Private Security Industry Regulation Amendment Bill: Minister of Police and PSIRA briefings

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30 October 2012
Chairperson: Ms A van Wyk (ANC)
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Meeting Summary

The Minister of Police and the Private Security Industry Regulatory Authority (PSIRA) briefed the Committee on the Private Security Industry Regulation Amendment Bill. The Minister outlined the intentions of the Bill, and gave an overview of the industry in South Africa. The Bill intended to regulate foreign ownership and control of private security firms in South Africa, to regulate private security firms outside of South Africa, to provide for PSIRA’s role, as a regulatory authority, in promoting crime intervention partnerships between firms and the organs of the state, to provide additional powers to the Minister of Police, to provide limitations on the participation in the industry of persons with criminal records, and to provide for funding of the PSIRA by the state. He broadly explained some the reasons behind the purpose of the Bill. The PSIRA delegation briefed the Committee on the major policy considerations behind the Bill. In future, security companies should have at least 51% South African citizen ownership, although the Minister would have the power to grant exemptions. At the moment, those with a criminal record were permitted to become involved in the security industry, after ten years since the offence was committed, but the intention was that no person with a criminal record could be involved. In line with the promotion of crime-prevention partnerships, a hybrid funding model of part state, part self-funding (through levies on the industry) was proposed. PSIRA was to be given authority to suspend firms who failed to pay their levies, and the criminal sanctions for offences were increased. There were also provisions around keeping an updated database of firearms in the industry, provisions for information to be provided to PSIRA when a person in the industry was deployed outside the country, and prohibitions against engaging in military assistance contrary to other legislation. PSIRA summarised the content of each clause of the Bill, and reported that the Bill was constitutionally sound and had been drawn up in consultation with a number of parties, including government entities, industry associations and trade unions. The cost of the implementation of the Bill was briefly explained, assuming that it commenced on 1 April 2014. Total State funding for the first year would be R28 million, rising to R135 in the following year, with funding thereafter largely reliant on a baseline with inflation-linked increases. Additional staff would be needed to implement additional programmes.

Members questioned the Minister on how PSIRA and government would withstand pressure from international countries in relation to foreign ownership, but the Minister was adamant that the industry must be regulated in the interest of itself and the country. The DA was particularly concerned about suggestions to regulate foreign ownership, which it believed would have a major impact on South Africa’s international standing, but the Minister countered that there was justification because of the serious repercussions of security. Members questioned how PSIRA could measure the weaponry in the industry, and repeated this point to PSIRA, particularly in view of the current situation of firearms registries. Members noted that he current implementation costs and budget were insufficiently detailed and would have to be revised. They questioned why PSIRA wanted to be involved in interception of communications, queried the periods of imprisonment now specified in the Bill, and asked how it could regulate operations outside the country, and what clause 15 sought to achieve. Further questions were asked around the exemption powers of the Minister, with the comment that the requirements were not clear, whether it was correct that permanent residents be excluded from ownership, and whether existing foreign owners would be compensated if they were excluded in future. Members wanted to know also whether Parliament was consulted, why there was reference to Acts not yet in operation in the Bill, and the reasons for partnerships between PSIRA and the State. Members disputed the readiness of PSIRA to implement the Bill, and questioned when companies would have to comply.

Meeting report

Private Security Industry Regulation Amendment Bill: Minister of Police briefing
Mr Nathi Mthethwa, Minister of Police, gave a briefing on the Private Security Industry Regulation Amendment Bill (the Bill). The State Law Advisers and the Parliamentary Law Advisers were also in attendance. He outlined that the Bill intended to achieve a number of objects, including to regulate foreign ownership and control of private security firms in South Africa, to regulate private security firms outside of South Africa, to provide a role as a regulatory authority in promoting crime intervention partnerships between firms and the organs of the state, to provide additional powers to the Minister of Police, to provide limitations on the participation in the security industry of persons with criminal records, and to provide funding of the Regulatory Authority by the state.

