Security Amendment Act threatens listed companies - CNBC Africa

Security Amendment Act threatens listed companies

Southern Africa

by Christine Mhundwa 0

If Jacob Zuma signs the Private Security Regulatory Amendment Act there could be unforeseen implications.

If South Africa’s President Jacob Zuma signs the Private Security Regulatory Amendment Act that’s currently sitting on his desk there could be unforeseen implications for listed security companies.

Costa Diavastos from the Security Industry Alliance said, “Once a company is listed on the JSE its shares are traded freely on the stock exchange and it would be very difficult to monitor the compliance of those companies to this particular piece of legislation, arguably  the shares could be traded between local and foreign investors through the course of the day of the week such that it would be both in compliance and in breach of the provisions with this particular limitation all within the space of that time span”.

While the private security industry says it believes the Act will improve regulation and functioning of the industry, it is deeply concerned about Section 20 – which was introduced on the day the Act was to be voted on in the Portfolio Committee on Police without prior notice or discussion.

Section 20 requires that a private security business may not be registered unless “at least 51% of the ownership and control is exercised by South African citizens”.

To allow for the passage of Section 20 the Minister of Police Minister Nkosinathi Nhleko recently announced that South Africa would withdraw from its commitments under the World Trade Organisation’s (WTO) General Agreement Treaty (GAT).

Webber Wentzel’s Peter Leon said Section 20 contravenes SA’s obligations under the WTO’s general agreement on trade and services as it stipulates that ‘no limitations will be imposed on foreign suppliers’ entitlement to full “market access and national treatment in South Africa’s Private Security services sector.

Leon added, “The way in which Clause 20 was hurriedly reinserted into the bill, shortly before it was passed, fell short of the standard of transparency required by GAT, as neither the WTO nor its members were appropriately informed, with any clarity or consistency, of the rationale contents and consequences  of Clause 20”.

Government maintains that the amendment is in the interest of protecting the country’s national security.

In a written response to CNBC Africa, Musa Zondi, spokesperson for the Police Minister said, “National security is compromised if security companies engage in intelligence work. As the minister said, we don’t know where that information goes to and why”.

However, Zondi would not say if there has been intelligence gathering on the part of security companies. The industry says it does not gather intelligence information.

The Act will impact companies like ADT, Chubb and G4S.

It is unclear when the president will sign the Act into law, as security companies have written to his office citing their concerns.