The impending Security Industry amendment bill contains a number of problematic clauses. It requires all private security companies operating in South Africa to sell a 51% stake to South African citizens, for example, a provision that seems very difficult to comply with and very anti-investment. The South African Chamber of Commerce and Industry (SACCI) seems to agree, it has called on President Jacob Zuma to send the bill back to Parliament, warning that it could invite foreign sanctions by undermining a host of trade agreements, as well as indirectly causing job losses. In this interview, advocate Mark Oppenheimer explains why SACCI has said that the proposed legislation is unconstitutional and why it could lead to problems with key South African trading partners like the UK and the US. – FDÂ
ALEC HOGG:Welcome back to Power Lunch. According to SACCI, if the contentious Private Security Industry Regulations Amendment Bill is signed in to law by President Zuma, South Africa could face crippling sanctions. It’s not often that one sees SACCI coming out as aggressively on this, but Mark Oppenheimer who is from the Bridge Group of Advocates is with us in the studio. He’s a Constitutional Law expert. Before we get into this Private Security issue, when the Constitution was put together, we as South African Citizenry were told we have the best in the world. It was based on the American Constitution, but even better. We have Sanctity of Contract. We have Property Rights. We have everything in place now for an economy that is going to flourish.
It doesn’t seem as though we know too much about this Constitution. Time and again, government is implementing things that, if you scratch your head, you wonder how that is going to make the economy flourish in the longer term. Do South African businesses have an understanding of what this framework is?
MARK OPPENHEIMER: I think they probably don’t, and that’s a pity. It should be a fundamental part of our education while you’re in business, and while you’re at school to understand at least the Bill of Rights. We’ve moved away from parliamentary serenity, so parliament can’t just do what it wants. We have this protection. We have the Supreme Law of the land that can protect us and say ‘I’m sorry. This Bill is unconstitutional’ and changes can be made. Because we have separation of powers, the courts can intervene where legislation is going to infringe on people’s fundamental rights.
ALEC HOGG: So if I understand it now, on the one hand the government is talking for a certain constituency. It would interpret what that constituency wants and it will try to drive things in one direction. You need someone at the other end to say ‘no, that’s not right’ and then of course, you have the Constitution that you can go to, but so much seems to be happening that might be unconstitutional and yet, it just carries on.
MARK OPPENHEIMER: Yes, part of the problem as well, is it’s all very well to say we have the Constitution protection, but you actually have to go to court, and spend the time and the money on it, so it’s very expensive to litigate in a Constitutional Court. Often, it will require going to a number of prior courts first, so undesirable to have legislation, which on the face of it is unconstitutional. What you want in those situations is for the legislature to realise it and not pass it. President Zuma has this golden opportunity at the moment. The Bill has been passed by Parliament. It’s sitting on his desk and he can refer it back.
ALEC HOGG: This is the Security Bill. Just explain what’s going on there.
MARK OPPENHEIMER: There are a few troubling clauses. The main clause is that foreign-owned security companies will be required to sell 51 percent of their ownership and control to South African citizens.
ALEC HOGG: Any South African citizens or only previously disadvantaged?
MARK OPPENHEIMER: Only South African citizens, but note that the term citizen is a bit of a problem because a company is not a citizen. Already, there’s some ambiguity about how you would end up doing this. You also have a situation where for instance, you have a listed company that can be fully traded around the world. How do you ensure that only South African citizens are buying those shares? You can’t.
ALEC HOGG: Like D4S, which is listed on the London Stock Exchange. I think it’s a top 100 company there.
MARK OPPENHEIMER: Yes.
ALEC HOGG: That’s interesting.
MARK OPPENHEIMER: So you run into that problem, but actually, that’s not the only problem. The legislation says that the Minister has discretion to change that percentage up or down, depending on the particular security sector. A number of different sectors can be affected. There are security guards, locksmiths, those who manufacture, distribute, and import certain types of security equipment as well, are going to be affected. The problem with proving the Minister with that much control is that he might say to the locksmiths ‘look, we’ll let you keep 60 percent of your shares – that’s fine – but in exchange for that, would you like to sell to these guys? We think they’d be a brilliant partner for you. Alternatively, if you refuse to submit, we’re going to wholesale require you to sell your business’. The other problem that you have is…
ALEC HOGG: That’s crony capitalism 101.
