The Committee continued with day 2 of the public hearings on the Private Security Industry Regulation Amendment Bill. Control Risks SA (Pty) Limited, a subsidiary of the Control Risks Group Holdings, a company registered in the United Kingdom, noted that it had been registered in March 2012. Its submission focused on how the Bill would affect its own position and foreign-controlled companies operating in South Africa. It highlighted, in detail, the potential detrimental impact of clause 9 of the Bill, of clause 11, which it saw as in conflict with section 9 of the Constitution, and the vague, ambiguous and overly-broad provisions of the Bill, relating to the degree of control to be given to South African citizens under clause 9, the lack of a transitional provision relating to the amendments in clause 11, and the over broad discretion afforded to the Minister of Police. A number of Constitutional Court cases were cited in support of the contentions. Members asked for elaboration on the rights of permanent residents and of citizens, questioned if the time-frames, or the principle behind handing over of ownership was the major issue, suggesting that this could easily be amended, and asked for further elaboration on why the Bill was seen to be discriminatory. Members also asked for more elaboration on the assertion that the Bill adversely affected the obligations of South Africa in terms of the agreement between United Kingdom of Great Britain and Northern Ireland and the Republic of South Africa, for the promotion and protection of investments, of 27 May 1998 (the SA-UK BIT). They also asked for suggestions on what could be done to bring the Bill in line with the Constitution.
The Security Industry Alliance (SIA) identified several positive aspects of the Bill, which its members welcomed, but also highlighted negative aspects that could not be supported. It challenged the definitions of “locksmith” and “security service” and proposed alternatives. It believed that the revisions to sections 20, 23 and 25, as well as section 26 (1) and (5) were not justified. Clauses that sought to limit foreign ownership in the private security industry were seen as unconstitutional and in breach of South Africa's international obligations under the General Agreement on Trade in Services (GATS), and it suggested that there was no rational basis for arbitrarily precluding a person who was a permanent resident in South Africa from participating in this sector. It was also concerned at the apparently irrational and arbitrary deprivation of property in violation of section 25 of the Constitution. It did not agree that powers of suspension should be expanded to include contraventions of the Levies Act, in terms of the revised section 26. It further noted that although there was a workshop involving industry stakeholders, no feedback had been provided and their suggestions were not taken into account. Members asked the Private Security Industry Regulatory Authority (PSIRA) if this was correct, and questioned why there was suggestion of expropriation of property rights when this word did not appear in the Bill.
The American Chamber of Commerce (AmCham) represented 250 American companies registered in South Africa, who employed more than 200 000 South Africans directly. Globally, the industry had grown, and AmCham recognised that it covered a wide range and thus welcomed recognition, in the Bill, of broader functions, as well as increased accountability and funding changes. It did not believe there was any basis for fears about foreign control, which was not supported by history, and felt that the vagueness of the Bill around South African ownership led to difficulties in interpretation, and uncertainty as to what was covered. It had similar concerns as other presenters around consistency with the GATS, and cautioned that all the unintended consequences must be considered and corrected. Members sought clarity on this point, and whether there were restrictions in USA.
ADT also supported some provisions of the Bill in relation to funding, the database on firearms, promotion of crime prevention partnerships, and accountability of PSlRA and private security companies. However, it cautioned that other provisions would have severe consequences on the economy, job creation and the fight against crime. ADT believed the definition of “security services” was too broad, and would over-burden PSIRA. It commented that the clause dealing with foreign ownerships ran contrary to South Africa’s commitments to maintain an open environment for investment, and said the fears that foreign ownership posed threats to national security could not be supported and the amendment must be withdrawn. In any event, leaving percentages of ownership to the discretion of the Minister was incorrect in principle. Amendments to section 20(6)(a) were too restrictive, and would result in forced sales, for less than market value, which could fall foul of section 25(1) of the Constitution. The discretion of the Minister, in the revised section 23(7) was not fair treatment of industry participants. It commented that the Bill would violate against the GATS and European Union Trade, Development and Cooperation Agreement, as well as the SA-UK BIT. ADT commented that a similar attempt to limit foreign ownership was made in 2001, but was withdrawn when the UK government objected. ADT proposed either that the Bill be withdrawn and re-worked with input from the industry, or that, at the least, those clauses dealing with foreign ownership be deleted. Members asked for suggestions on a new definition for “security services” and asked for clarity on ADT employees, and concerns around fair treatment.
Gun Free South Africa (GFSA) welcomed clause 3, but suggested certain information that should be specified, either in the Bill or regulations, to be included in reports by PSIRA to the Minister, with the same information also to appear in Annual Reports. It was in support of clause 6’s provisions for funding, which would enable PSIRA to function more effectively. However, it wanted the exact responsibilities of PSIRA to be spelt out, so that inspectors knew exactly what they must inspect, and a list of possible requirements was also suggested. GFSA also urged that oversight of the private security industry be further strengthened, by having something similar to the Independent Police Investigative Directorate, specifically for the private security industry.
