State of the Industry 2014

August 26, 2014

4 Security Focus | Vol 32 No 7 2014

The future of South Africa’s private security industry and how it will be regulated, lies in the hands of President Jacob Zuma. As the Private Security Industry Regulation Amendment Bill
awaits the President’s signature, numerous security industry bodies and associations have made strong calls for the controversial bill to be sent back to parliament for review. This is due to the portion of the bill which relates to the limitation placed on foreign-owned private security firms.

According to the Security Industry Alliance (SIA), the R50-billion per year private security industry is one of the largest employers in South Africa (more than two million people) and says that millions of South African citizens rely on the industry for personal and asset protection. If the bill is signed into law, it will force foreign-owned private security firms to sell at least 51 per cent of their companies to South Africans. Some of the more well-known firms affected include ADT, Chubb G4S and Securitas.

Former police minister Nathi Mthethwa seems concerned with the tremendous growth of the private security industry. He told Parliament in February there were more than 445 000 registered security guards, compared with little more than 270 000 armed statutory forces, including the SAPS and SANDF. He said South Africa had the largest private security industry in the world, with approximately 9 000 registered companies.

“The bill aims to regulate foreign ownership and control private security businesses, regulate operations of security firms outside South Africa, provide for accountability and provide a separate database on firearms issued to security service providers,” he said.

“The South African private security industry is increasingly performing functions which used to be the sole preserve of the police. This has a serious influence on the functioning of the criminal justice system as a whole. While it is true that private security does, and can, fill certain vacuums, private security can never replace the public police,” Mr Mthethwa said.

He said the industry was vulnerable to criminal networks, citing the voluntary process in 2008 when 170 728 guards were vetted through the SAPS criminal records centre, 14 729 were flagged as being linked to possible criminal activities. Mr Mthethwa added that foreign ownership needed to be limited because the sheer size of the industry made it a threat to national security.

According to the Private Security Industry Regulatory Authority (PSIRA), it is estimated between 15 000 and 20 000 new members join the private security industry each month, but many operate unlawfully and are not registered with the organisation.

 

Industry outcry

The foreign-ownership limitation has caused an outcry in the industry. The Democratic Alliance police spokesperson, Dianne Kohler Barnard, said while all stakeholders agree on the need for better regulation of the industry, the foreign ownership clause was bizarre. “It will be devastating and will breach global treaties, so we could be tied up in international courts for years,” she added. The Institute for Security Studies (ISS) has also added its voice to the concerns, saying the loss of investment and jobs that will result from a limitation on foreign ownership in the country’s private security industry will be a greater threat to national security than the industry itself.

An ISS critique of the bill by senior researcher Johan Burger and the head of the governance division, Gareth Newham, published in Business Day in April, concluded: “Surely limiting foreign investment and the jobs it may bring, is more of a threat to our national security than the mere foreign ownership of a small number of companies.

“Unfortunately, given the absence of a rational, evidence-based argument to explain why foreign ownership of security companies is a threat to national security, questions now arise as to the real reason behind the controversial clause in the Private Security Industry Regulation Amendment Bill.”

Mr Burger and Mr Newham said there were 445 000 registered, active private security guards in South Africa. “This means private security officials far outnumber the 270 000 public security officers, a number that includes those working for the South African Police Service and the South African National Defence Force. Given the large number of people the private security industry employs, it is important that it should be well regulated.”

SIA chief executive officer Steve Conradie has appealed to President Jacob Zuma not to sign the Private Security Industry Regulation Amendment Bill into law with the 51 per cent clause included. The objection by SIA is supported by the Security Association of South Africa (SASA). Responding to an opinion editorial by Police Minister Nathi Mthethwa, published in Business Day in May, Jenny Reid, managing director of iFacts and immediate past president of SASA, said the bill was not in South Africa’s best interests, as the Minister would like South African citizens to believe.

Speaking on behalf of SASA, she said while the Minister had provided a compelling argument for regulation of the private security industry, he
had missed some critical points, which the private security industry has raised on numerous occasions.

“The private security industry is not opposed to government regulation. In fact, the leading industry associations and their membership companies, including SIA and SASA, have consistently stated they support greater regulation of the private security industry,” she said. “The reason for this is the very core of the private security industry in South Africa is under threat by noncompliant security companies, who continue to operate unabated, posing a significant threat to their clients, the industry as a whole, as well as a threat to national safety and security interests. She added that what the private security industry does take enormous issue with is the clause on foreign ownership. SASA says PSIRA has not yet been able to control the mushrooming of non-compliant/fly-by-night security companies, and yet this proposed legislation now aims to target compliant firms that also just happen to be multi-nationals. The Minister has hit back on the industry’s concern about job losses, saying that there is no evidence to support this.

