Private Security Industry Regulation Amendment Bill [B27-2012]: adoption

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06 November 2013
Chairperson: Ms A van Wyk (ANC)
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Meeting Summary

Amendments made to the Private Security Industry Regulation Amendment Bill were reviewed by the Committee. Opposition Members were vehemently opposed to the inclusion of a clause regulating the foreign ownership of security companies. Members of the South African Police Service, Civilian Secretariat of Police and Private Security Industry Regulation Authority (PSIRA) justified the need for this provision due to the crucial role played by the industry. There was a danger that foreign powers could use security companies as a front for espionage.

Opposition Members replied that the provision was an attempt at indigenisation and was unconstitutional. It would be very difficult to implement the Bill due to the difficulty of monitoring ownership through the trading of shares on the stock exchange. Given the perception of pervasive crime in South Africa, they felt that placing restrictions on foreign ownership would discourage foreign investment. They pointed out that public hearings had not been held on the reinsertion of the clause regulating foreign ownership. This opinion was countered as the provision had been a part of the original Bill as tabled. The figure of 51% ownership was challenged as this seemed to be on the basis of a newly-introduced Bill on foreign investment that still had to be processed by Parliament. Opposition Members were suspicious of the late re-introduction of this clause and expressed disappointment that the Authority was being brought into a political dispute.

The strict time-period for the implementation of the Bill had been relaxed and would be addressed in the transitional arrangements of the Bill. There had been negotiations with the Department of Trade and Industry. It was possible to monitor the nature of share-holding on the stock exchange.

The Bill and all clauses were adopted by the Committee on a majority vote. Members of the DA declined to take part in the voting process as they needed to consult with their caucus first. Members of the FF+ abstained from voting while members of the IFP and COPE voted against any clauses relating to the regulation on foreign ownership, and against the Bill itself.

Meeting report

The Chairperson asked the technical team to review the changes made to the Private Security Industry Regulation Amendment Bill (PSIRAB) the previous day.

Major-General (Gen) Philip Jacobs, South African Police Service (SAPS) pointed out that the duplication in the Long Title regarding the appointment of the director had been removed. An insertion had been made to provide for the proposed clause on the limitation on foreign ownership. Some typographic errors had been corrected and some formatting errors.

Mr M George (COPE) objected to the inclusion of a provision for limitation of foreign ownership in the Long Title.

The Chairperson said that this would be dealt with when the relevant clause was reached.

Mr V Ndlovu (IFP) objected as well. The correction to the Long Title had not been discussed the previous day.

Ms D Kohler-Barnard (DA) also objected. This provision had not been approved but the proposed Long Title was now being presented as if the proposed amendment was now a fait accompli. She described this provision as being akin to indigenisation.

Mr George said that the technical team had made a change without any consultation with Members.

Mr S Thobejane (ANC) said that the rules of Parliament should be observed. Members could not talk about something that was not already committed to paper. The proposed clause had now been included so that Members could discuss it and reach an amicable solution.

Mr Ndlovu said they had never suggested that foreign investment be addressed in the Long Title.

Mr D Stubbe (DA) said that Members had not agreed to this change, and it was wrong to have made the change without the consent of Members.

The Chairperson said that the current business was discussion of the changes made, and not voting.

Clause 9
Gen Jacobs read the change to clause 9 which specified that PSIRA’s reporting procedure would be subject to the Public Finance Management Act (PFMA). The procedure for the dissemination of documents and other duties of the Council had now been expanded upon. The provision in (j) had now been split. The requirement for security clearances for Council members and the provision that members should not have financial interest in security companies had now been written in separate sub-clauses.

Clause 14
Gen Jacobs said that clause 14 dealt with the appointment of the director and deputy directors of the Authority. A provision had been inserted that such persons should be 'fit and proper persons, with due regard to their qualifications, experience, conscientiousness and integrity '. Another change was that the Minister would be required to report the appointments of director and deputy-directors to Parliament.