The Minister said that according to the Private Security Industry Regulatory Authority (PSIRA) Annual Report, South Africa had approximately 8 000 private security companies, 1.7 million security guards and an estimated 430 000 active firearms in the private security industry. The police and army numbers were almost half of private security numbers. The growth in the industry occurred world-wide, not merely in South Africa, although South Africa had one of the largest industries in the world. Currently, not all companies in South Africa were registered with PSIRA, as required by the law.

The Minister said that there was a perception that the preserve of the police was being taken over by private security. However, private security could never replace the public police service, as they had different motives. Police served the public while private security operated for profit. Police had special legal powers that private security did not have, and the latter tended to favour the wealthy clients, because of their profit-driven existence. Private security shifted social control away from the state and accountability was market-driven whereas the police were scrutinised by the public.

The Minister said that South African Police Services (SAPS) had raised problems with private security services, including allegations that they were supplying criminals with information, were directly involved in crime, hiring out of weapons, were involved in criminal actions aimed at undermining competing companies, were issuing fraudulent training or illegal certificates, and were undertaking hits or assassinations on behalf of other people. He said that the issue of weapons in the hands of private security was something that needed to be audited.

The private security industry wanted to benchmark itself against other countries in the world. A desktop review of legislation pertaining to foreign ownership in private security industries, in fourteen countries, was used. Five of these countries, the USA, China, Brazil, Russia and Canada, had limited private security to nationals within those countries. Eight countries placed severe limitations on foreign ownership. The United Kingdom allowed only firms from within the European Union to operate in the UK. Pakistan had completely banned foreign companies from operating, and this had sparked outrage from the USA and even from the UK, which had, as just outlined, limited its own operations.

The United Nations had recognized the threat of the growth of security companies and there was strong lobbying against international instruments. An international code of conduct was signed in Geneva, and most of the African companies involved were South African. Some commentators had expressed concern that this code of conduct replaced any possible international instruments regulating private security industries.

The Minister said that there was no basis for the argument around the effect on job losses. The provision of security depended on demand and supply, and a change of ownership would not affect demand. When foreigners had bought companies previously, there were no significant job losses. The private security industry was growing rapidly without regulation, and he urged that it must be regulated to ensure it performed in a manner fit for a democracy. Currently, the industry was marred by a lack of accountability, weak regulators including shareholders and boards, no control over the type or quality of services, untrained staff and corrupt behaviour. The industry itself had recognised that regulation was needed, and the repercussions of the industry not being regulated had to be addressed. The government and South African people needed to withstand international pressure, as seen in Pakistan, to promote regulation.

The Chairperson asked the Members to confine themselves to asking questions of clarity.

Mr M George (COPE) asked how PSIRA, the government and South Africa could withstand pressure from the likes of the UK, USA and Germany, when they had previously been unable to do so.

The Minister said that the government had been through this route before and that the pressure was on everybody. It was important to paint the context to resist such pressure. There was an element of hypocrisy, since countries that tried to pressurise others were themselves restricting foreign ownership. The sovereignty of the country could be under threat if it could not resist such pressure. He said that PSIRA was prepared, had done work around regulations, and had agreed that it was in the interest of the industry to regulate it.

Ms D Kohler-Barnard (DA) said that the Bill mentioned regulating foreign ownership, but she suggested that “expropriating” was a better word. Losing all foreign ownership would have a major impact on the financial standing in the international community. She was shocked that this Bill was on the table.

The Minister answered that no business was being taken away from anyone. Each country had its own set of rules and laws, and the government needed to work in the interests of South Africa. Both nationals and foreign nationals would be affected, and the 51% limit was very mild and moderate. It would be foolish to look at the private security industry as a purely private business matter, as it had many repercussions.

Mr G Lekgetho (ANC) asked if the presence of so many criminal elements in the industry occurred before or after 1994.

The Minister replied that the industry, prior to 1994, was dogged by high number of mercenaries and similar units. South Africa had attempted to change the nature of the industry since 1994.

Mr V Ndlovu (IFP) asked if PSIRA was able to measure exactly the number of weapons in the hands of the industry, how it could do so, and how it planned to measure weaponry in industry.

