TRALAC - Trade Law Centre

Security Industry Association protests proposed measure to restrict foreign ownership of security firms in South Africa

Tuesday, 03 June 2014

Source: PR Web (Press Release)

The Security Industry Association (SIA) has added its voice to security organizations protesting a bill in South Africa that would ban foreign ownership of security firms.

On May 28, SIA wrote a letter to Sen. Ron Wyden, D-Ore., and Sen. Orrin Hatch, R-Utah, chairman and ranking member respectively of the Senate Finance Committee, to suggest putting pressure on South Africa through amendments to the African Growth and Opportunity Act (AGOA) if the South African bill were to become law.

Originally enacted in 2000, AGOA allows products from sub-Saharan African countries to enter the U.S. market duty-free with a number of conditions—including efforts to open their economies and build free markets. Currently, South African President Jacob Zuma is considering a bill approved by Parliament, the Private Security Industry Regulation Amendment Bill, which would force private security services firms invested in South Africa to sell at least 51 percent of ownership in the firms to South Africans or to essentially withdraw from the market. Enactment of such legislation would be a major victory for those supporting “forced localization” measures, and it could become a harbinger of similar measures thorough sub-Saharan Africa. (See "Private Security Bill Spells Trouble," Mail & Guardian, http://mg.co.za/article/2014-04-10-private-security-bill-spells-trouble.)

"A foreign ownership limitation may place South Africa in contravention of its international trade obligations, including AGOA," wrote SIA CEO Don Erickson to the U.S. Senate. "Specifically, AGOA requires eligible countries to provide evidence that they are meeting, or attempting to meet, the act's eligibility requirements, including 'the elimination of barriers to United States trade and investment, including…the provision of national treatment and measures to create an environment conducive to domestic and foreign investment.'"

The South African bill also has an unacceptably wide definition of companies that deal in "security services," according to SIA. If enacted, the bill would apply to any company that "manufactures, imports, distributes or supplies security equipment," the association said. Restrictions on these companies would jeopardize investments from foreign-owned security companies, which currently represent less than 10 percent of the security industry in South Africa. The presence of foreign-owned security companies benefits South Africa, as the contribute capital investment and infrastructure development as well as introduced international best practices and skills training for the entire security sector in the country in addition to producing thousands of entry-level jobs.

SIA is not alone in protesting the bill, which the South African President could sign, reject or send back to Parliament for changes. The American Chamber of Commerce in South Africa, the European Union and others have protested the measure. U.S. Ambassadors to South Africa and the World Trade Organization (WTO) along with representatives of other countries invested in the private security industry in South Africa, also believe the provision may be in contravention of South Africa's other international trade obligations, notably the General Agreement on Trade in Services (GATS).

SIA hopes the Senate Finance Committee will strongly consider South Africa's disposition of the Private Security Industry Regulation Amendment Bill when considering its position with regard to AGOA.

 

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