Private Security Industry Regulation Amendment Bill: Re-consideration and adoption

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28 January 2014
Chairperson: Ms A Van Wyk (ANC)
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Meeting Summary

The Committee met with the South African Police Service (SAPS) and the technical team from the Civilian Secretariat for Policy, as well as representatives from the Private Security Industry Regulation Authority (PSIRA), to once again consider the latest version of the Private Security Regulation Amendment Bill, which had been the subject of extensive discussion in 2013. The Bill had, however, been returned to the Committee for reconsideration of the clause on which the opposition parties were dissatisfied, following the Committee’s report to the House. The technical team began by briefing the Committee on a research document motivating the new section 20(2)(c), which dealt with foreign ownership, which was the primary area of contestation in the Bill. The briefing note discussed private security companies and intelligence gathering, specific incidents and companies before turning to an interesting comparative study outlining the trends of other countries toward foreign ownership of private security companies. Members then discussed that briefing note, raising questions around threats to national security and destabilisation of states by the private security industry, intelligence activities and specific incidents and companies, and also aired concerns about the possible effect of the Bill on disinvestment, and its likely negative effects on the economy. Some Members felt the Bill contributed toward the democratisation of South Africa, and promoted economic empowerment by prioritising South Africans as industry owners.

The technical team then took the Committee through the remainder of the Bill, highlighting a few amendments, insertions and deletions. A small amendment was proposed to the Preamble. The Committee was satisfied on an amendment to clause 20 that would provide for the Committee to have to approve regulations made under the proposed section 20(2A) and (2B).

The Committee then voted on each clause, with the majority approving clauses 1 to 42. However, the DA opposed clause 20 in its entirety. The FF+ opposed specifically clause 20(2)(c). Voting on the Bill in its entirety, the ANC (comprising the majority) voted in favour of the Bill, but the DA and the FF+ objected to and voted against the Bill.  

Meeting report

Chairperson’s opening remarks
The Chairperson reminded Members that the year had started with a lot of challenges, noting in particular the death of a number of people during protest marches, which was a matter of great concern to the Committee. Protests were a constitutional right of society and it was expected the police would police those protests within the confines of the law. She stressed strongly that although communities had the right to protest, that right came with a number of responsibilities, including that protests should be peaceful and not harm people or property. She said that the Committee must look at its programme to decide when the South African Police Service (SAPS) should attend a meeting to address Members on protests. She reminded Members that two years back, a briefing was received from the Civilian Secretariat of Police (the Secretariat) and police managers responsible for the policing of protests on the new policy and approach to protests. The question now was whether that policy was properly implemented. She believed the SAPS management had a responsibility to sit down and evaluate why protests were so prevalent and to do so without fear or favour. A number of possible short-comings needed to be addressed, which might relate to equipment used, age of police officers or numbers of officers in those units. Such an evaluation should result in people being given the opportunity for safer protest, and more confidence on the part of policy that the public protestors would adhere to the law.

Turning to the agenda for the day, the Chairperson noted that the Committee was due to deal with the Private Security Industry Regulation (PSIRA) Amendment Bill. She read out a letter to the Committee following a complaint laid by opposition parties on a certain provision in the PSIRA Bill. The Bill had been returned to the Committee by the House, to afford Members a further opportunity to raise concerns and deliberate, because Parliament was not satisfied with the report of the Committee. Although it would be possible simply for this Committee to re-adopt its report, the interests of democracy would best be served by providing all Members with the opportunity to go through the Bill again, specifically focusing on the clauses of contention.

She noted that on the following day the Committee would deal with the appointment of the head of the Independent Police Investigative Directorate (IPID). The Minister would join the Committee for that process. She noted that she had received correspondence from a group of NGOs who had concerns. Although the IPID Act did not actually provide for a public process, but rather one where this Committee would advise Parliament, she noted that the public input had been tabled formally with the Speaker, and it would be made available for Members before tomorrow’s morning. The input was basically based on the legislation and not on the appointment itself. That would not influence the  process the Committee needed to embark on tomorrow.