Private Security Industry Regulation Amendment Bill: Public hearings day 2
Control Risks SA Proprietary Ltd submission
Mr Peter Leon, Head: African Mining and Energy Projects, Control Risks SA (Pty) Ltd, stated that Control Risks SA was a wholly owned subsidiary of Control Risks Group Holdings Limited (CRG), a United Kingdom company. CRG was a global risk and strategic consulting firm specialising in political, security and integrity risk. The company aimed to help its clients to understand and manage the risks of operating in complex environments. CRG brought together the expertise of regional political risk analysts, business intelligence and corporate investigation experts, as well as security consultants, to offer fully integrated, information-led risk management services. CRG currently provided strategic advice and crisis management assistance and wished to offer these services through its South African office, to provide a high value-added service to its South African clients, both domestically and across Africa. It was in the process of registering as a security provider under the Private Security Industry Regulation Act, 2001, as some of the services it wished to offer through its SA office fell under the Act’s definition of security services. In order to register under this Act, Control Risks SA was in the process of appointing both executive and non-executive directors who were South African citizens or were permanently resident in South Africa. However, some directors remained foreign nationals.
At the moment, section 23 of the Private Security Regulatory Industry Act (the Act) allowed directors and persons performing an executive or managerial function on behalf of a security services provider to be either a citizen or permanent resident of South Africa. However, the Bill insisted now upon 51% control by citizens only. He noted that clause 9 of the Bill potentially was in conflict with section 25 of the Constitution of the Republic of South Africa, as well as potentially breaching the agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of South Africa, for the promotion and protection of investments of 27 May 1998 (the SA-UK BIT). The wording was vague, ambiguous and overly-broad. The second problematic clause was the potential detrimental impact of clause 11 of the Bill, which was seen to be in conflict with section 9 of the Constitution, and the lack of transitional provisions around this clause. The third problem was that overly-broad discretion was afforded to the Minister of Police.
Mr Leon expanded on these provisions. He noted that clause 9 of the Bill amended section 20 of the Act, to include an additional requirement for the registration of security business, that at least 50% per cent of the business must be owned and controlled by South African citizens. The Minister was empowered to prescribe different percentages of local ownership for certain categories of security services. No time frame was specified for security services providers to restructure their businesses to comply with ownership percentages prescribed by the Minister. He therefore suggested that a transitional provision be inserted, to allow companies registered as security service providers a period of five years within which to divest at least 51% of their equity to South African citizens.
Clause 11 of the Bill amended section 23 of PSIRA to require that every natural person who wished to register as a security services provider under PSIRA must be a South African citizen, as opposed to being a South African citizen or permanently resident in South Africa, as was currently the case. Again, clause 11 of the Bill did not stipulate a transitional period to allow security businesses to make the necessary arrangements to comply with the amended registration requirements for natural persons.
If the Bill was enacted, Control Risks SA, as currently structured would not be able to register as a security services provider, as it would not be able to meet the 51% South African ownership and control requirement, or any alternative South African ownership and control percentages above 0%. Certain of its executive and managerial staff were in the process of applying for permanent residence status in South Africa, but if the Bill were enacted this was not sufficient. CRG would in effect have to divest 51% of its shareholding in Control Risks SA to South African citizens and would thus forfeit its right to control its South African subsidiary. This could not only affect services rendered to its clients, but would require CRG to dismiss any non-South African director or any non-citizen fulfilling a position of executive or managerial functions.
Clause 9 of the Bill imposed severe limitations on the rights of persons. Section 25 of the Constitution provided that no one may be deprived of rights, except under a law of general application, and no law may permit the arbitrary deprivation of property. Property may be expropriated only for a public purpose, or in the public interest, and subject to compensation. Property included shares in a company. A lawful expropriation (forced transfer of a right in property) would constitute a deprivation of property, which had been broadly interpreted by the Constitutional Court to include ‘any interference’ with property rights. To be lawful, the deprivation must take place under a law of general application, must not be arbitrary, must be for a public purpose or in the public interest, and must be compensated. Mr Leon argued that the deprivation set out in the Bill appeared arbitrary, as there was no sufficiently reasonable or rational connection between the deprivation and the Bill’s purpose. The Memorandum on the Objects of the Bill listed the increased threat to national security posed by the participation of foreign nationals in the industry as one of the challenges to the industry. However, it did not explain how foreign nationals posed a threat, and failed to draw a link between permanent residents and the threat to national security. Neither the Bill nor the Memorandum explained how the compulsory equity divestiture or change in control of security businesses would diminish the threat, bearing in mind that 49% of a business could still vest in foreign hands.