The Minister said that it was very difficult to give definite answers to that question, but that part of the programme involved people who were arrested for being in the industry illegally. Their weapons undermined the industry. Further regulation would lead to more precise and definite answers.

Briefing on Private Security Industry Regulation Amendment Bill from PSIRA
Mr Manabewe Chauke, Director, PSIRA, introduced the delegation and gave an overview of Bill. He said the purpose of the Bill had already been outlined by the Minister, who had also detailed the challenges that the industry faced. He then listed and explained the major policy changes that the Bill sought to introduce, as follows:

- Ownership of Security Businesses: The Bill permitted at least 51% of ownership and control by South African citizens. The Minister would be empowered to prescribe different percentages.
- Registration by South African Citizens only: The Minister would be empowered to exempt persons from exclusion, and security businesses owned by foreign nationals might be exempted.
- Consequences of Being Found Guilty of an Offence: The Bill proposed changes to the time periods of “cooling-off” before a person found guilty of an offence may register to operate in the industry.
- Promotion of crime prevention partnerships between private security industry and organs of the State.
- Introduction of funding model from self-funding, to a hybrid model comprising of self-funding and state-funding.
- PSIRA would have the authority to suspend security providers who failed to pay a levy in term of the Levies Act.
- Provision was made for keeping an updated database of firearms, to account for the number of firearms in the industry by the Central Firearms Register of Service.
- There was now a requirement for provision of information, to the Director of PSIRA, relating to a person, who, within South Africa, recruited, trained, hired out, sent or deployed any other person to provide security service outside South Africa.
- There was a prohibition against engaging in any activity that was in contravention with the Prohibition of Mercenaries Activities and Regulation of Certain Activities in Country of Armed Conflict Act, 2006, or the Regulation of Foreign Military Assistance Act, 1998.

Mr Chauke then outlined the amendments proposed (see attached document for full details).

Clause 1 would amend Section 1 of the current PSIRA Act, and expanding upon or clarified many definitions in the Section. Mr Chauke noted an error: saying that the reference to section 1(i) should be removed from the Bill and subparagraph (g) was not to be deleted.

Clause 2 sought to amend
Section 2 of the PSIRA Act. It dealt with defining organs of state and crime prevention. The National Crime Prevention Strategy (NCPS) of 1996 had implemented a policy shift from crime control to crime prevention, and promoted crime prevention partnerships between private security and organs of the state.

Clause 3 would substitute Section 10 of the PSIRA Act, to ensure effective accountability of the Council to the Minister, and introduce a requirement for quarterly performance reporting.

Clause 4 sought to amend Section 12, to allow any person to attend any meetings of the Council, on such conditions as the Chairperson may determine. The main purpose of the amendment was to delete references to the word “Deputy Directors”, as this suggested that executive management of the Authority was limited to only three Exco members. It also allowed more flexibility in the appointment of various levels of management of the Authority.

Clause 5 would amend Section 14 of the PSIRA Act, to oblige the Council to appoint a qualified person as the Director of PSIRA, on conditions and terms that would be determined by the Council. It also aimed to extend Exco to more than three members, and do away with the Deputy Directors.

Clause 6 would substitute Section 16 of the PSIRA Act. PSIRA would move from being a self-funding model to a hybrid-funding model, to introduce state funding of the authority. There was also provision being made that the accounting records of PSIRA must be audited by the Auditor General.

Clause 7 was inserting a new Section 16A. This covered additional Council obligations in respect of the Annual Report. This insertion also would align the PSIRA Act with Treasury Regulations.

Clause 8 would repeal Sections 18 and 19 of the PSIRA Act, which dealt with auditing and the financial year. As already outlined, the content of these sections would be replaced by the new Section 16 and 16A.

Clause 9 would amend Section 20(2)(c) of the PSIRA Act, to introduce limitations and prohibitions on ownership and control of security businesses by foreign nationals. All businesses must comply with regulations within five years of the Bill coming into law.

Clause 10 outlined the requirements around certified copies of South African valid ID. The purpose of this was to exclude permanent residence permits from the definition of documents required for registration.