Clause 16
Gen Jacobs said that the provision in (j) had now been split. The requirement for security clearances for Council members and the provision that members should not have financial interest in security companies had now been written in separate sub-clauses. Gen Jacobs read the reworded clause 16. This would now make provision for the Council to be the accounting authority.

Clause 17
Gen Jacobs said that there had been an insertion in clause 17 to state that the Council must account for money received or paid on account of the Authority; and cause the necessary accounting and other related records to be kept.

The Chairperson said that the change requested on the tabling of the Annual Report by the Minister had not been made. However, the PFMA already said that this must be done.

Ms Jenni Irish-Qhobosheane, Civilian Secretary for Police, said that the Committee had found that accessing the Annual Reports of the Private Security Industry Regulation Authority (PSIRA) had been a problem. The provision had now been included to make more of an obligation to publish the report.

Clause 20
The Chairperson asked the technical team to introduce the proposed change on ownership rules.

Gen Jacobs read sections of the original Bill. In clause 10 of the original Bill, the government had been afforded the power to make measures to address historical inequalities, uphold the Constitution, promote cultural heritage and achieve socio-economic rights. Essential security interests should be protected. The transitional provision was in clause 38 of the Bill inserting section 44A which stated in section 44A(15): The implementation of section 20(2)(c) with regard to a security business that is registered as a security service provider at the commencement of the Amendment Act must be done in accordance with legislation promoting and protecting investment in the Republic and the Republic’s international trade obligations.” Private security related to financial and security interests. Many security companies operated in cities where there was already widespread close circuit television coverage (CCTV) coverage. There was more than a possibility that, if there was foreign control, a foreign power could monitor the activities of citizens without a warrant. There was no control if a foreign-owned company was used as a front for a foreign intelligence body. This was why he felt that there should be a ban on foreign ownership, as was the case in other countries. There should be enough South African involvement to ensure better control, although full control would never be achieved. Vetting procedures should keep most negative influences out of the industry.

Ms Irish-Qhobosheane said that renegotiation of agreements would be needed. The value in terms of direct investment would have to be considered, and where foreign investment could be channelled into other areas. There should also be South Africans willing to take over the foreign ownership.

Mr Manabela Chauke, PSIRA Director, said that there was a threat of espionage in every country. This could be achieved by intelligences agencies infiltrating security companies, especially where these companies provided services to state buildings. There was also a trend for persons of foreign descent guarding shopping malls, but there still needed to be some restriction.

Ms Irish-Qhobosheane added that this was not an issue unique to South Africa. Most European countries only allowed companies owned by members of the European Union to provide security services.

Ms Kohler-Barnard was astounded that there was a reference in 44A(15) being made to a Bill that had not yet been processed by Parliament. She had asked for evidence that security companies were being used for espionage, but for a year no evidence had been produced. She asked if there would be any monitoring of shareholders of security companies. It would be cataclysmic to suggest that foreign ownership should be handed over. South Africans were known to be a criminal society, and 51% South African ownership would not guarantee less exposure to criminal activities. There would be disastrous consequences for investment. Members had rejected the proposal the previous day. The comments on people of foreign descent was a threat to many South Africans. She asked if this was about indigenisation. She was ashamed that this had been allowed to happen.

Mr George said that the Director was now being involved in politics. This proposal had come through the back door, ignoring the opinions of the dti and other Departments. This was unfortunate. PSIRA was now being used for political ends. Most of the companies were listed on the stock exchange, and he questioned how practical it would be to monitor share trading. He did not think that this law could be implemented. He asked what danger was posed by foreign security companies. It was easy to talk security. The Federal Bureau of Investigation (FBI) was present in South Africa, and was able to monitor the President. Foreign companies were far advanced enough not to have to use security companies as fronts.

Mr Thobejane said that Mr George had chaired this Committee in previous years. The change of dynamics did not stop South Africa from being vigilant towards its own safety and security. He indicated to Members that the issue of security should not be viewed in terms of job creation only. It was about the social emancipation of the country. Foreigners had taken over South Africa in the past, and still wished to retain control over sectors of the economy. There were people conducting themselves as if they were foreign agents. The transitional period put forward would give some protection. The country had to protect its citizens rather than focus on foreign interests. Members should give speakers the chance to state their cases. Disruptive behaviour should be brought to a standstill. He did not think he was offending anyone. He had the right to speak his mind and express the views of his party.