Section 198 of the Constitution provided that national security must reflect the resolve of South Africans to live as equals and that it must be pursued in compliance with the law, including international law. The courts had in a number of cases refused to allow the State to rely on national security interests to justify the infringements of other constitutionally protected rights, including the right to a fair dismissal, the right to freedom of expression and open justice. In the Constitutional Court judgment of Masetha v President of South Africa 2008 (5) SA 31 (CC) Sachs J observed that “exemptions, including those set out in favour of the national security, are presented as exceptions and not as the norm” (Para 157). The Bill failed to provide for compensation as required by section 25 (2) of the Constitution. Clause 9 of the Bill could not be justified under section 36 of the Constitution, as there was no cogent relationship between the limitation and its purpose, and there might be less restrictive means by which the government could manage any perceived threat to national security.
Mr Leon then spoke of the possible claims under the SA-UK BIT, saying that the SA-UK BIT was a bilateral investment treaty between SA and the UK establishing the terms and conditions for foreign investment by nationals and companies of one state in the other. If clause 9 of the Bill was enacted, South Africa would be in breach of its international law obligations as set out under Articles 2, 3 and 5 of the SA-UK BIT. Control Risks SA, which was registered in March 2012, would qualify as an investment under the SA-UK BIT. More detail was set out of the wording of each of these articles (see attached presentation for full details). Article 2.2 included an obligation on South Africa to act in good faith, without ambiguity and in a manner that was not arbitrary or discriminatory. He reiterated that clause 9 of the Bill was unreasonable, as there was no apparent relationship between the Bill’s compulsory equity divestiture provisions and its purpose, and was discriminatory between UK and South African investors. Article 3.1 stated that equal treatment on investments and returns was required for own and foreign nationals, and clause 9, which was based on nationality, was clearly in contravention of this. CRG would face treatment less favourable than that accorded to South African citizens who owned and controlled similar businesses. Finally, Article 51 said that South Africa was not to nationalise or expropriate the investments of UK nationals or companies, except for a public purpose related to the internal needs of South Africa, and then only on a non-discriminatory basis, and against prompt, adequate and effective compensation. CRG’s shares in Control Risks SA would be subject to indirect expropriation.
Mr Leon stressed that CRG also employed foreign nations in executive and managerial positions, and they were appointed on the basis of their extensive qualifications, expertise and experience. Clause 11, as presently worded, would require that they be demoted or dismissed. Not only would this be detrimental to CRG’s business, it might violate the right to equality of a non-citizen, and all foul of section 9(3) of the Constitution. The Constitutional Court had accepted discrimination on the basis of citizenship as an analogous ground.
He added that section 25 (1) of the Immigration Act, 2002 provided that permanent residents ‘have all the rights, privileges, duties and obligations of a citizen, save for those rights, privileges, duties and obligations which a law or the Constitution explicitly ascribed to citizenship’. The Immigration Act did not specifically exclude permanent residents from certain employment, and section 27(a) allowed permanent residence status to be granted to a person who had received an offer of permanent employment in South Africa. He cited the case of Larbi-Odam v Member of the Executive Council for Education (North-West Province) 1997 (12) BCLR 1655 (CC), which related to unfair discrimination against permanent residents. Government would be unlikely to be able to prove that the discrimination between citizens and permanent residents was justifiable, even for national security. The Constitutional Court had held that a person’s profession was an important part of his or her life, which justified security of tenure in a position. Finally Mr Leon stated again that there were arguably less restrictive means by which the government could ensure that foreign nationals in the private security industry did not present a national security risk.
Mr Leon noted that both clauses 9(a) and 11 of the Bill affected the directors or persons performing executive or managerial functions in a security business. However, there was ambiguity between the amendments. Clause 9(a) referred to 51% control by South African citizens and clause 11 may have the effect of 100% control. This was contrary to the principle that legislation must be stated in a clear, accessible and reasonably concise manner, and thus could well be declared unconstitutional and invalid.
It was not clear whether the Bill, in amending the requirements for a natural person (a South African citizen) to register as a security service provider, applied to every natural person performing managerial or executive functions for such a business, or every director of a company It was not clear whether the Bill intended this provision to apply retrospectively, and if they did, there were no transitional provisions, which would mean that security businesses who had executive or managerial staff who were not citizens would be in contravention of section 38(3)(a) of the Act.
A further problem was the overly-broad discretion to the Minister to prescribe different percentages of ownership and control requirements, in respect of different categories of security businesses. Vague wording was used that the Minister must be guided by “the security interests of the Republic”. This was not only contrary to the principle, as outlined in Affordable Medicines Trust v Minister of Health RSA 2005 (6) BCLR 529 (CC), that discretion must not be broad or vague, but was likely to lead to uncertainty that would affect investor confidence, but was. Foreign direct investment had already declined by 43.6% in the first half of 2012, compared to the same period last year.
