Business Day this week reported the amendments would restrict foreign ownership of private security companies in the interest of national security. It is unclear what the threat is, or how severe, as this was not explained.
Chapter 13 of the draft Defence Review calls for similar restrictions on the ownership of the local defence industry, for the same reason. While the amendments to the private security act has excited some comment - in a separate editorial the paper called the move “paranoid and insecure” – the plans articulated in the draft Defence Review has not yet attracted public comment. One understands there’s alarm and concern in the industry, much of which is foreign owned or owned by foreigners, but where that is being directed is a good question.
On the Private Security Industry Regulation Authority Act the paper’s editorial writer had the following to say: “While some of the provisions in the Bill make some sense … others are downright bizarre. One of the key objectives is to place limitations on the foreign ownership and control of private security businesses in SA, as well as to regulate the operations of security firms outside SA’s borders. One can only presume that in the eyes of the government, foreign investment in private security is motivated by the desire to execute a coup rather than extract a profit.
“Within the broader context of continuing police and spy wars that have become commonplace, this legislation looks not only obstructive to an effective and necessary sector but also petty and insecure. Perhaps the organs of state security are fearful of a private militia developing under the cloak of private security companies. Some regulation of the private security industry may be advantageous, but it is simply outrageous to pretend that these services, or the involvement of foreigners in the sector, are threats to state security.
Whether one can say the same for foreign ownership in the defence industry is a question readers must ponder and answer for themselves – the Review does not give much insight on this point. Foreign ownership in itself and the conduct of these owners and managers are not beyond criticism. There are many who believe that foreign owners asset strip and have failed to invest in either new technology or skills. Can they prove this? By contrast, is autarky and secrecy viable in the 21st Century? Maybe in the United States, but by a country as small as South Africa? The local military, police and intelligence services, even collectively, are a small market and exports are a must – even North Korea knows this. So, there goes secrecy. Exports mean marketing and disclosure to (potential) clients.
Marketing is expensive, particularly when ten Rand buys little more than one Euro. So government (or was it just then Public Enterprises minister Alec Erwin) part-justified foreign investment in the state-owned Denel as gaining necessary access to the marketing organisations of the global parents. Private industry has done the same. Trouble is many in government and the military who favour this new autarky have, perhaps rightly, gotten noses out of joint when local equipment gets showcased abroad under foreign flags. Some companies have gone further … at least one, based in Midrand, has posed as foreign flagged. This was noticed and caused offence in high circles. Truth be told, it upset in low circles too. I was certainly affronted.
Is this anger fuelling “national security concerns” and should that trump an open market?
Some believe national security is a convenient cover for transferring ownership to favoured connected political elites. Evidence of this is visible elsewhere in the economy, so why not in defence?