Mr P Groenewald (FF+) said he was not hearing these allegations of espionage for the first time. If he wanted to infiltrate South Africa, the last choice he would follow would be in the highly regulated security industry. He could not accept this clause as it was unconstitutional. Section 59 of the Constitution was clear that there was a process to be adhered to, which made provision for the public to air their views. The proposed clause would have a vast influence on the industry. He could not say what the financial implications would be, and it would be unfair to proceed without giving stakeholders the chance to raise their voices. Passing this clause would lead to court cases.

Mr Stubbe agreed on the issue of unconstitutionality. The argument regarding CCTV did not hold water. Many companies owned their own CCTV for their own purposes, and could not be expected to be part of PSIRA. The figure of 51% was not mentioned in the Gazette, and he asked where this had come from.

Mr Ndlovu said that the 51% question was hard to understand. The Committee had been told by the Department of Trade and Industry (dti) that they would remove restrictions on foreign ownership from the Bill. The matter could not be discussed at present. He had hoped that this proposal would not be raised at the last moment. Shares were being traded continuously, and were open to foreign purchases. This proposal would undermine foreign investment. This item made a mockery of the discussion from the first day of discussion until present. Parties had been prepared to give and take, but this proposal represented a breaking point. The Gazette was silent on 51% ownership. Members could not work on this basis, and were acting in the interests of this country.

Mr J Moepeng (ANC) would not be deterred by Members laughing while he spoke. It was incorrect for Members to refuse to allow themselves to be persuaded and walk out of the meeting.

Mr Stubbe explained that Ms Kohler-Barnard had other business to attend to, and would return to the meeting later.

The Chairperson felt that Ms Kohler-Barnard could have acted with more respect to the Committee, but knew that she was attending a press conference.

Mr Moepeng said that at a particular time in Zimbabwe, United States dollars had been intercepted and taken into the country. Hiroshima had been bombed. In the process of all these things, South African Members of Parliament had to remember that the security of Zimbabwe and Japan had been put to the test. Bad events should be anticipated. It was necessary that certain amendments be affected. There was a slogan of “Proudly South African”. South Africans needed to participate in the ownership of the security industry, and had to own the processes. Security companies were on the stock exchange. The technical team could explain how the process would be taken forward. The question was whether this proposal would help South Africa to move forward, rather than reject it as pure politics. The financial implications had been explained, and it only be decent if Members were not satisfied on this aspect it could be explained before the sitting in Parliament. The focus should be on striving to make all Members of the Committee happy while considering the interests of the country as a whole. There was nobody whatsoever saying that foreign companies should not own anything. What was being said was that ownership should be regulated. Colonisation could not be allowed. It was important for South Africans to participate.

Ms M Molebatsi (ANC) said that in order to attract investors, security had to be guaranteed. The ANC was not outlawing foreign ownership, but promoting South African ownership.

The Chairperson asked what had been discussed with the dti. She asked what the opinion of the State Law Advisor (SLA) had been on the constitutionality of the proposal. The transitional arrangement and the Bill clearly indicated the payment of compensation, negotiation and bilateral agreements. There had been a time frame originally but this had been removed. She asked how the 51% had been reached and how the stock exchange would be addressed. The original Bill had included this provision, and had been subject to the public hearing process.

Ms Irish-Qhobosheane replied that the Bill circulated to Members reflected the thinking of the dti even though it had not yet been passed by Parliament. On the practical application, there would have to be negotiation on bids agreements and the cost of investment in the security industry, and offering similar investment opportunities in other sectors. The 51% related to majority influence. Private security was not an ordinary trade, and was different to any other type of industry. It included surveillance and armed reaction. In some cases entire suburbs were monitored. The Stock Exchange had specific procedures.