“The industry would argue that in addition to the threat of disinvestment, the proposed legislation will require such onerous requirements that foreign investors will, understandably, just take their investments elsewhere. We have all seen this happen in some of our other industries before and in the rest of Africa as well, so why should the case be any different here?” says Ms Reid. “We believe that stamping out non-compliance should rather be the immediate and urgent priority of the SAPS and PSIRA, rather than an attempt to eradicate foreign investment in an economy which is already bucking under the pressure of the status quo,” she said.

 

Cost of non-compliance

“In a country where many consumers still view private security services as a grudge purchase, or a token necessity, we’re seeing a significant and alarming number of individuals and companies still selecting those security companies who have submitted tenders at the lowest price,” says Costa Diavastos, national president of SASA. “What these individuals don’t see, are all the associated costs.”

As the regulatory authority for the private security industry, PSIRA is responsible for putting in place statutory minimums and enforcing legislative requirements. According to a section of the PSIRA Act of 2001, any person who contracts a security service that goes against the provisions of the act is guilty of an offence. However, many fly-by-night security companies, who have identified the security industry as a quick and easy way to make money in a crime-ridden country, blatantly ignore the PSIRA act.

“These non-compliant companies save on costs by using untrained, unscreened and unregistered individuals as security officers, who more often than not, are also undocumented foreigners who are desperate for work,” says Mr Diavastos. “These companies do not comply with the law, do not pay minimum wages, or even training costs – and are easily able to quote the lowest price for their services and undercut all the compliant security companies in the tendering process.”

According to independent calculations by PSIRA, based on statutory requirements laid out by the Department of Labour, the average monthly cost of a Grade A security officer working a 12-hour shift is between R10 947, of which R4 077 is the guard’s take-home salary. The balance is made up of statutory requirements, including sick pay and study leave. “To cut costs, non-compliant operators are almost always forced to act illegally,” Mr Diavastos believes. “This means not paying minimum wage. It could also mean using a junior security officer to perform higher grade duties.”

As part of the salary structure are statutory requirements, including compensation for occupational disease or injury, a contribution towards unemployment and a provident fund. “What we have noticed is that many non-compliant security companies will deduct a provident fund contribution from the security officer and will not match this amount or pay it over to fund administrators.”

In order to create a legitimate and functioning security industry, PSIRAcan enforce the law. The costs of injury, non-payment of funds and other infringements, can become the burden of the company that has employed the security provider in the first place. “This is especially an unforeseen consequence if the security officers have been sourced from labour brokers or if you use an independent contractor,” points out Mr Diavastos.

 

PSSPF addresses non-compliance

According to the Private Security Sector Provident Fund (PSSPF), despite it being a statutory and mandatory requirement for every security employer and employees to contribute to the industry provident fund, compliance remains a challenge as a large number of private security companies are not making contributions to the fund, denying compulsory benefits to security employees. The PSSPF is one of the largest defined contribution provident funds on the continent providing more than 200 000 private security employees and their immediate families with benefits on retirement, disability, death and funeral. According to Mziwandile Peter Zibi, principal officer of the PSSPF, the Private Security Provident Fund is legally obliged to track down and ensure all private security companies, unless exempted, are registered as participating employers. The fund will continue with its efforts to deal with non-compliance in the sector which has, over the years, affected beneficiaries who are left destitute.

“In dealing with non-compliance by some of the employers, the fund has adopted multiple strategies including having ongoing discussions with the Financial Services Board (FSB) in putting into effect criminalising noncompliance in line with the new amendments contained in the act,” says Mr Zibi. “This has, so far, yielded positive results as some of the employers are coming forward to honour the debts and determinations issued by the Pension Fund Adjudicator.”

“The fund will take all reasonable steps to ensure compliance by also working together with its various stakeholders to compel defaulting employers to pay contributions in respect of their employees,” he says.

 

Professionalisation of industry

The South African Institute of Security (SAIS) believes professionalisation of the industry must become a priority. According to Dr Barney Delport and Dave Dodge, both members of the Board of Governors of SAIS that represent the security industry at SASSETA, the private security industry is a vital contributor to SASSETA and has representation from a large number of security organisations, including SAIS. SASSETA is the Sector Education and Training Authority that monitors the quality of training and skills development qualifications of individuals
and organisations operating in the safety and security sector.

According to SASSETA, there are approximately 1,6 million private security guards who are either unemployed or inactive. It says this raises a number of questions whether or not the industry should continue training new entrants into the over-saturated market. Recent research conducted to update the SETA’s Sector Skills revealed that the sector needs to concentrate on comprehensive professionalisation of the industry rather than training new entrants into the market.

“Professionalisation of the security industry is also a concern of the Minister of Police. The SETA will, therefore, concentrate on increasing the level of professionalism of the sector by addressing all areas pertaining to registrations, accreditation, collaborating with PSIRA and other relevant stakeholders.”

At the time of going to print, Security Focus was informed that the Security Industry Alliance and associated industry bodies, had won the appeal in the PSIRA fees matter. More details of this
judgement will be provided in the next issue of Security Focus.

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