The proposed bill aims to force foreign-owned private security firms to sell 51 per cent of their companies to South Africans.
(READ MORE: S.Africa's amended security bill threatens constitutional rights)
The president of the American Chamber of Commerce in South Africa, Jeff Nemeth noted that the country was keen to having a grip on the private security sector.
“It’s understandable that the South African government wants to keep tight rein on security and information,” Nemeth told CNBC Africa.
“One of the things they have done is indicating that the management of the security companies should be South African and now they are escalating this control to ownership,” he added.
(READ MORE: SIA slams S.Africa's proposed security services bill)
Nemeth added that, multinational brands bring a lot of technology and global expertise to other industries they participate in and said the same was expected in the security industry.
He noted that the move was affecting investor confidence across the foreign investors’ community.
“If you are a foreign direct investor and you are looking at investing in a different country you usually have choices and you don’t want to put your investment where it is not secure or without returns,” Nemeth said.
“As investors think of markets where they can create or grow their business, stability becomes a big concern for investors and if ownership begins to be regulated this consequently affect investor perceptions.”
Nemeth posited that stable banking, stable currencies, stable governance structure and stable regulatory regimes were key to guaranteeing return on investments.
Nemeth warned that the yet to be signed bill could threaten existing trade agreements with countries like the United States.
The US is the second largest trading partner of South Africa with taking first spot in heavy industry trade. Last year South Africa had a 38 billion US dollar tax exemption and with the impending bills such benefits are now under threat.
The country is also considering forced sale that might see some companies being sold at the lesser value.