Mr Sisa Makabeni, SLA, said that the Minister would be allowed to prescribe different percentages for different spheres within the security industry. He thought that the proposal was constitutionally sound. There was a way to monitor ownership. There were means to verify ownership of public companies. Some companies had to have a certain percentage of Black Economic Empowerment (BEE) holding, and this could not be diluted. Special purpose vehicles could be set out for black ownership, and these shares could not be sold to persons of other racial groups. There was a provision for the Minister to allow for the verification of ownership.

Gen Jacobs said that regarding the implementation of the clause, this must be done in accordance with legislation promoting the investment process. The proposed legislation was the Promotion and Protection of Investment Bill. The PSIRAB could not be initiated until this Bill was in place.

Mr George was not satisfied by the answers. He had posed the question regarding the dti. The Secretary said that dti had been consulted, and would do certain things.

The Chairperson said that the Secretary had made it clear that the dti had been consulted.

Mr George said that there had been a letter from the dti on the matter. Ms Irish-Qhobosheane had talked about the future. The SLA had said that the Bill was constitutional, but many Bills had in fact been taken to the Constitutional Court despite the views of the SLA. Everybody was agreeing that BEE was not working due to fronting and other problems. The issue of ownership was not addressed by black economic empowerment (BEE). He asked how this Bill would be practical.

The Chairperson admonished Members for coming to the meeting with closed minds.

Mr Groenewald had received a Bill published for comment without the clause in question. Secondly, he asked what the financial implications would be for the industry and not the state. ANC Members were appealing to Members to be open-minded, but he appealed to them to be rational. There were some good issues in the Bill, and one clause should not be slipped in that would derail the Bill.

The Chairperson said that the process had started in October 2012. The provision had been far worse than Mr Groenewald imagined, and the Committee had rejected it on that basis.

Mr Ndlovu said that it would not help if Members were sarcastic to each other. Members should respect each other. Provisions in the Bill were affected by matters that had only been published in the Gazette. He was still not clear on the 51% provision. Members had been involved with the Bill from the start. He still wanted to know how many security companies were owned by foreigners, and how many had more firearms than SAPS. He was still waiting for these answers. The Bill could not be based on figures put out for comment.

Mr Thobejane said that differing was not a sin. The proposed legislation on PSIRA and protection of investors did not contain the 51%. South Africa was a unitary state. All government departments related to each other, and the laws should not contradict each other. The Constitution was the basis of legislation. In this industry it was imperative that everyone could have a stake, but South Africans needed to be protected. South Africa was globalised. One area where more could be done was to see if the area would be properly covered. During the transitional period there should be protection for investors. Cool minds were needed and actions had to be above board. Parliament had to protect the interests of South Africans while also protecting the economy. There was one government in the country, and the Department was there to ensure coherence.

Mr Groenewald remarked that almost a year had passed since this Bill had come to the Committee. He had heard the arguments about foreign espionage. If a hostile organisation wanted to misuse a security company, it did not need to have 51% ownership. He rejected this argument. He wanted clarity on the proposed bilateral agreements, and how current companies would be affected. The was an important issue. Future investors would know what to expect.

The Chairperson said that for all new companies there would be a 51% requirement. There would be a process of negotiations and bilateral agreements for current companies. The rigid time-frame contemplated in the original Bill had been relaxed significantly.

Mr George asked where the response from the dti was. He did not want to disagree for the sake of disagreeing, but did not want to move on something that was not viable.

The Chairperson said that a technical team had been set up. PSIRA would have become a vote of Parliament, but National Treasury had objected to this. The dti was happy with the transitional arrangement.

Mr Groenewald wanted clarity. He as not so sure that all countries had bilateral agreements with South Africa. The could be investors from other countries.

The Chairperson understood that such countries would have protection.

Mr Ndlovu said that dti spearheaded investment in the country. He asked why bilateral agreements were being made part of the Security Cluster. He asked where the go-ahead from the dti was. The Government Gazette was just a paper that could be read by anyone. There was no agreement on that matter.

Ms Irish-Qhobosheane said that the technical process would be that dti would have to negotiate with the countries which had bilateral agreements. She had given this explanation earlier, but Mr Groenewald might not have been present. The Bill published in the Gazette might not be passed yet, but did represent the thinking of the dti.

