TRALAC - Trade Law Centre

South Africa expects challenge to security law, says Minister Davies

Friday, 09 October 2015 Published: | Michael Cohen and Rene Vollgraaff

Source: Bloomberg

South Africa can expect challenges to legislation that would limit foreign ownership of private security companies, Trade and Industry Minister Rob Davies said, days after the U.S. warned the bill may affect the country’s inclusion in a preferential trade agreement.

“The law is sitting with the president,” Davies said in Johannesburg on Friday. “We do think that we must expect there will be a challenge if the bill goes through in its current form.”

Section 20 of the Private Security Industry Regulation Amendment Bill would require all security companies and manufacturers, importers and distributors of security equipment to be at least 51 percent owned by South Africans. Opponents of the bill say it would violate the World Trade Organization’s General Agreement on Trade in Services and the requirements of the U.S. African Growth and Opportunity Act because it would effectively result in expropriation and limit foreign investment.

The U.S. is reviewing South Africa’s status as a full beneficiary of AGOA, as the preferential trade accord is known, potentially risking as much as $1.7 billion of exports a year.

“South Africa still needs to take concrete steps to eliminate barriers to U.S. trade and investment,” the American embassy in Pretoria said in a Twitter post on Oct. 7. Removing section 20 from the private security bill “would address all U.S. concerns,” it said.

The law, which is awaiting President Jacob Zuma’s signature, is also opposed by Crawley, U.K-based G4S Plc, the world’s biggest provider of security services, as well as Securitas AB and Princeton, New Jersey-based Tyco International Ltd. The government says the bill is needed to protect national security by ensuring South African control the companies.

If enacted, it could result in foreign private security firms leaving South Africa completely because they probably won’t operate in a country where they don’t have full control of their business, Costa Diavastos, Executive Director of the Security Industry Alliance, an industry body, told reporters in Johannesburg on Oct. 6.

Industry Mushrooms

The private security industry has mushroomed in Africa’s second-largest economy as the police battle to tackle rampant crime. The murder rate increased for a third consecutive year in the 12 months through March to 33 per 100,000 people, while attempted murders climbed by 3.2 percent, latest police data shows.

About 446,000 registered security guards operate in South Africa, compared with 270,000 police officers and soldiers, according to the government. Companies protect households and businesses by linking to alarm systems. The government’s concerns that foreign-owned companies threaten national security are unfounded, Diavastos said.

The security bill won’t be decisive in determining whether South African can continue to benefit from AGOA because the review is based on the issue of beef, pork and poultry access, Davies said.

“If the private security bill is signed into law, AGOA is the least of our problems,” Catherine Grant Makokera, a senior associate at Pretoria-based Tutwa Consulting, said by phone on Friday. “There’s a whole lot of other things that will kick it, like the WTO obligations, claims of expropriation potentially.”

Police Minister Nkosinathi Nhleko said in March that the government will withdraw from the WTO’s GATS while it negotiates the planned ownership curbs and any “necessary compensatory adjustment” with other signatories to the accord.

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
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