Clause 11 outlined the position of permanent residents. The purpose of this was to exclude foreign nationals from registration, to prohibit certain convicted criminals from registration, and to limit discretionary powers to the Authority. The restrictions in this clause were justifiable, and were similar to those used in other legislation. 

Clause 12 would amend Section 26 of the PSIRA Act, and provide for suspension of businesses that would not pay levies. The amendment simplified the existing requirements around suspension and said that those security businesses that had failed to pay their levies would lose their registration status, and could be publicly named.

Clause 13 intended to amend Section 35 of the PSIRA Act. It was introducing additional powers to the Minister to make regulations involving suspensions, withdrawals, lapsing of registration, ownership and control, reporting information, minimum standards, periods of imprisonment and governance of PSIRA.  The Minister would also now be empowered to make regulations to improve clarity on ownership and control, and have the cash-in-transit standards enforced, to protect vulnerable officers.

Clause 14 would amend Section 36 of the PSIRA Act. It enabled the sharing of information on firearms, for regulation purposes. This would strengthen the regulation of firearms in the industry and enhance PSIRA’s accountability for firearms in the industry.

Clause 15 was inserting a new Section 36A into the PSIRA Act, to regulate security businesses operating outside the country, outlawing mercenary activities by security businesses. The new section would reduce diplomatic risks currently posed by security companies operating outside the country, and bring more transparency to the activities of security companies’ operations outside the country.

Clause 16 intended to amend the existing Section 38, and dealt with prosecution of offenders and gave details of punishments. It was done as a deterrent measure.

Clause 17 would repeal Section 43. He noted that this was a technical point. The Security Officers Act, 1987, was repealed by the PSIRA Act of 2001, and the current provisions would make way for the implementation of the Levies Act.

Clause 18 set out amendments to the schedules of offences, by adding new offences to the table. This was to ensure that persons convicted of mercenary activities would not be able to register as security officers.

Clause 19 was the substitution of the Long Title, whilst clause 20 dealt with the Short Title and date of commencement, which would be yet to be determined.

Mr Chauke summarised that the provisions of the Amendment Bill were constitutionally sound, and that the form and style of the Bill conformed to legislative practice. Thirteen government departments and state entities, eight industry associations and ten trade unions were consulted when drawing up the Bill. The implementation of the Bill involved the funding of the Authority, capacity building, growing the national footprint and the renewal of registration. He explained that the main portion of the funding related to initial capital expenditure for expansion, the replacement of the current revenue contributed by security officers, the funding of special projects, new offices and alternative platforms for service delivery. Capacity building involved expanding the number of law enforcement units. Growing the national footprint meant creating service delivery points in provinces where they did not previously exist.

Mr Nick Ligege, Chief Financial Officer, PSIRA, explained the costs of implementation if the Bill was approved. Certain assumptions were made for the purpose of calculating these costs, and it was therefore assumed that the Bill would begin operating on 1 April 2014. Four programmes would need funding – namely, law enforcement, finance and administration, communications, and training and corporate services. There was also a need for supplementation of funding by the State. The total State funding required for the implementation was calculated at R28 million in the first year, rising to R135 million in the second year (mainly because of an increase in inspectors). After that, incremental increases would occur, but these would be inflation-linked. He described how the amounts were divided between compensation to employees, lease payments, goods and services and project expenditure (renewal of registrations). He also showed the total current expenditure, and capital expenditure, which was mainly in relation to ERP software and motor vehicles. He also detailed the estimated numbers of additional staff per programme needed in the following years, mostly in law enforcement. (See attached presentation for full details)

The Chairperson said that the reported implementation costs could not be accepted in their present form, as more detail and timelines were needed. Parliament would require a proper cost and revenue plan.

Mr D Stubbe (DA) asked how PSIRA could ensure that companies did not intercept communications, and how it would know which companies did this.

The Chairperson asked why PSIRA wanted to be more involved in the interception of communications, if it was supposed to be a regulatory authority.

 Mr Thula Bopela, Chairman, PSIRA Council, said that PSIRA’s role in interception of communications was needed to deal with security companies who did not abide by the legislation. PSIRA was under-resourced but it would get in technical expertise from the Department of State Security and increase the number of inspectors.