Private Security Industry Regulation Amendment Bill: Technical team input and deliberations
Maj-Gen Philip Jacobs, Head: Legal Support and Crime Operations, SAPS, explained that the legal team had done more research and had prepared additional motivation on the provision in the PSIRA Bill, under clause 20, for additions to the section 20(2)(c), on the restriction on foreign involvement. His briefing note (see attached document) dealt with the proposals for the new section 20(2)(c) of the PSIRA Bill, and he emphasised that it did not actually prohibit foreign ownership in a South African private security company but rather provided for a restriction on the extent of foreign ownership in a registered private security company. Item 15 of the transitional provisions in the Bill recognised existing rights of non-citizens of the Republic who already had a shareholding in excess of the future percentage limit in a South African private security business. The transitional provision was intended to address the withdrawal of foreign involvement in excess of the statutory participation limit in a responsible manner. All new applications for registration would, however, need to comply with the provisions of the Bill once it was passed.

It was submitted that a restriction on foreign investment in a sector such as the private security industry was both reasonable and justifiable in the context of the broader national security, given the nature and scope of this industry, the technological advancements in the private security space, and developments since 9/11. The potential or opportunity for abuse and threats to national security needed to be recognised and addressed by any responsible state in a proactive manner. The recent trend in other countries was to either totally prohibit ownership of private security companies by foreigners or to restrict the extent of foreign participation and give a majority share-holding and control to its citizens.

Maj-Gen Jacobs said there were also links between private security companies (PSCs) and intelligence gathering, with the line between PSCs and private military companies increasingly becoming blurred. The dynamism within the private security sector was also fast-paced and regulatory mechanisms seem to be lagging behind. Through years of expansion, some of the foreign-owned private security companies in South Africa (SA) were involved in large takeover deals. Some of the deals involved swallowing companies that were disreputable. The links of these companies to foreign companies with questionable human rights records, as well as with foreign states posed a national security threat to SA. PSCs today were used for a wide variety of intelligence tasks from gathering of intelligence from satellites and sophisticated sensors, to interpreting and analysing results and distributing information among relevant government bodies. Furthermore the role of private security companies in the foreign military assistance/mercenary environment was also of concern.

The research also included some comparative studies. In the case of the USA, foreign investment in the USA was a matter of congressional concern. It was believed by some that the USA had an unusually liberal policy which allowed foreigners to invest in virtually all American businesses and real estate and that these foreign investments undermined the American economy by making it vulnerable to foreign influence and domination.  There were no across-the-board, blanket restrictions on foreign investment in the USA. Instead, over the years, Congress had believed that certain industries which could affect national security should have limits on foreign investment.

Maj-Gen Jacobs highlighted that a number of countries had total prohibition on foreign ownership of private security companies such as in Colombia, Botswana, Djibouti, Nigeria, Senegal, Antigua and Barbuda, the Bahamas, India, the Philippines, Saudi Arabia, Switzerland and Mozambique. Here, the laws and regulations did not generally make distinctions based upon investor origin, nor did they limit foreign ownership or control of companies other than a few, inter alia including private security companies. Other countries had a restriction on foreign share holders, such as Kenya, where there needed to be at least a 25% local shareholding. A similar situation applied in Honduras, where foreign companies wishing to apply for permission to provide security services in Honduras should partner with Honduras companies engaged in the same activity, and where the manager of the partnership should be a Honduran by birth.  

The Chairperson thought it was a pity that this briefing note was not available earlier in the process, as it would have provide clarity to Members who had expressed doubts previously.

Ms D Kohler-Barnard (DA) wanted to know what proof there was of companies seen as a threat to national security and if there were such companies, then she questioned why the issue was not dealt with on a case by case basis. She was concerned about forcing disinvestment, and reminded the Members that this was a particularly sensitive issue, in view of the state of the Rand. She asked how the nationality of shareholders would be determined from one day to the next. She did not understand what the involvement of PSCs in intelligence activities had to do with the Private Security Industry Regulating Authority (PSIRA), and how the restriction of at least 51% South African ownership would stop intelligence-gathering by the other 49%. She also sought more information on examples of any PSCs which had attempted to overthrow the state. She stressed that the limiting of foreign ownership would discourage investment especially given the large involvement of international companies in the private security industry. The implications for this on the SA economy were massive and would make global headlines.

Mr G Lekgetho (ANC) agreed that the briefing note should allay fears of the DA, particularly regarding disinvestment, and those who were suggesting that 51% of South Africans were criminals.