The Chairperson said that legislation was informed by policy. This legislation indicated the policy direction in which government was moving. The intention was to boost security, but cognisance was also been given to trade agreements with other countries. It was not realistic to expect 51% ownership overnight. Security had to be balanced against international obligations.

Gen Jacobs said that some very important issues had been highlighted, such as the role of the dti. There was also a difference between the introduced Bill and the current version. The original Bill had a requirement for the 51% provision to be enforced within five years of the enactment of the Bill. Parliament would need to discuss the legislation regarding investment. The clause could have been inserted elsewhere. The legislation put forward by the dti would regulate the process. Parliament still had a role to play in the process, and the Minister could not divert from this process.

Clauses 26-35
The Chairperson asked the technical team to revise the clauses that had not been addressed at the meeting the previous day.

Gen Jacobs said that there had been punctuation changes. In clause 33, the reference to the Annual Report was felt to be sufficient notwithstanding some issues raised by Members the previous day.

Clauses 36 and 37
Gen Jacobs said that clause 36 would repeal section 39 of the principal Act, and clause 37 would repeal section 41.

Clause 38
Gen Jacobs read clause 38, which would insert a new section 44 A. This would make provision for transitional arrangements.

The Chairperson noted the agreement of Members.

Clause 39
Gen Jacobs read clause 39, which would amend the Schedule to the principal Act.

The Chairperson noted the agreement of Members.

Clause 40
Gen Jacobs read clause 40, which would amend the Index to the Act. He noted some minor wording and punctuation errors.

The Chairperson noted the agreement of Members.

Clause 41

Gen Jacobs read clause 41, which would substitute the Long Title of the Act. There was a duplication that would need to be removed.

The Chairperson asked if the Long Title should refer to the appointment of the Council.

Mr Thobejane asked if there should be provision for the secretariat.

Ms Irish-Qhobosheane said that the function would be that of a secretary and did not need to be included in the Long Title.

Memorandum on the Objects
Gen Jacobs pointed out the changes to the Memorandum. Public hearings had been heard which had elicited valuable input. There was an addition on page 8 to deal with clause 20, on foreign ownership. In addition to consultations before the Bill was introduced, a number of stakeholders had made inputs. Funding would be from levies.

Voting on the PSIRA Bill
Ms Kohler-Barnard said that the DA would reserve its right to participate in the voting process until the changes had been discussed in caucus. She and Mr Stubbe left the meeting.

Members agreed to adopt clauses 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19.

Mr Groenewald (FF+) recorded an abstention on clause 20.

Mr George (COPE) said that there had been discussion on this clause and a lot of views had come in on this trying to address the concern. He said they were putting this clause through as if there had been no discussion on this clause and he did not think this was correct.

The Chairperson said they had discussed the issue and there had been no proposals for amendments. If he wanted to vote against Clause 20, it was his right to vote against Clause 20.
A vote was taken on clause 20. Five members voted for the clause, two against (IFP and COPE), and there was one abstention (FF+).

Members agreed to adopt clauses 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36 and 37

Members agreed to adopt clause 38 with the abstention of the FF+. A vote was taken with six votes in favour, two against (IFP and COPE), and one abstention (FF+).

Members agreed to adopt clauses 39 and 40.

A vote was held on clause 41, as amended. Seven votes were recorded for the clause, two against (COPE and IFP), and there was one abstention (FF+).

Members agreed to adopt clause 42.

A vote was called on the Memorandum of Objectives. Eight votes were recorded in favour, two against (COPE and IFP) and the FF+ abstained.

The Long Title, as amended, was adopted with the abstention of FF+.

The Chairperson called on Members to adopt the PSIRA Bill. Eight Members voted in favour, two against (IFP and COPE) and one abstention (FF+).

The Chairperson asked if she should read the Committee Report on the Bill. The Content Advisor said that she should.

The Chairperson read the Committee Report. The report was adopted.

The meeting was adjourned.


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