Mr Stubbe asked why PSIRA had concluded that the period of imprisonment should be five years, in relation to Section 13.

Mr Bopela replied that PSIRA had looked at previous cases of contraventions of the PSIRA Act. The main concern was that the Courts did not appear to regard the offences in a serious light and it was hoped that by specifying this period, it would be an indication to the court that PSIRA saw the offence as seriously.

The Chairperson asked the State Law Advisors to consider the issue of allowing the Minister to regulate a period of imprisonment.

Mr Stubbe asked if PSIRA was aware of the backlog on firearms, given that it had wanted to do a presentation in thirty days.

Mr George said that the Central Firearms Register was either semi-functional or dysfunctional, and asked how PSIRA would improve this.

Mr Bopela said that PSIRA was aware of the firearms backlog, but would ensure that PSIRA was able to keep an updated firearms record for itself. It was not taking away the function of SAPS, but was trying to account for the firearms in the private security industry.

The Chairperson felt that the obligation for the database of firearms in the industry indeed should rest with PSIRA.

Mr Stubbe asked how PSIRA would be able to regulate operations outside of the country, as proposed in clause 15.

Mr George wanted to know how clause 15 would improve transparency, if the companies were operating outside of South Africa.

Mr Bopela said that PSIRA wanted to be able to know which companies were going outside of the country, and what they were going to do. PSIRA would specifically ask for this information before the companies left. He agreed that it would not be possible for PSIRA to actually prevent the companies from carrying out mercenary activities outside the country, but it wanted to make provision for this type of regulation. To improve transparency, the companies would be required to brief PSIRA on what they were doing outside of the country. PSIRA would also work with state organs to find out what was being done by South Africans outside of the country, but would not play an active role in finding out this information.

Ms Kohler-Barnard asked if there was a mandate to effectively spy on South Africans overseas.

Mr Bopela replied that the matter could be dealt with via an embassy in that country, if there was one.

Mr Ndlovu asked if the Minister would make exemptions in consultation with Parliament.

Mr George asked for a better explanation of the powers of the Minister to exempt companies.

The Chairperson agreed that the process of the Minister making exemptions was unclear, and she too asked for clarification.

Mr Bopela said that the powers set out in the Bill meant that the Minister had to take account of concerns of PSIRA, but as presently framed there was no requirement for Parliamentary involvement.

Mr Ndlovu asked if PSIRA had the human resources to apply the Levies Act.

Mr Bopela said that PSIRA would have to expand in order to do so. Currently, the organisation had a sub-committee to deal with the Levies Act, but it was a slow process that needed improvement.

Mr Ndlovu, and the Chairperson, said that Prohibition of Mercenary Activities Act had not yet been implemented, and asked why PSIRA was referring to it in this Bill.

Mr Bopela replied that whilst that Act had 

not yet been implemented, security companies were involved in this arena. PSIRA, by including a reference to that Act, was trying to ensure that it would be in a position to handle the matters proactively, when the Act was passed, as it did not want to have to seek an amendment at that stage.

Ms Kohler-Barnard noted that PSIRA had oversight over the industry. She asked why it was prepared to grant private security licenses to known criminals.

Mr Bopela said that in terms of the current legislation, persons with criminal records were allowed to register as security officers, if the offences had been committed more than ten years previously. PSIRA was in fact proposing that a person with a criminal record should not be allowed to enter the industry at all, regardless of the time that had lapsed since the offence.

Ms Kohler-Barnard asked for an explanation on the promotion of a partnership between the private security industry and SAPS, if it was not paid for by the state, and why SAPS was needed for cash-in-transit operations.

The Chairperson asked why PSIRA wanted a partnership between itself and SAPS, questioned if this was really necessary, and asked for more detail on the role of PSIRA in this partnership.

Mr Bopela said that that private security helped to prevent crime, and PSIRA wanted to ensure that its involvement in this field was integrated with SAPS.

