Security bill spat: SA-US relations at risk
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.
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.
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