Ms Kohler-Barnard interjected that this was not what she had said.

The Chairperson urged Members to speak through her as the Chairperson and not address each other directly.

Mr Lekgetho continued by noting that only people who represented the colonisers would continue saying that. The Bill was being brought as part of the democratisation of the country. He was happy that new applications would need to adhere to the new provisions of the Bill. This was not to say that foreigners should not come to the country, but this Bill applied to new applications. He thought the briefing report should be adopted, to allay the fears of those inside and outside the Committee.

Mr P Groenewald (FF+) suggested that maybe those Members who wanted to do election campaigning should do so outside the House. He felt the Bill dealt with a serious matter and Members needed to apply an objective and open mind. He was not convinced that if a company wanted to destabilise SA, a below- 51% share in public security entities would ensure that did not happen. If he wanted to destabilise SA, for instance, the last thing he would use was a PSC, as according to the legislation all names, addresses and other details of members would need to be registered. He could not see that a decrease in shareholding would take away any threat, and questioned how in fact this would be achieved. He agreed it was a pity that Members only received the briefing note now, as he had many questions relating to the document such as the bad record of G4S, despite it being used for security internationally. He asked what a “reasonable time” would be for existing private security companies to reduce their foreign ownership. He said he needed the answers to these specific questions before he could make a decision.

Rev K Meshoe (ACDP) wanted to know if there were examples of countries where security companies had destabilised the state. He was not referring to individuals, saying that all governments, SA included, had their “bad apples”. He agreed that all information relating to PSCs needed to be registered so it would be foolish to use individuals for destabilisation when their data was recorded. He cautioned against throwing the baby out with the bathwater, because not all PSCs were without integrity. He thought the PSCs dealing in illegal activities needed to be confronted individually, rather than imposing a blanket ban on majority shareholding, when the majority of South Africans needed security.

Mr S Thobejane (ANC) thought that because the briefing note made reference to particular researchers and academic institutions, there was sufficient substantiation for the recommendation. He thought it made sense to restrict foreign ownership, saying it related not only to security threats but about economic empowerment for South Africans to enjoy ownership of the industry, as it had been shown globally that such empowerment had the potential to grow economies. The briefing note needed to be looked at in a broader way instead of a narrow, political one. He hoped that Members were prioritising SA and South Africans, instead of arguing for others and other nationalities. South Africans should not be seen as workers only but as owners of their own economy. It should not be forgotten that SA came from a history of colonisation and the transformation of South African thinking needed to start to display patriotism.

Mr D Stubbe (DA) noted there were two arguments on the matter- those arguing for economic reasons, and those arguing on the issues of intelligence gathering. He asked where PSIRA would get the structure, capacity or know-how to deal with so-called foreign intelligence involvement. If that needed to be legislated, it should be brought up in the relevant government structures as it was not the job of PSIRA. 

Mr Groenewald asked for a general percentage of how many PSCs in SA had foreign shares.

The Chairperson hoped the Department had that answer, as she had asked for a break-down in figures in 2013. If not, the Committee would give an opportunity to provide the figures at a later stage. She highlighted the international trend as contained in the briefing note, and noted that the Committee did not have to wait until something happened to react.

Maj-Gen Jacobs noted that the preparation for this briefing note comprised of desktop research, and no intelligence reports were used. There were a huge number of countries with a limitation on foreign ownership, and in some countries a total prohibition. He thought it would be unfair to have a total ban on foreign ownership. In more and more countries, PSCs were being used to take the place of formal statutory military bodies.

Ms Jenni Irish-Qhobosheane, Secretary of Police, said the international reality was that PSCs were used to perform certain contracts as opposed to a country’s own military. Examples included Afghanistan and Pakistan, where the activity of foreign PSCs was being outlawed because of the effects of destabilisation by these companies. This was also the case in the Middle East, with the UN cancelling contracts with reputable PSCs because of destabilisation. In many cases PSCs were not just guarding companies but had become involved in many other activities.
A PSIRA representative noted that currently the legislation did not oblige companies to provide the names and lists of their shareholders.