Mr Leon summed up the objections to clauses 9 and 11 in conclusion.
Mr G Lekgetho (ANC) asked if the rights of permanent residents were the same as that of citizens.
Mr Leon referred to sections 25 and 27 of the immigration Act, and the cases outlined in the presentation. The reason for referring to those cases was to show that the Constitutional Court had stated that permanent residents did not have all the same rights as citizens, such as the right to vote, but would have the same rights to work, and that there should not be discrimination against permanent residents.
Mr Lekgetho noted the comments on the absence of transitional provisions to allow security services to restructure their businesses, to comply with ownership percentages prescribed by the Minister. That would be something quite easy to fix in the Bill.
Mr Leon reiterated that the Bill had other implications in relation to the Constitution and the bilateral agreement between the UK and South Africa. Addressing the transitional provisions would not resolve other grave issues arising from the Bill.
Mr Lekgetho asked why CRG considered the Bill to be discriminatory.
Mr Leon replied that the discrimination related to the differential treatment to South African citizens and permanent residents, which was irrational and could not be justified. It was also discriminatory because it violated the SA-UK bilateral treaty, which specifically prohibited discrimination against UK investors in South Africa.
Ms M Molebatsi (ANC) observed that an issue had been raised that the Bill discriminated against foreign nationals. She asked for the suggested recommendations on how to resolve this issue.
Ms D Kohler-Barnard (DA) asked if the CRG objections to the Bill would be resolved if the Bill was amended to apply to either South African citizens or permanent residents. She also noted the comment that the Bill could be challenged on the grounds of improper expropriation and asked what could be done to bring the Bill in line with the Constitution in this regard.
Mr Leon responded that the problem around unfair discrimination between citizens and permanent residents could be resolved if the Bill was amended to apply to either South African citizens or permanent residents. The provisions of the principal Act, which allowed a permanent resident to be a manager or director of a security company, were acceptable. However, this would not address the expropriation issue, which could only be resolved by making provision for proper compensation.
Mr V Ndlovu (IFP) asked if, and how, the Bill had an impact on the bilateral agreement between South Africa and UK.
Mr Leon reiterated that, as outlined in the presentation, the Bill had a negative impact on the bilateral agreement between South Africa and UK, because it offended against Articles 2, 3 and 5 of the SA-UK BIT.
Security Industry Alliance submission
Mr Costa Diavastos, Executive Director, Security Industry Alliance, noted that the Alliance (SIC) was an umbrella body of large private security companies, employer organisations, trade organisations and other interested parties. It was established in 2003 with the aim of providing a unified platform from which the security sector could interface with Government and other stakeholders, on important sector issues. The SIA’s members employed over 150 000 people in the private security sector, and its representation spanned a wide range of sub-sectors (see attached presentation for full details). It had for a number of years campaigned for improvements in industry regulation. The security sector was beset by an overwhelming proliferation of unregistered and non-compliant security businesses, which had led to the rapid degradation of employment standards. Often, minimum wages and conditions of employment were not observed, and unfair competition driven by price was growing, in the absence of effective regulation. SIA believed that the Bill had a number of positive aspects. However, it also wished to outlined the challenges.
The positive aspects included:
-The Private Security Industry Regulatory Authority (PSIRA) was to be funded and would operate in a more structured way. Its status would essentially be elevated to "organ of state". which permitted an appropriation from the National Treasury. It would also be subjected it to fiscal oversight in accordance with the Public Finance Management Act, which had formerly been lacking. The current funding model was not sustainable, since it placed the entire burden of funding regulation in the sector upon security service providers and ordinary workers.
-Increased accountability of the Council of PSIRA, as well as the strengthening of other governance functions and structures, was welcomed.
-The amendments recognised that the private security sector was constituted of a complex interconnection between different sub-sectors, extending beyond security guarding, into electronic security systems, response, close protection, assets in transit, event security, manufacturers and distributors of electronic security equipment, security training, private investigations, locksmiths and security advisors. This Bill would allow proper and specific regulation of all subsectors, to allow for more effective, efficient and value adding regulatory functions.
-The SIC supported the robust measures that dealt with the prohibition of foreign military assistance and the regulation of the deployment of South Africans into security functions in foreign territories
-Greater oversight and control over the proliferation of firearms in the sector was welcomed, provided that such control did not amount only to increased administrative requirements for service providers, but assisted in streamlining the legitimate licensing and deployment of firearms, for the appropriate purposes.
