “SIA believes there are alternatives and more appropriate proposals which could address the concerns around national security raised by the Minister of Police, and which would at the same time avoid the negative consequences of the current Bill. SIA is committed to working with the Ministry of Police to address its concerns and to find a workable solution that will allow foreign-owned companies to continue adding value to the economy and to continue being an enabler of sustainable employment opportunities. And we believe in South Africa and its people and are committed to open, transparent engagement and consultation.”

Less than 10%

According to SIA, foreign private security companies represent less than 10% of the private safety and security sector in South Africa. The vast majority of the private security industry is currently owned and controlled by South Africans. All foreign-owned private security companies operating in South Africa are controlled and managed by South African citizens. Very few private security personnel are authorised to carry weapons. They have to be authorised under a regulated authorisation process, which includes South African nationality as a mandatory test.

Out of the nearly 446 000 security officers directly employed in the private security sector in South Africa, foreign companies employ less than 10%, in other words, between 30 000 to 40 000 employees.

The Bill creates uncertainty which is not conducive to investment and job creation in the life safety and security sector.

“Limiting foreign ownership in the specific case of private security will send negative signals to foreign investors in other sectors, at a time when South Africa is actively seeking foreign investment as part of its industrial growth plan,” Conradie notes. “Given the assumptions of the National Development Plan in terms of savings and gross capital formation in South Africa, it is estimated that foreign direct investment (FDI) levels should increase from 1% to 5% by 2030. An argument used to support the draft Promotion and Protection of Investment Bill is that foreign investment will be sufficiently protected from forced transfers of property rights by the South African legislation. The PSIRA case demonstrates that such forced transfers can result in hastily adopted amendments to legislation, and that the SA legislation does not offer such comfort.

“The definition of security ‘services’ is extremely wide, and so in addition to private security companies, it could include firms such as Bosch, Samsung and Sony, which make CCTV cameras. The legislation may also include companies such as Fedex that transport this equipment. As the provision is so broad, many of these firms and affected parties have no idea they fall under the ambit of the legislation.”

Conradie asked, How does one deal with the question of dilution of ownership when a company is listed on a stock exchange? All of the biggest foreign-owned private security companies in SA, or their parent companies are listed abroad. Once listed, it’s difficult to keep track of how many of those shares are held by pension funds or brokers on behalf of foreign citizens.

Complementary and distinct from the SAPS

SIA understands the Minister’s concern regarding national security. However, since the PSIRA Act restricts registration as a security officer to South African citizens, SIA believes it is unlikely citizens would place foreign interests before local interests, and that the perceived threat to national security because of foreign ownership is not a matter of concern. Private security personnel have the same powers as ordinary citizens. They are only authorised to make citizen’s arrests, banish trespassers and deny entry, and search personal property, by virtue of their status as agents of property owners and employers. The government has legal recourse through the courts to hold the industry accountable for unlawful action.

The 51% ownership amendment would also contravene Bilateral Investment Treaty provisions. For example, the agreement between South Africa and the United Kingdom obliges the South African government not to ‘impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals or companies of the United Kingdom, or treatment less favourable than that which it accords to its own nationals or companies.’ Moreover, the investments from companies of the UK ‘shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation.’

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