TRALAC - Trade Law Centre

Security bill spat: SA-US relations at risk

Wednesday, 07 October 2015 Published: | Banele Ginindza

Source: Independent Newspapers (South Africa)

South Africa is in danger of being sidelined for project funding by the International Monetary Fund (IMF) and the World Bank as the US lobbies to scrap the controversial Private Security Industry Regulation Amendment Bill.

Yesterday, the US trade mission threatened to withdraw its support for South Africa’s funding applications for infrastructure development projects if certain clauses in the bill were not reviewed, and once more placed the Africa Growth and Opportunity Act (Agoa) on the back foot.

Costa Diavastos, an executive director of the Security Industry Alliance, which is spearheading the lobbying against the cession of the 51 percent stake of foreign-owned security firms to locals, said US trade officials had given an undertaking that they would revoke their support for South Africa’s loans if the amendment came through.

“US trade officials are on record saying they would not support our IMF and World Bank applications for funding,” Diavastos said at the presentation of the SA Chamber of Commerce and Industry business confidence index for September, at which the impact of the proposed bill was discussed.

IMF 640px

In 2010, the US support proved vital to South Africa securing a $3.75 billion (R50.775bn) loan for the Medupi coal-fired power station.

But now US officials have warned that if the clause was not removed, the US government would see it as an expropriation of US property, a move that would automatically disqualify South Africa from continued participation in Agoa.

Heidi Ramsay, the deputy spokeswoman for the US embassy in Pretoria, said the US’s concerns were that the requirement would force US security firms to sell off their ownership at what would likely end up being fire-sale prices, which could effectively result in an uncompensated expropriation.

Already, South Africa is treading on very thin ice as it pushes for the lifting of the conditional access to Agoa and the restoration of full benefits.

The country missed the end of September deadline as US authorities hardened their attitudes and demanded further concessions on the bill.

Diavastos said the private security sector had invested about R4.5bn into the economy over the past eight years through mergers and acquisitions and acquisition of firms locally. He said it was an R50bn-a-year industry, employing roughly over 500 000 people.

Gordon Institute of Business Science economist Roelf Botha said the security legislation could knock R133.4bn off South Africa’s gross domestic product, R52bn off tax revenue and cost about 850 000 formal and informal jobs. Those would be the effects of the act discouraging foreign investment, losing South Africa’s duty-free access to the lucrative US market through Agoa and likely provoking trade retaliation from US and European countries.

Botha said the American Chamber of Commerce in South Africa, which represents 250 American companies in South Africa, 60 of which are Fortune 500 firms, said reasons given by the government that foreign-owned security companies were a threat to South Africa’s national security were absurd.

“There is a law in South Africa, PSIRA Act 56 of 2001, that requires that management of foreign-owned security companies are South Africans; foreign-owned security companies are registered South African companies; the security companies employ almost 100 percent South Africans and they make up less than 10 percent of the security industry in South Africa,” he said.

 

View related news articles

'The renewal: US-Africa relationship'

'The renewal: US-Africa relationship'

In his first allocution to African leaders at the virtual African Union Summit in February, recently elected United States President, Joe Biden, reiterated his administration’s commitment to rebuilding partnerships with Africa and re-engaging with international institutions such as the African Union. Biden set out his foreign policy priorities, pointing towards...

13 April, 2021
SA president to meet with US Chamber of Commerce over investment

SA president to meet with US Chamber of Commerce over investment

President Cyril Ramaphosa will participate in a virtual business and investment roundtable on Tuesday (10 November) with representatives from three major business organisations from the United States. The organisations are the Business Council for International Understanding (BCIU), the Corporate Council on Africa (CCA), and the US Chamber of Commerce. “The president...

10 November, 2020
Opinion: 'Trump vs. Biden: This is how it could impact South African agriculture'

Opinion: 'Trump vs. Biden: This is how it could impact South African agriculture'

As the race for the White House continues, agriculture leaders say a win for Democrat Joe Biden will strengthen and fast-track trade relations between South Africa and the United States. Currently, the race between pres. Donald Trump and Biden hinges on tight races in battleground states. Trump has already falsely claimed victory while Biden called for patience and every...

05 November, 2020
Will the US presidential elections impact South Africa’s economic recovery?

Will the US presidential elections impact South Africa’s economic recovery?

With over 6.29million recorded cases worldwide and over 380,00 deaths, its safe to say the COVID-19 pandemic has shaken the globe as we know it. Although Africa has, for the most part, managed to avoid an exponential spread of the disease, the overall recovery of the country and more specifically South Africa, hangs in the balance due to a number of...

27 July, 2020
'South Africa must get ready for an inevitable loosening of trade ties with the US'

'South Africa must get ready for an inevitable loosening of trade ties with the US'

In six months’ time the world’s gaze will be trained on what is gearing up to be a contentious and hotly contested presidential election in the US. Irrespective of who emerges victorious between the incumbent President Donald Trump and the Democratic nominee Joe Biden South Africa needs to start thinking about what it stands to lose – or gain – from the new...

02 June, 2020
Opinion: A bipartisan legacy of Africa trade worth remembering

Opinion: A bipartisan legacy of Africa trade worth remembering

In a White House ceremony twenty years ago this week, former U.S. President Bill Clinton signed into law the African Growth and Opportunity Act. While AGOA hasn’t met all of its lofty goals, this trade legislation has helped lift many Africans out of poverty.   Today, with the global economy bordering on coronavirus-sparked turmoil and African economies bracing...

18 May, 2020
Former US negotiator: US-Kenya deal could spur regional value chains

Former US negotiator: US-Kenya deal could spur regional value chains

A trade deal with the U.S. could help both Kenya and its neighbors in the East African Community by fostering the development of regional value chains, a former U.S. trade official tells Inside U.S. Trade. “I think it’d be really fascinating as we go forward with this U.S.-Kenya FTA to see what’s going to be possible not just for Kenya but for other African countries...

10 February, 2020
South Africa GSP country review hearings: programme and witness list

South Africa GSP country review hearings: programme and witness list

EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF THE U.S. TRADE REPRESENTATIVE PUBLIC COUNTRY PRACTICE HEARING U.S. GENERALIZED SYSTEM OF PREFERENCES (GSP) Held at the Office of the U.S. Trade Representative 1724 F Street, N.W. Washington D.C., Rooms 1 and 2 January 31, 2020 Program and Witness List - Final Welcome and Introduction 10:00 am Ms. Laura Buffo, Deputy Assistant...

29 January, 2020
South Africa will caution Trump on ‘premature’ trade review

South Africa will caution Trump on ‘premature’ trade review

South Africa’s government will tell President Donald Trump’s administration that its review of a preferential trade agreement that could put as much as $2.4 billion in exports at risk is premature and potentially damaging for both economies. The U.S. Trade Representative will start public hearings on Thursday [see submissions and hearing schedule here] to...

29 January, 2020