Mr Amichand Soman, Director: Legislation, Civilian Secretariat for Police, explained that in terms of the process relating to shareholding, the Companies Act dealt with the matter, both for private and public enterprises. It outlined the process of warehouse shares, where the shares were not sold through the willing-buyer, willing-seller format. This vehicle was used to dispose of shares, in line with international best practice, to comply with the statutory limitations imposed through legislation.

Ms Irish-Qhobosheane outlined the UN had ended its contract with a PSC in the Middle East because of involvement in some controversial issues.

Ms Kohler-Barnard sought clarity on the warehousing company and whether the warehousing company, with the majority shares, ran the company. She asked how the process worked when the shares were then returned to the company after a number of years. Would that not be contravening the law?

Mr Soman replied that the detailed process was contained in the Companies Act where the warehousing company would seek a buyer to buy out the excess shares.

Mr Groenewald noted that his specific question - relating to the figure of PSCs in SA with a majority foreign ownership - was not yet answered. 

The PSIRA representative responded that PSIRA could not currently provide that figure to Members.  PSIRA had information on foreign directors on their database but did not necessarily have a list of shareholders.

The Chairperson noted that this question had been asked numerous times. She had also asked it in writing last year already and the answer could not be delayed any further. 

Another PSIRA representative replied that it had already been said there was no obligation for PSCs to provide lists of shareholders. The information that PSIRA currently had might not be accurate as it was voluntarily provided.

The Chairperson asked for an indication of the information that PSIRA already had, and stressed that it must revert to the Committee.

Mr Groenewald commented that he thought there was a security threat because of the incompetence of certain organisations.

PSIRA Bill deliberations
The Chairperson asked the Committee now to re-consider the Bill.

She noted the areas that the opposition parties had previously voted against, namely, clauses 20, 38, 41 and the Memorandum on the Objects of the Bill. She asked that Members focus on these clauses as the technical team took the Committee through the Bill again.

Maj-Gen Jacobs proposed a new amendment, by way of an insertion to the Preamble of the Bill.

He then proceeded to take Members through existing amendments to the Bill.

Mr Groenewald noted the objection of the FF+ to clause 20(2)(c).

Mr Thobejane noted the proposed amendment of the ANC on clause 20, amending section 22, which would read  “any regulation contemplated in subsection 2A or 2B must be published for public comment in the Gazette”. 

Mr Groenewald requested an amendment to the proposed amendment. His proposal was that the regulations to be referred back to the Committee for approval.

Members were satisfied with that proposal.

The Chairperson explained this meant the regulations relating to the process about the time, process and other issues would be published in the Government Gazette. There would be a public comment period, which the Minister was obliged to take, and thereafter the regulations would come to the Committee for approval before coming into effect.

Ms Kohler-Barnard asked if the selling of shares from foreigners to South Africans, and then possibly back to foreigners, over the 51% threshold, would be covered in the regulations, as it was a very liquid situation.

Mr Soman replied that apart from being in the Companies Act, the situation was also catered for in the transitional provisions.

The Chairperson reminded Members that before the Bill was adopted, the Minister of Trade and Industry had indicated his intention to pass legislation relating to foreign investment. Once that legislation was passed, the PSIRA legislation could not be in contradiction with the new trade and industry legislation. This would serve as another safeguard, over and above regulations coming back to the Committee.

Ms Kohler-Barnard thought it was an odd procedure to be passing legislation in anticipation of other legislation which had not been passed yet. She sought an explanation on the phrasing of clause 20(2A), which said that “Despite subsection (2)(c), the Minister may, taking into account the security interests of the Republic, prescribe by regulation a different percentage of ownership and control  in respect of different categories of the security business contemplated in section 21A”. She found it extremely threatening to business.

The Chairperson highlighted that the section should be read in its totality. The Minister would not be taking the decision arbitrarily and it could even mean that he might increase the percentage of certain business above 49%.

Ms Irish-Qhobosheane explained that if a company fell short of the 51% after the transitional period was over, that company would be de-registered as it would no longer be compliant with the PSIRA Act.

The Chairperson said the Member’s question was not being addressed.

Maj-Gen Jacobs thought the main issue was to take into account the security interest, which could work both ways –it could be more or less than 51%, based on the security interest in a specific case. The security interest would be the mechanism on which a decision would be based.