SIC was concerned about a number of aspects of the Bill, which were summarised as:
-The limitation on foreign ownership within the private security sector was in breach of South Africa's obligations under a number of international trade agreements and treaties, and was inconsistent with the Constitution of the Republic.
-A number of provisions were drafted in a vague manner, which would lead to unintended consequences and would essentially undermine a number of the objects of the Bill.
-Inadequate provision was made in the Bill to allow for increased engagement and consultation with industry stakeholders, such as security businesses employer organisations, associations and trade unions, in order to strengthen regulation.
Mr Diavastos expanded on these concerns. The impact of a limitation on foreign ownership had not been examined sufficiently. Foreign owned private security companies had transferred technology, developed skills, and provided employment opportunities to many South African employees, in almost every sub-sector of private security. They played a critical role in developing the commercial interests of the sector, to the benefit of the entire industry and the country. Almost all security technology, from alarm systems to CTV systems, were manufactured and distributed by international companies. The Bill would force many companies to divest of their foreign expertise, leaving skills, capability and technical support gaps.
In addition, he noted that many international companies had invested substantially into the sector. The Bill in its present form would devastate investor value, and might negatively impact on the creation of an open environment for investment and job creation on a wider scale. South Africa, as a developing economy, should be attracting foreign direct investment to support domestic investment financing in the sector. Despite what was set out in the Memorandum of Objects, companies with foreign ownership had operated in South Africa for over a decade, without any threat to national security. There was no rational reason to believe that threats would be presented as a result of foreign investment in the future.
It was unsure how far the reach of the PSIRA would extend. Particularly in the electronic security and IT industries, there would be numerous companies falling under the Bill.
SIA then touched on some specific concerns in relation to other clauses of the Bill.
In the definitions section, section 1(b)(e), which dealt with locking systems by means of a specialised device in any manner, was worded in a way that might cause the mandate and jurisdiction to extend to regulation of persons and companies that were involved in the IT industry, insofar as they deployed electronic and software based locking systems. This was surely not the intention. SIA proposed alternative wording, to read: "locksmith" means a person who, for the benefit of another person, engages in any activity or business which is related to the opening, closing or engaging of locking mechanisms of any nature, by means of lock picking or other tools or specialised devices, or who duplicates or copies keys from a sample, or originates keys, access cards, discs, tags, or other objects which are used to unlock, close, release or engage locking mechanisms, by means of tools including electronic devices, key cutting machines, files or other equipment or any other specialised devices designed for the purpose of originating, electronically enabling or copying keys, access cards, discs, tags, but does not include the manufacture of keys in bulk by or for lock manufacturers”.
The definition of a security service in 1(l)(h) was extended to persons or companies involved in the distributing or transporting of security equipment. This would have the consequence of including persons and companies involved in the road freight industry, such as couriers, freight forwarders and similar businesses as service providers of security services. SIA believed that this over-extended the mandate of PSIRA, and recommended that the extension of the definition be removed.
The clauses that sought to amend the existing sections 20 and 23, by regulating and limiting foreign ownership in the private security industry were both unconstitutional and in breach of South Africa's international obligations under the General Agreement on Trade in Services (GATS), as well as the Article 2 of the SA-UK BIT. There was no rational basis for arbitrarily precluding a person who was a permanent resident in South Africa from participating in employment opportunities within the sector. SIA recommended that no change was needed to the wording of section 23.
The proposed amendments were also inconsistent with the Constitution because they were irrational and in breach of the rule of law in that they constituted an arbitrary deprivation of property, in violation of section 25(1) of the Constitution, amounting to constructive expropriation and gave rise to an uncompensated expropriation of property. SIA recommended that all the provisions amending sections 20, 23 and 25 of the Act be removed. in violation of Section 25 (2) (b) of the Constitution. SIA’s recommendation was that all of these provisions be removed prior to the promulgation of the Bill.
The amendments to sections 26(1) and (5) of the Act dealt with suspension of security service providers. SIA noted that the grounds upon which security service providers could be suspended had been expanded to include contraventions of the Levies Act. Whilst, in principle, the strengthening of the powers of PSIRA to deal with non-compliance was welcomed, it believed that this was over-regulation, particularly as it related to payment of levies. The suspension of a security service provider was an administrative act, as envisaged under the Promotion of Administrative Justice Act (PAJA), and should thus be subject to fair process prior to being applied. It recommended that the wording should be amended.
In conclusion, it was noted that the Memorandum of Objects made reference to an open and transparent consultation process. Although a workshop was scheduled between the stakeholders in the industry and PSIRA in October 2010, during which some to the amendments were discussed, there was no feedback on inputs, and none of the submissions made appeared to have been considered.
Ms Kohler-Barnard noted the comment that inputs did not appear to have been taken into account, and asked officials from PSIRA why this was so.