Ms Kohler-Barnard said she was totally against regulating ownership of the companies, and that it was a very sensitive move. She asked if it was necessary and if any study been done on its effect. She mentioned that some companies were listed on the stock exchange, and asked if PSIRA was intending to control the stock exchange. She asked for clarification on local ownership having to be 51%, or 100% after a time period.

Ms M Molebatsi (ANC) asked how PSIRA was going to deal with the issue of fronting, saying that companies could be fronted by South Africans although effectively still be owned by foreigners.

Mr Lekgetho asked what the size of the foreign-owned business ratio was, and how this compared with the currently position of local-owned businesses. He asked what would happened to the 49% ownership of the company, and if it would still remain in the hands of foreigners.

The Chairperson said that there was a contradiction in the Bill about ownership. There was ambiguity about the 51%, or 100%, ownership requirements.

Mr Bopela said that the Bill proposed that at least 51% of ownership should be in the hands of South African citizens, although the Minister could make exemptions. This would be a starting point, and there were areas where the Minister could allow different percentages depending on other factors. The Bill did not propose to take away entire ownership.

Ms Kohler-Barnard said that as far as she knew, permanent residents had the same rights as citizens, except when it came to voting. She asked if the proposal to restrict permanent residents from ownership was not unduly harsh, or even xenophobic. She asked how companies owned by non South-Africans could pose a threat to the country.

The Chairperson asked if PSIRA had ensured that the Bill was not in contravention of the rights of permanent residents.

Mr Bopela said that the proposed amendment was done in the interest of the security of the State. It was not in its interest that the State be protected by foreign nationals, as there were rogue elements associated with foreign nationals. This was the policy direction that had been adopted. The law advisors could explain the issues around the rights and duties of permanent residents.

The Chairperson said that permanent residents were clearly distinct from foreign nationals. She asked for input from the State Law Advisor.

A State Law Advisor agreed that permanent residents had been granted the same rights as citizens, except “political” rights. There was sufficient justification to put a limit on the rights of permanent residents in clause 9, as this related to the security interests of the country. He reminded Members that the Minister would have the power to grant exemptions that would effectively change the percentage holding of ownership for certain categories, depending on the security risks involved.

Ms Molebatsi asked what the consequences would be for companies if they did not comply with the 51% ownership rule.

Mr Bopela said that companies would be able to approach the Minister with reasons why they had not complied and could make out a case for exemption. However, if companies had made no effort to comply, they would be delisted and deregistered.

Ms Molebatsi asked if PSIRA was ready to implement this Bill.

Mr Bopela said that PSIRA would be ready by the time the Bill was adopted. However, its readiness was affected also by whatever changes Parliament might make.

Mr George disputed this, saying that he knew that PSIRA was not currently capable of implementing the Bill. This was a point that the Committee would need to debate. Previously, similar legislation had failed, and this contained even more complex provisions. He asked specifically if funds were available for the implementation of the Bill. He wondered why, in principle, the state needed to pay for the needs of private security companies, when they made so much money. He asked how the Auditor-General was going to get involved.

The Chairperson repeated that PSIRA needed to draw a clearer budget, setting out what income it generated and what it needed from the government. It also needed to include quarterly financial reports. There was no reference to income in the Bill. She asked if the shortened period, from 120 days to 90 days, in respect of non-payment of levies would ensure better collection of debts.

Mr Bopela said that the budget would be improved upon on in the future. PSIRA had calculated the income that it was likely to generate from levies, although a report would still need to be made on the exact amounts.

Mr George asked if new companies needed to comply immediately.

Mr Bopela said that existing companies would have to align themselves in a given period, while new companies would have to adhere immediately to the legislation, once it was in force

The Chairperson asked for an explanation on the redefinition of a security officer, and how PSIRA would manage that.

Mr Bopela said that PSIRA wanted to cover people who were trying to avoid regulation.

Ms Kohler-Barnard asked if financial compensation would be given to foreign companies when they were forced to sell their ownership. She also noted that USA did not restrict foreign ownership.

Mr Bopela said that there would be no expropriation of rights or ownership of companies without compensation.

The meeting was adjourned.


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