The proposed Private Security Industry Regulation Amendment Bill provides for the regulation of ownership and control of a business operating as a security services provider. According to the Bill, a security business will only be allowed to register, which is a requirement to conduct the business as a security provider, ?if at least 51 percent of the ownership and control is exercised by South African citizens?.

The Bill does give the Minister some discretion and allows the Minister to prescribe a different percentage ownership and control in respect of different categories of security business such as guarding, response security, assets in transit, importers and distributors of monitoring devices and security advisors. As the Bill currently stands, all current registered security businesses will have 5 years from the date of commencement of the Bill to comply with the ownership requirements. Of course new entrants will have to comply with the ownership requirement.

Businesses that are affected may of course pursue various avenues in order to safeguard their issues such as attending the Parliamentary Portfolio Committee meeting to make submissions and approaching the courts for relief. No doubt numerous arguments may be advanced as to why the amendment should or should not be allowed. Few may consider that South Africa is not allowed to implement the proposed changes to the Private Security Industry Regulation Act as far as the limitation on foreign ownership is concerned.

This is due to the fact that it is contrary to South Africa's international obligations at the World Trade Organisation (WTO). South Africa is a founding member of the WTO and a signatory to the General Agreement on Trade in Services (GATS). The GATS allows member countries to make commitments in services sectors. These commitments are commitments to liberalise the services sectors, i.e. allowing foreigners to provide their services in South Africa. However the GATS also allows a member country to maintain restrictions on services being provided by foreigners. As such South Africa in theory would be able to introduce a measure whereby foreign ownership in services sectors is limited. However this is only allowed if a member country made that specific commitment in its schedule of commitments. Is this the case for South Africa?

The South African government is in fact prohibited from imposing a 49% ceiling on foreign ownership in the security businesses. This is due to the fact that South Africa committed to its international trading partners at the WTO that it would not impose such restrictions on foreigners in providing security services. Any attempts to amend the legislation to impose such a limitation will be a violation of South Africa's WTO commitments. South Africa's trading partners could thus approach the WTO dispute settlement body to resolve any such dispute, whilst foreigners would be able to rely on bilateral investment treaties to protect their interests.

Rian Geldenhuys
© Trade Law Chambers 2012