The Chairperson concurred with the observation made by Ms Kohler-Barnard and further observed that PSIRA had stated that a number of stakeholders and entities had been present during the consultation process but had failed to identify the names of these entities and stakeholders.
Mr Manabela Chauke, Director, PSIRA, replied that it was not true that PSIRA had not considered the inputs made by the security providers. For instance, the comments around state funding had been incorporated into the Bill. The reality was, however, that PSIRA could not take on board every input and suggestion made by the security providers.
Mr Ndlovu observed that mention had been made of the words ‘expropriation’ and ‘removal’ of property rights, but said that these words did not appear in the Bill.
Mr Diavastos responded that even if the words themselves did not appear in the Bill, the effect of the Bill would be to expropriate or arbitrarily deprive security providers of foreign ownership of the property they owned.
American Chamber of Commerce (AmCham) submission
Mr Marutona, Representative, American Chamber of Commerce, explained that the Chamber (AmCham) aimed to facilitate trade and investment between the United States of America (US) and South Africa. It represented 250 American companies, which were registered in South Africa, and which employed more than 200 000 South Africans directly. The US companies contributed R62.7 billion, through R568.7 billion of portfolio investments, to the South African economy in 2011. AmCham actively supported the aims and ambitions of New Growth Path and the National Development Plan.
He noted that globally, the size and role of the civilian private security industry had grown dramatically in recent years. South Africa reported a growth from 115 000 security personnel in 1997, to 390 000 in 2010. In India, there were 7 million security personnel, outnumbering police officers 4.98 to 1. In South Africa, this ratio, for every one police officer, was 2.57; in the US 2.26; and in Australia 2.19.
AmCham recognised that the security industry provided more than guarding services. It regarded it as a positive change that the Bill covered guarding, installation of electronic systems, armed reaction and cash-in-transit. It also agreed with the enforcement of the regulations through joint accountability for compliance by providers and customers. It welcomed the amendments changing the way the regulator would be funded and operate, and the fact that PSIRA would gain status as ‘organ of state’, allowing access to government funding. This change would reduce budgetary pressures on the regulator.
AmCham believed that there were, however, several negative aspects to the Bill. Firstly, it pointed out that there was no support for the fears about foreign control. In fact, in the history of some mercenary activities originating from South Africa, industry representatives had actually pointed out that cases that had occurred were masterminded by or included participation of South Africans, and were not instigated by foreigners or foreign owned enterprises.
AmCham noted the amendments requiring any private security company registered in South Africa to be owned by South African citizens within 5 years of the legislation being passed. The vagueness of the Bill lent itself to mixed interpretation. There was no clarity regarding what happened to existing investments, nor who would benefit if ownership interest were sold pursuant to the Bill. Much of the security technology installed around South Africa, including at key points, involved foreign sourced electronics. Many of the companies providing electronic equipment were also IT companies. The Bill was unclear if the ownership requirements apply to the company as a whole, or just the aspects dealing with security.
AmCham also had concerns as to whether the proposed amendments were consistent with South Africa’s World Trade Organisation (WTO) General Agreement of Trade in Services (GATS) commitments. South Africa had undertaken full market access (Art XVI) and international commitments (Art XVII) with respect to investigation and security services. Private security companies of WTO members should be able to provide these services without restrictions around the level of foreign investment, and on terms no less favourable than for South African owned firms. AmCham was concerned that limiting foreign ownership would send negative signals to other foreign investors. Compelling firms to sell 51% ownership to South Africans within the five year timeframe could result in oligopolies, as the number of companies decreased, leading to more concentrated ownership, which was not ideal.
AmCham concluded that whilst it supported government’s move to regulate and monitor the private security industry, it cautioned that the unintended consequences would need to be considered and corrected.
Ms Molebatsi asked how many South African companies were registered in the United States.
Mr Marutona said that although he was aware there were quite a number, he did not have the statistics with him, and would e-mail them through later to the Committee.
Mr Ndlovu asked how the Bill was infringing on the World Trade Organisation (WTO) General Agreement of Trade in Services (GATS) commitments.
Ms Kohler-Barnard referred to the Bill’s requirement that security providers should transfer 51% of their shares to South Africans, but wondered if there was anything to stop immediate transfer on to other foreigners. She also asked if there were similar restrictions on ownership in the US.
Mr Marutona confirmed that there were no such requirements in the US.
The Chairperson referred to the five year period provided in the Bill within which the service providers were to comply with the provisions of the Bill. She asked if security providers had a problem with the principle, or the five-year timeframe.
Mr Marutona responded that the problem was seen as the principle underpinning the time frame.