Ms Irish-Qhobosheane added that the proposal by Mr Groenewald to have the regulations come back to the Committee would then come into play. If the Minister made a decision to prescribe a different percentage of ownership, it would first need to go through the regulations process, which would require that then to go through the Committee.

The Chairperson urged the subsection to be read in conjunction with subsection (5), which stated the Minister would need to take into consideration the recommendations of the Exemption Advisory Committee within 90 days.

Rev Meshoe suggested insertion of the word “consult” into the section to make the process clearer.

The Chairperson did not think it was usual to “consult” on issues of national security. She pleaded with Members to read the entire section to understand it, as to her mind, Members were unnecessarily concerned about it. She asked Maj-Gen Jacobs to read the entire section, with the added proposed amendment, for Members.  

Maj-Gen Jacobs proceeded to do so.

Mr Stubbe thought the “may” in section 20 (5) should be “must”. 

Mr Sisa Makabeni, State Law Advisor: Office of the Chief State Law Advisor, explained the “may” was correct as it was a discretion given to the Minister to grant or refuse exemptions.

Ms Kohler-Barnard did not understand how it would be possible to register all companies selling items such as cameras relating to security, as it was a very vast industry.

Maj-Gen Jacobs noted there was no amendment to that section and it remained exactly how the initial Act was drafted in 2002.

Ms Kohler-Barnard said she was obviously not on the Committee in 2002.

Mr Stubbe asked where he would find the category of persons being exempted.

Maj-Gen Jacobs explained that there was an obligation on the Minister that every exemption granted must be published in the Government Gazette to become public knowledge. PSIRA also kept records of such exemptions in order to enforce the law.    

Maj-Gen Jacobs continued taking the Committee through the Bill.  

Ms Kohler-Barnard did not know why there was reference to the USA as it did not restrict foreign ownership.

Maj-Gen Jacobs said the events of September 11 were referred to as they had had an impact on security concerns globally, with countries looking afresh at their intelligence, defence and security situations.

Ms Kohler-Barnard noted there were no restrictions on foreign ownership at all in the USA.
Ms Irish-Qhobosheane clarified there was a process to restrict certain companies in investing in security in the USA. This was not necessarily through legislation, but through the President setting up a committee to determine who could or could not invest, which was actually a less-than-transparent process.

Ms Kohler-Barnard was referring to a specific letter from the Ambassador of the USA sent to the Committee.

The Chairperson said there was not legislation but there was a process which was less transparent then what the Committee was proposing.

Ms Kohler-Barnard argued that the US Ambassador stated there was no federal or state law restricting private security companies based on nationality of ownership. 

The Chairperson repeated there was no law, but there was a process housed within the Presidency of the USA.

Ms Kohler-Barnard said that contradicted the letter completely.

The Chairperson said the other Committee Members had that letter.

Ms Irish-Qhobosheane said the Secretariat would be able to draw the source document where Congress approved that the President set up a panel to review any security investment in the USA.
The Chairperson asked that that document be provided to the Members to get the issue out of the way once and for all.

Maj-Gen Jacobs continued taking the Committee through the Bill.

Clause by clause voting on the PSIRA Bill
The Committee voted on each clause of the Bill in turn.

The majority of Members approved each of clauses 1 to 42. However, the DA opposed clause 20 in its entirety, while the FF+ opposed clause 20(2)(c) specifically. 

The Chairperson then put the entire Bill before the Committee.

ANC Members moved and seconded the Bill for adoption. Ms Kohler-Barnard noted the objections of the DA.

The Chairperson asked if this must be recorded as an objection or if the DA was voting against the Bill.

Ms Kohler-Barnard said it was difficult to take such a decision, because she had not gone to the caucus with it, but she would be prepared to go out on a limb and record a vote against the Bill.
Mr Groenewald noted the objection and vote against the Bill, by the FF+.
The Chairperson noted that the Committee would adopt the Committee Report on the following day, to ensure that the Committee Section had captured the clause by clause voting correctly.
She thanked the Department, the officials from the Secretariat and PSIRA as well as Maj-Gen Jacobs (whose primary task did not in fact lie with this Bill) for assisting the Committee. She thanked Members for their time, spirit of the debate and the ability to discuss issues openly. The debate on the Bill would be decided by the Programming Committee.

The meeting was adjourned.  


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