G4S, the world’s biggest provider of security services, and rivals including Securitas and Tyco International, face having to relinquish control of their South African units as the government restricts foreign ownership in the industry.
The Private Security Industry Regulation Amendment Bill, which is awaiting President Jacob Zuma’s signature, will require all security firms and manufacturers, importers and distributors of security equipment to be at least 51 percent owned by locals. The government says the measure, which Parliament’s two chambers have passed, is needed to safeguard national security.
“This sends totally the wrong message to foreign investors,” Steve Conradie, the chief executive of the Security Industry Alliance, an industry body whose members include G4S, Securitas and Tyco’s ADT Security, said last week.
“We wrote a note to the president to request him not to sign that bill. We need to wait and see what will happen with that process” before deciding on a court challenge.
The private security industry has mushroomed as the police battle to tackle rampant crime. An average of 2 209 serious felonies, including 45 homicides, were committed daily in the year to March last year, the latest police data show.
About 446 000 registered security guards operate in South Africa, compared with 270 000 police officers and soldiers, according to the government.
Faced with high levels of violent crime, many wealthy and middle-class South Africans have retreated into guarded, gated complexes, ring their homes with electric fences and have contracts with armed response companies.
South Africa was clamping down because of its concern with the size of the industry, the blurring of lines between security companies and private defence businesses and their use in gathering intelligence, Police Minister Nathi Mthethwa said.
“South Africa currently has one of the largest private security industries in the world,” he said in February.
The government needed “to ensure that our domestic legislation protects both our national and security interests”.
Mthethwa’s spokesman, Zweli Mnisi, was not available for comment.
The rules are separate from black economic empowerment laws aimed at giving the black people a bigger stake in the economy to compensate for discrimination during white segregationist rule. Those regulations include requiring mining companies’ local assets to be 26 percent black-owned by the end of this year.
The Security Industry Alliance has dismissed the government’s concerns, saying that less than 10 percent of guards were employed by foreign-owned companies.
“We asked the question what national threat the foreign companies pose and are still waiting for an answer,” Conradie said. The law already required that “you need to be a South African citizen to manage a security company”.
G4S, based in Crawley, England, is the largest foreign-based employer, with 14 302 staff, followed by Switzerland-based Tyco’s ADT unit with 10 516 and Stockholm-based Securitas with 3 110, according to the industry body.
Fidelity Security Services, based in Johannesburg, is the country’s largest security company, with 26 551 workers, followed by Pretoria-based Protea Coin Group, with 17 500.
Anthony Minnaar, the head of Unisa’s security management programme, said his research on foreign-owned security firms showed a number focused exclusively on maximising profits, while failing to act in their clients’ best interests.
The new ownership requirements might “not be a bad thing at all if the companies can somehow deliver better services more cost-effectively”, he said.
The SA Chamber of Commerce and Industry said the inclusion of security equipment manufacturers, importers and distributors under the ambit of the law implied that multinational electronic suppliers such as Apple, Sony and Panasonic would have to sell 51 percent of their businesses to locals.
“The property rights infringement and vague scope of application cannot be said to be rationally linked to the goal of improving the regulation of South Africa’s security industry,” Neren Rau, the chamber’s chief executive, said last week.