The American Chamber of Commerce in South Africa (AmCham)

The Private Security Industry Regulation Amendment Bill

Prepared for the Parliamentary Portfolio Committee on PoliceORAL Submission : 1 November 2012 at 15h00

What is AmCham

• Principal mission: facilitating trade and investment between the United States and South Africa

• Represents 250 American Companies which are registered in South Africa and which employ more than 200 000 South Africans directly.

• US Companies contributed R62.7 Billion* (portfolio investments: R568.7 Billion*) to the South African Economy in 2011.

• Actively support the aims and ambitions of New Growth Path and the National Development Plan

* South African Reserve Bank Quarterly Bulletin, December 2011

Review of the Private Security Industry in South Africa

• Globally the size and role of the civilian private security industry has grown dramatically in recent years.₁

• South Africa reported a growth from 115 000 security personnel in 1997 to 390 000 in 2010 ₁

• In India there are 7 million security personnel, outnumbering police officers 4.98 to 1

• In South Africa this ratio is 2.57,| in the U.S. 2.26 | and in Australia 2.19

1. UNODC: Report on the meeting of the Expert Group on Civilian Private Security Services held in Vienna from 12 to 14 October 2011 , http://www.unodc.org/documents/justice-and-prison-reform/Expert-group-meeting-Bangkok/IEGMCivilianPrivateSecurity/English_V11868142.pdf

Positive Aspects contained in the proposed Legislation

• It recognizes that the security industry provides more than guarding services. Guarding, installation of electronic systems, armed reaction and cash-in-transit aspects are covered.

• Enforcement of the regulations will be through joint accountability for compliance by providers and customers.

Positive Aspects contained in the proposed Legislation

• The Amendments change the way the regulator will be funded and operate

• PSIRA will gain status as “organ of the state” allowing access to government funding

• This change will reduce pressure on the regulator and allow it to do its job rather than worry about budget

Positive Aspects contained in the Legislation

• Given the history of some mercenary activities originating from South Africa, industry representatives have pointed out that cases that have occurred were masterminded by or included participation of South Africans and were not instigated by foreigners or foreign owned enterprises

Negative Aspects contained in the Legislation

• Amendments require that any private security company registered in South Africa must be 51% owned by “South African citizens” within 5 years of the legislation being passed

• The vagueness of the legislation lends itself to mixed interpretation.

• There is no clarity regarding what happens to existing investments

Negative Aspects contained in the Legislation

• Who will benefit if ownership interests are sold pursuant to this legislation?

• Much of the security technology installed around South Africa, including at key points, involves foreign-sourced electronics.

• Many of the companies providing electronic equipment are also IT companies. Does this ownership requirement apply to the company as a whole? Or just the aspects dealing with security?

Possible International Violations of the Proposed Amendments

• Are the proposed amendments consistent with South Africa’s World Trade Organisation(WTO) General Agreement of Trade in Services (GATS) commitments? South Africa has undertaken full market access (Article XVI) and national treatment commitments (Article XVII) with respect to “Investigation and security” services

• Private security companies of WTO members must be able to provide these services without restriction (on the level of foreign investment or otherwise)

and on terms no less favourable than those applicable to locally owned firms

Possible International Violations of the Proposed Amendments

• Limiting foreign ownership will send negative signals to other foreign investors

• Compelling firms to sell 51% ownership to South Africans within the five year time frame could result in oligopolies as the number of companies decreases

• The result may be a more concentrated ownership which will be less than ideal

Conclusion

• AmCham supports Government’s move to regulate and monitor the private security industry,

however,

• the legislation will give rise to many unintended consequences and we urge Government to seriously consider the concerns raised

Questions

Thank you!