Ms Charlene Louw, Executive Director, ADT Security, firstly commended government for some of the provisions of the Bill, noting ADT’s support for the provisions around funding, a separate database on firearms issued to security service providers, the promotion of crime prevention partnerships, the accountability of PSlRA and private security companies.
However, she noted that ADT had concerns about other aspects of the Bill, which it saw as ill-conceived and which would, if implemented, have severe consequences on the South African economy, job creation and the fight against crime. Certain provisions of the Bill were not aligned with other existing legislation or government policy. Some of the wording lacked clarity and might contribute to legal uncertainty.
ADT submitted that the definition of “security service" was too broad, in that it extended regulation to industries such as the information technology industry, distributors, resellers, freight forwarders and similar transportation agencies, who already had a wide range of statutory regulations governing their operations. This amended definition might have the result of overburdening the PSlRA, which appeared already stretched in its mandate, and unable to effectively regulate the industry.
ADT commented on the amendments to section 20(2)(c) which dealt with the limitation of foreign ownership. It noted that these criteria were obviously meant to reduce the entry of 'unsuitable' persons into the industry, and to deter unscrupulous companies. However, this new insertion ran contrary to the commitment that the South African government had to maintaining an open environment for investment. This was core to long-term, sustainable, economic growth. As a developing economy, South Africa needed to attract foreign direct investment in order to support domestic investment financing requirements. Furthermore, the PSIRA Act 56 of 2001 restricted registration as a security officer to citizens. It was inconceivable that citizens would place foreign interests before local interests, so the perceived threat that foreign ownership posed to national security was not credible. ADT suggested that this amendment be retracted, as it was irrational and contrary to economic development.
ADT’s concerns around the limitation of foreign ownership also applied to the new section 20(2A). However, there was a further concern that no percentage was prescribed, and it was left to the determination of the Minister. This was irresponsible and did not support rational, sustainable legislative measures aimed at ensuring improved regulation of the industry and fair treatment of industry participants.
ADT regarded the amendments to section 20(6)(a) as far too restrictive, in that the significant divestiture of foreign ownership could not, for practical purposes, happen within five years. If the Bill was passed, foreign and juristic shareholders of security businesses would be required to sell their shares. This would not only constitute a forced sale of shares but, given that the sale would be made at a time when the market would be aware of the forced divestiture, it was unlikely that these shareholders would receive a fair market value. This could therefore be regarded as a deprivation of property, and may quite possibly fall foul of the provisions of section 25(1) of the Constitution.
ADT contended, in relation to the revised section 23(7), that the discretion of the Minister to exempt any person from the exclusion in sections 23(1)(a) or (6) did not support fair treatment of industry participants. The Bill also provided no clarity as to the circumstances in which a security service provider would be exempted. ADT suggested that the term "on good cause “ be added.
ADT also repeated earlier concerns that the Bill would violate South African obligations under the GATS, particularly Article XVII(1) and Article XVII(3), which were quoted. Whilst a member state, such as South Africa, could stipulate, in its Schedule of Specific Commitments, that it would limit the conferral of equivalent national treatment to certain services, it had in fact not done so in relation to security services, and was thus still bound to provide equally favourable treatment to local and foreign providers of security services.
There were also problems in relation to the European Union and South Africa Trade, Development and Co-operation Agreement (TDCA). EU partnered South Africa in its pursuit of a better life for all its people, and this relationship was impacted upon by a number of agreements, protocols and papers. Article 100 of the TDCA specified that arrangements applied to South Africa to the EU should not be discriminatory in relation to investment promotion and trade development between the two parties.
In addition, the SA-UK BIT obliged 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 UK, or to give less favourable treatment to UK nationals than it did to South Africans. In 2001, a similar attempt was made to limit foreign ownership in the private security industry, but, when the UK government objected, it was withdrawn. It was therefore surprising that another attempt was being made now.
Ms Louw concluded that this Bill was in many respects obstructive to an effective and necessary industry, when it attempted to place limitations on foreign ownership and control, because, as already outlined, it was in conflict with South Africa's international trade relations, the Constitution and may well be in conflict with the requirements for equality of treatment of foreign nationals. She pointed out that private security personnel had the same powers as ordinary citizens, drawing most of their powers from the law of contract, the law of property and labour law. They were only 'authorised' to make citizen's arrests, banish trespassers, deny entry and search personal property by virtue of their status as agents of property owners and employers. The security industry could be held accountable for unlawful or excessive actions. It was unjustifiable to suggest that the involvement of foreigners was a threat to state security. ADT suggested that a far more business-friendly approach was needed by the Ministry of Police, and urged that submissions made by the industry must be taken into account. ADT believed that the Bill should in fact be withdrawn and completely re-worked, with input from all stakeholders, alternatively that at least those provisions around foreign ownership must be deleted.
