Holding South Africa Responsible for Potential Trade Violations

Security Industry Association (SIA)

The Security Industry Association (SIA) recently had the opportunity to participate in an out-of-cycle review process for South Africa’s participation in the African Growth and Opportunity Act (AGOA) in response to concerns about the country’s compliance with provisions of the law.

SIA believes that a pending South African law which will restrict foreign ownership of security firms operating in South Africa to a minority share, creating a significant barrier to trade in violation of eligibility criteria set out in AGOA Section 104.

The legislation, which is currently before the president of South Africa, would amend the Private Security Industry Regulation Act (PSIRA). Section 20 of the amendment bill provides that foreign-owned private security firms, including companies that supply, manufacture, install and distribute equipment to the private security industry, will be forced to sell at least 51 percent of their South African businesses to South Africans, in what is often referred to as a “forced localization” measure.

Specifically, AGOA requires eligible countries to provide evidence that they are meeting, or attempting to meet, the Act’s eligibility requirements, including “the elimination of barriers to United States trade and investment, including… the provision of national treatment and measures to create an environment conducive to domestic and foreign investment.”

As a signatory to the General Agreement on Trade in Services (GATS) treaty, South Africa is also committed to the “nondiscrimination” principle in international trade. If the restrictions under Section 20 are enacted, it would violate Article XVI (2f) of GATS, which prohibits a “limitation on the participation of foreign equity capital in terms of maximum percentage limit on foreign shareholding.”

It is quite clear that enactment of this provision would result in the erection of a substantial barrier to trade contrary to Section 104 of AGOA.

We presented these concerns and others to the U.S. Trade Representative (USTR) Trade Policy Staff Committee on August 7.

Questions or comments on this issue?

Contact Jake Parker at jparker@securityindustry.org.