Why the SA government is clamping down on the private security industry
Private security is one of the industries that has blossomed in South Africa over the last twenty years. In fact, the police station near my brother's home in Observatory in Cape Town actually has signs on it saying that it is protected by ADT – even the SAPS apparently relies on private security!
The growth in the industry has, naturally, attracted some foreign investment –global companies like ADT and Chubb have a presence in the South African market, as do some others – although it is somewhat limited. And now, government seems to be planning a clampdown on foreign investment in the private security sector, with new legislation that would impose domestic ownership quotas on private security companies. It's a strange, anti-business move that would surely discourage foreign investors, and government's reported reasons – that these companies are becoming involved in intelligence gathering – seem weak at best. – FD
ALEC HOGG: Welcome back. JB Cronje is with TRALAC. He's a researcher there and he's been having a look into the security industry where there's some interesting developments going on in proposed legislation. JB, the private security industry in South Africa has expanded dramatically over the past few years I guess, since we had this vacuum that organised crime jumped into post 1994, but it now appears as though government would like to get the international companies to sell majority shareholdings to South African-owned or to local ownership. What's behind this?
JB CRONJE: Well, it's difficult to say. The provision in the Amendment Act provides that foreign ownership will be limited to a maximum of 49 percent and of course, the Amendment Act gives the Minister discretionary powers too, to change these percentages for the different categories.
ALEC HOGG: You mean below 49.
JB CRONJE: Yes.
ALEC HOGG: Or not above 50.
JB CRONJE: Well, he will have discretion.
ALEC HOGG: To go anywhere…
JB CRONJE: Exactly. It will include manufacturers, distributors, and even importers of security equipment. That is how broad the definition of security companies in the Act, is.
ALEC HOGG: JD, was this a pre-election type of ruse or is it something we need to take seriously? If you're starting to discourage foreigner investment into South Africa – and there are some big names here and we'll get into them in a moment – then perhaps we're going in a very strange direction.
JB CRONJE: Absolutely. I don't know what the real reasons are for the introduction of this provision. The Minister of Police said in Parliament that the motivation for the introduction of this provision is because the line between private security companies and private military companies have become increasingly blurred and many of these private security companies are involved or in the field of intelligence, as well. That is the only real motivation, but apart from that, I haven't seen any real evidence to substantiate these claims.
ALEC HOGG: That's extraordinary. There's a company listed on the London Stock Exchange, G4S, which is run by a South African or an ex-South African anyway, a guy named Ashley Almanza – I don't know if you've come across him – and his Chief Operating Officer for the Africa regions, a guy called Andy Baker. There's strong South African involvement there. Have you heard from companies like this, a London Stock Exchange listed company that now might be forced to get its thirteen-thousand people operation in South Africa divested to local interests?
JB CRONJE: Well, as far as I know there are over nine thousand companies operating in this sector in South Africa, of which less than ten percent are foreign-owned and controlled, including G4S, ADT, and Chubb etcetera. Yes, they provide a number of jobs for between thirty and forty-five-thousand South Africans, which are mainly in the lower skill sector. That might have a major impact, on not only investment in South Africa, but on job losses and the security of people relying on these foreign companies to provide services to them.
ALEC HOGG: I guess what they think is that some South Africans would be able to move in there and take up the baton. It would be interesting to see whether Jacob Zuma actually does sign that into law, now that we've had the election and the election hearing is, I hope, behind us. Gugu, it isn't a good sign, though. Over the weekend, we had Jacob Zuma saying that he would be going pro-business. This is not a pro-business move.
GUGULETHU MFUPHI: Not at all, especially if you put it together with other legislations, in particular oil and gas exploration in South Africa. It does seem as though we need a lot more clarity and direction with regard to increasing foreign direct investment in the country.
ALEC HOGG: Did you ever hear what happened to Ebrahim Patel, who was supposed to be with us yesterday? I was really hoping he would give us some good, positive pro-business direction, but he didn't pitch. Did you ever hear?
GUGULETHU MFUPHI: Nothing at all Alec, nothing at all. Hopefully, we will get some kind of communication from his department sometime soon. From what I understand, that's all from us here in South Africa. Alec, it's been fun having you in Cape Town.