Mr Ndlovu asked ADT to elaborate why it believed that the definition of "security service" in the Bill was too broad.
Ms Louw responded that the current wording would make “security services” include companies that were distributing or transporting security equipment, or even freight forwarders who were merely in the business of transport. It was inconceivable that this was the intention of the Bill.
The Chairperson asked that ADT should forward its proposals on a revised definition to the Committee.
Ms D Sibiya (ANC) referred to the revised section 20(2A), and asked for further elaboration on the ADT concerns that this did not constitute fair treatment.
Ms Louw stated that the impact of the revised section was that certain companies who provided certain services within the security sector would be exempted from the effect of the provisions of the Bill, and this would not be fair to other companies in the sector.
Mr M Mncwango (IFP) asked about the welfare of the workers employed by ADT, how many people were employed by ADT, and what they were paid.
Ms Louw answered that although she did not have the exact figures to hand, she was quite aware that ADT had over 10 000 workers in its employment and none of these workers were paid below the minimum wage. The welfare of the workers was also a priority to the company and there was a Provident Fund that provided additional benefits to the workers. There was also an educational programme, in which the education of the children of those employees who had died in the line of duty would be funded by the company, up to university level.
Gun Free South Africa (GFSA) submission
Ms Felicity Harrison, Vice-Chairman, Gun Free South Africa, noted that Gun Free South Africa (GFSA) recognised the need to review the-Act from time to time, to assess its provisions, and to refine or tighten them up as needed. It therefore supported the intention of the Bill in regard to promoting and strengthening the effective control and management of firearms by the private security industry.
She noted that GFSA's submission was based extensively on a research paper: Jaynes, N (2012), Flying Below the Radar? The armed private security sector in South Africa.
GFSA supported clause 3, which was substituting section 10 of the Act, and stated that the Council was accountable to the Minister for the performance of its functions, and must submit a quarterly report to the Minister. However, it suggested that the amendment and related regulations should specify the information to be included in each quarterly report. It would like to see PSIRA being required to report quarterly on the number of security firms registered; number of security guards ·registered; including category and functions; details of training guards had received, including most recent training; number of firearms registered to, lost by and stolen from private security companies; all instances in which firearms were discharged by security guards, including circumstances and consequences; as well as detailed information on criminal investigations involving the private security industry. GFSA's recommendation was based on Jayne’s' observation that there was a need for more information on the private security industry, including personnel, equipment, cases of misconduct, budgets, types of functions and training regimes.
GFSA also supported clause 6, which provided that PSIRA would be financed by money that was appropriated by Parliament; and by registration fees, levies or monies from any legitimate source. This would give PSIRA additional resources to function effectively as a regulatory authority of private security companies in South Africa.
GFSA urged that the Act and Regulations be further amended to spell out, in detail, the exact responsibilities of PSIRA in overseeing the private security industry. This detail would guide inspectors on exactly what they needed to inspect. GFSA suggested that, for example, they should have to confirm that the firearms for which security companies held licences were actually in their possession, that they were safely stored in SABS-compliant safes, and that guards using these firearms were fit and proper. Inspectors should also confirm that armed guards had undertaken the necessary training-and that this training was of the requisite standard (see presentation for further details).
GFSA also urged that e oversight of the private security industry be further strengthened by having something similar to the Independent Police Investigative Directorate, specifically for the private security industry.
GFSA noted the insertion of the new section 16A in the Act. This required the Council to submit an annual report to the Minister, within five months of the end of the financial year, with prescribed information. GFSA recommended that the content of this report must be spelled out even further, to include number of security firms registered; number of security guards registered, including category and functions; details of training guards had received, including most recent training; number of firearms registered to, lost by and stolen from private security companies; all instances in which firearms were discharged by security guards, including circumstances and consequences as well as detailed information on criminal investigations involving the private security industry.
Members did not ask any questions.
The meeting was adjourned.
- Webber Wentzel on behalf of Control Risks SA presentation
- ADT Security (Pty) Ltd presentation
- ADT Security (Pty) Ltd submission
- Gun Free South Africa submissions
- Gun Free South Africa Oral Submission
- Comparing South African Police Service and Private Security Industry Developed by Gun Free South Africa
- Safer South Africa Foundation submission
- Safer South Africa Foundation presentation
- American Chamber of Commerce presentation
- American Chamber of Commerce submission
- Ceasefire Campaign comments
- Webber Wentzel on behalf of Control Risks SA submission
- Security Industry Alliance submission
- Security Industry Alliance presentation
- SIA Board Member companies Annexure A
- SIA Board Member companies Annexure B
- Mr JA September submission
- D Bosman submission
- SASSETA submission
- Civilian Secretariat for Police submission
- We don't have attendance info for this committee meeting
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