JB Cronjé, tralac Researcher, discusses the review of South Africa’s Private Security Industry Regulation Act in the context of the country’s services commitments at the WTO

As a Member of the World Trade Organization (WTO), South Africa must fulfil in good faith all the obligations assumed by it under the various WTO Agreements including the General Agreement on Trade in Services (GATS). During the Uruguay Round of Multilateral Trade Negotiations, South Africa made certain commitments in a number of services sectors and sub-sectors with respect to foreign services and foreign services suppliers. The commitments specify the terms, limitations and conditions on market access and the conditions and qualifications on national treatment the country can maintain or introduce in the sectors where such commitments were undertaken. These commitments are contained in the country’s Schedule of Specific Commitments and form an integral part of the GATS. In the case of non-compliance with any obligation, any WTO Member may invoke dispute settlement proceedings to seek the withdrawal of the inconsistent measure. The GATS also makes provision for the modification or withdrawal of a country’s commitments, but requires such a country to enter into negotiations with any affected Member State and reach agreement on any compensatory adjustments.

During 2012, a review of the Private Security Industry Regulation Act 56 of 2001 was undertaken with a view to strengthening control over the regulation of the private security industry, including security services rendered outside South Africa by South African security companies. However, a number of provisions in the Private Security Industry Regulation Amendment Bill 27 of 2012 relating to the registration of security services providers seem problematic in light of South Africa’s WTO GATS commitments.

South Africa made extensive liberalisation commitments on ‘investigation and security’ services under GATS including: the cross border supply of investigation and security services into South Africa; the consumption of investigation and security services abroad; the establishment of foreign owned and controlled investigation and security services businesses in South Africa; and the temporary movement of foreigners active in the security and investigation services sector to South Africa. A definition of ‘investigation and security services’ is provided in the United Nation’s Provisional Central Product Classification (UN CPC) which subdivides the sector into: investigation services; security consultation services; alarm monitoring services; armoured car services; guard services; and other security services not elsewhere classified. This definition corresponds to the definition of security services and security activities regulated in the Act. Consequently, any regulation on the private security industry must therefore adhere to South Africa’s GATS commitments.

The Private Security Industry Regulation Amendment Bill requires all persons rendering security services to register as security service providers. A security business can only be registered if all the persons performing executive or managing functions are registered as security service providers. If the security business is a company, close corporation, partnership, business trust or foundation, every director of the company, every member of the close corporation, every partner of the partnership, every trustee of the business trust, and every administrator of the foundation, whatever the case may be, must be registered as a security service provider. However, one of the requirements is that the applicant must be a citizen of or have permanent residence status in South Africa. This requirement constitutes a qualification on national treatment. South Africa has not inscribed any conditions or qualifications on national treatment in its Schedule of Specific Commitments on security and investigation services.

The Bill also introduces a limitation on foreign participation in the industry. The Bill proposes to restrict foreign ownership and control of security businesses to a maximum of 49 percent. The Bill also gives the responsible government Minister the power to prescribe by regulation a different percentage of foreign ownership and control for the various categories of security businesses including guarding, close protection, response security, assets in transit, event security, private investigators, manufacturers, importers and distributors of certain equipment, security training, security advisors, electronic security or locksmiths. If adopted, the proposed provision would violate South Africa’s market access commitment on the establishment of foreign services suppliers. This particular commitment provides that the country shall not maintain or introduce measures that would limit the participation of foreign capital in terms of maximum percentage limits on foreign shareholding or the total value of foreign investment.

At the beginning of November, the Bill was adopted by the Portfolio Committee on Police for final approval by the National Assembly. However, a few days after adoption the National Assembly referred the Bill back to the committee for reconsideration. Hopefully, the committee will take South Africa’s international law obligations into consideration when it reconvenes in 2014.

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