MARK OPPENHEIMER: Without a doubt. You’re taking away the power from the law and you’re providing it to a Minister and a small committee. That’s very dangerous.
ALEC HOGG: Maybe yes, with their favoured participants in that transaction. Okay, so there are obvious flaws from a moral perspective. What does the Constitution say?
MARK OPPENHEIMER: I think there are three kinds of Constitutional attacks. The first question we need to ask ourselves is ‘what is the rationale that government has given us for putting this in place in the first place’, and really, it’s a reason given by states all around the world. It’s the reason given for the Secrecy Bill. It’s national security. The idea is that if we allow foreign entities to set up private armies, they pose a threat to the State. If the Belgians for example, decided they missed the glory days of having colonies in Africa, what they’ll do is they’ll set up a private security company and have their troops at the ready, to march to the Union Buildings.
ALEC HOGG: That’s preposterous.
MARK OPPENHEIMER: It is preposterous. It’s paranoid and I think it’s rather xenophobic as well. In addition, one of the reasons why it’s irrational is that there are already limitations on who can be a security guard. The existing Act – this is an Amendment to the Act – requires everyone that works in the industry to already be a South African citizen or a permanent resident. It’s very hard to organise a coup when you have to use the citizens of that state that you want to attack.
ALEC HOGG: Mark, that’s an excuse. The reality is that you can now go to the Constitutional Court and say ‘is this constitutional or not’ – the suggestions that parliament is trying to put forward. You said that was the one attack. What were the other two?
MARK OPPENHEIMER: The one is…we have an equality clause, which lists that you cannot unfairly discriminate against a particular set of individuals. The Constitutional Court has already looked at something like citizenship in a prior case and said that you can’t unfairly strip non-citizens of their rights – arbitrarily. This is exactly what’s happening here. We’re saying to people ‘because you happen to be a foreigner, you will not have the same rights. We’re going to strip you of your property’. Furthermore, we have the Property Bill, which says that no one may be arbitrarily deprived of their rights to property.
ALEC HOGG: So what happens now? Let’s say Zuma signs this into law…
Does it immediately enact or do you then have to go to the Constitutional Court or overturn it? Alternatively, if you have a challenge in the Constitutional Court against the new law in the country, does that put it in suspension?
MARK OPPENHEIMER: Well, you raise an interesting point. Prior versions of this Bill provided compliance time, so there’d be five-year periods for companies to be able to sell their shares. Now, that’s been removed so as soon as the law is signed, the President will set a commencement date, which could be tomorrow – it’s sitting on his desk at the moment, – which means that you have this fire sale problem as well. In order to run your business, you have to sell 51 percent or more of your shares. The problem is how likely are you to get a fair price?
ALEC HOGG: Can you get (as we see in The Good Wife) an urgent interdict, and it all stops, and even the President of the country with the new Bill, cannot enact it immediately?
MARK OPPENHEIMER: You may have a situation like that, so you may have someone rushing to the High Court to say ‘look, we can’t comply with this. We think it’s unconstitutional’. The High Court can make some kind of declaratory order, which will have to then be confirmed by the Constitutional Court. That may happen.
ALEC HOGG: So all is not lost.
MARK OPPENHEIMER: Yes, all is not lost, but it does place a massive burden on those that want to raise that challenge because of the costs, time, and uncertainty involved. Furthermore, the problem you have is the security sector now but really, I think this is government testing the water. Other industries are going to be affected. If they’re successful here, there’s no reason why they won’t stop with other sectors. Really, I think where we’re heading… If you look at the Zimbabwe Indigenisation Act, it says 51 percent of all businesses will be owned by locals, and I think that’s the ultimate strategy that the government is aiming towards.
ALEC HOGG: Extraordinary. Mark Oppenheimer is with the Bridge Group of Advocates. There’s a lot at stake here, but we do have a Constitution to fall back on.
A memorial service was held at the Bryanston Catholic Church in Johannesburg yesterday for the late Business Connexion CEO, Benjamin Mophatlane, a regular visitor to out studios here at CNBC Africa. The service, which was open to the public, was attended by various industry leaders in the ICT sector: friends, colleagues, and family. CNBC Africa’s Christine Mundwa filed this report.
CHRISTINE MUNDWA: They came in their numbers.
