Shot in the foot again

07 October 2015 - 02:02 By Graeme Hosken

A controversial bill aimed at regulating the security industry- punted by the government as necessary for national security, and which will require that 51% control of foreign-owned security companies be transferred into South African hands - could cripple the economy and cost nearly 900000 jobs, analysts warn. They say that if the bill becomes law the economy would sink further, security businesses would close, billions in foreign investment would flee the country and the Private Security Industry Regulator Authority would have to shut down security companies.Hanging over President Jacob Zuma's head as he contemplates enacting the Private Security Industry Regulation Amendment Bill are threats that the US will revoke its support for International Monetary Fund and World Bank infrastructure development loans to South Africa.Also under threat is South Africa's continued preferential access to US markets through the African Growth and Opportunity Act, which allows exports to the US to be free of import duties.Economists and the security industry warn that South Africa risks losing R52-billion in company and income tax, and that the country's gross domestic product could fall by R133-billion a year if the bill were enacted.The warning is contained in a research paper compiled by the Gordon Institute of Business Science (Gibs) and security industry analysts released yesterday.The researchers reviewed previous interviews and surveys involving the affected industries.Central to security industry concerns is a clause in the bill that would compel foreign-owned security companies, and manufacturers and distributors of security related equipment, such as cash-in-transit vehicles, alarm systems and CCTV cameras, to sell a 51% stake in their company to South Africans.A sub-clause allows the police minister to increase the percentage at any time.In March, Police Minister Nathi Nhleko said the rapid growth of the private security industry was a national security threat.This industry, he said, "increasingly gathers intelligence that sometimes can compromise national security".He said the bill would not prohibit foreign involvement in private security companies but would restrict it."In terms of South Africa's commitments under the World Trade Organisation, we may modify our international commitments."Costa Diavastos, executive director of the Security Industry Alliance, said that if the bill were enacted the effect on the man in the street would be almost immediate and would last for years."The regulator could force security companies to stop operating. If companies don't comply with the 51% stake clause, the regulator would have to stop their operations."He said foreign owners would not settle for 49% ownership of their companies."Another clause allows the police minister to change the foreign ownership stake even more. This will eventually lead to 100% expropriation. Its unlikely companies will continue to operate."It will hit a growing industry which reinvests its profits in South Africa.""There is no rationale to the government's argument that the bill is necessary for national security," Diavastos said."We hope, given the time the bill had been on Zuma's desk, that common sense will prevail - but if not we are prepared to take legal action."Gordon Institute of Business Sciences's Roelof Botha said: "The 51% clause is an enemy of South Africa's economy. This bill is bad legislation."In global competitiveness, South Africa ranks 100 out of 140 countries, and in terms of global rankings for burden of government regulation we rank 117 out of 140."He said that, according to the institute's research, the macroeconomic effect of the 51% clause was a R52-billion loss in company and income tax, and GDP falling by R133-billion."On the line are 852000 jobs, and a credit-rating downgrade highly likely."Economist Daniel Silke said the bill was another example of the government's short-sighted ideology, "which is applied erroneously to the free market in an attempt to impose further state controls"."The continued imposition of bureaucratic restrictions can only have detrimental effects on industry."The potential for job and trade losses is huge.The SA Chamber of Commerce and Industry said yesterday that business confidence in South Africa was at its lowest in 22 years...

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