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Important questions about the Private Security Industry Regulation Amendment Bill and the GATS
Much has been written in the media lately on the South African Minister of Police’s recent comments that the country wants to modify or withdraw its current commitments under the World Trade Organisation’s (WTOs) General Agreement on Trade in Services (GATS). This does not mean the country is on the brink of terminating its WTO Membership.
In terms of South Africa’s current commitments under GATS it undertook to not impose any terms, limitations and conditions on the participation of foreign capital in private security companies in South Africa. However, this is exactly what the Private Security Industry Regulation Amendment Bill proposes to do by limiting foreign ownership and control of private security companies to a maximum of 49%. The Bill also gives the Minister discretionary power to determine diverse ownership and control percentages for different market segments.
These proposed provisions are in direct conflict with the country’s GATS commitments. South Africa is legally bound by its GATS commitments under international law. Failure on the side of South Africa to implement its commitments will have legal consequences under WTO law. This restricts the President from signing the Bill into law. The Minister’s willingness to undertake the modification exercise in terms of the requirements and procedures provided under Article XXI of that Agreement sends a positive signal that the country will abide by its international law obligations created under WTO Agreements. It is possible to modify commitments undertaken, but this has to be done in accordance with the provisions of the GATS.
The particular provision in the Bill raises a number of questions that have not featured prominently in the current debate.
What is the rationale for introducing the provision? Is the policy response appropriate to address the concern?
The Minister said the private security industry poses a potential threat to national security because “we are aware that this industry increasingly gathers intelligence which sometimes can compromise national security. Some of these companies have strong links outside the country and it would really be unrealistic not to guard against these potential dangers”. He also said “South Africa intends on entrenching its national security as a development state. We cannot be apologetic about this. In as much as we appreciate that the private security industry is an important player in the economy, we are all too aware that on the flip side, it can become a security threat and compromise the national security interests.”
This “potential threat to national security” is ostensibly the reason for the controversial provision in the Bill. A good starting point is to ask what ‘national security’ means. Burger and Newham (2014) describe national security “as freedom from external and internal threats, which may manifest as military, political, economic, societal and environmental threats, crime and violence and the threat of anarchy”. If this definition is shared by the Minister, he is in actual fact making a serious accusation against private security businesses and, if substantiated with evidence, should be a matter of grave concern for the South African public.
An evidence based explanation should provide details of the type of information private security companies are collecting that could compromise national security. Are they using this information for ulterior and illicit purposes? If so, what are law enforcement agencies doing about this? With whom do private security companies have “strong links outside the country” that could pose “potential dangers” to the South African state? Are these “links” with foreign states or foreign private companies?
It is important to differentiate between the private investment interests of foreign companies in South Africa and the political interests of their home states. It is not one and the same thing. Furthermore, all persons performing managing and executive functions in a private security business must be registered as a security service provider. All security service providers must be, amongst other requirements, South African citizens or permanent residents. In the absence of a rational argument for the introduction of the controversial provision, it is difficult to understand how foreign owned and controlled private security companies could pose a threat.
Many companies operating in South Africa are owned and controlled by foreigners. Why are businesses operating in other industries, such as information technology that could pose a threat, not subjected to similar treatment? Should the government decide to persist with the Bill in its current format and notify the WTO of its intention to implement it, questions on the type of compensatory adjustments South Africa might be required to make must arise.
What compensation will South Africa ‘pay’ for modifying existing GATS commitments?
The GATS Article XXI requirement to negotiate compensatory adjustments with all affected WTO Member States does not refer to monetary compensation. If requested, South Africa will be required to undertake further liberalisation commitments in terms of improved market access and/or national treatment or the removal of most-favoured-national treatment exemptions in other services sectors. The agreed compensatory adjustments must maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in the Schedules of specific commitments of South Africa prior to the negotiations. South Africa already had undertaken extensive liberalisation commitments under the GATS.
Further commitments may have to be made in other services sectors such as telecommunication, tourism, transport, finance etc. that have until hereto been protected from foreign competition. In other words, South African services sectors unrelated to the private security industry may eventually have to ‘pay’ for the controversial statutory limitation on foreign capital participation in the private security sector.
The outcome of the negotiation process is uncertain. In the end, compensatory adjustments may not compensate the affected private security companies at all. This will create various implications for these private companies that will have to decide on their continued participation in the South African economy, including relocation and divestment decisions.
Source:
Burger, J. and Newham, G. 2014. Are foreign-owned private security companies a threat to South Africa’s national security? [Online] Available from: http://www.issafrica.org/iss-today/are-foreign-owned-private-security-companies-a-threat-to-south-africas-national-security
Previous tralac discussion notes on this topic:
