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Security bill threat to SA-US relations

Source: by Simon Barber, Mail & Guardian October, 02/10/2015

WASHINGTON — US officials, anxious to repair a troubled "partnership"
with SA, fear a deepening breach in relations if President Jacob Zuma
signs the Private Security Regulation Amendments Bill in its present
form.

This is because of mandates imposed by Congress requiring the US to
vote against International Monetary Fund (IMF) and World Bank loans to
any country found to have expropriated US property without
compensation or arbitration. It would also have to deny bilateral
official finance and guarantees to those countries.

Section 20 of the bill, which is awaiting Mr Zuma`s signature, would
require multinational private security companies to reduce their
shareholding in local subsidiaries to 49% or less, resulting, the
industry fears, in a fire sale of assets at less than fair market
value.

Should the section become law as now written, it would be up to US
government lawyers to decide if it amounted to expropriation.
Unofficially, Obama administration officials share the industry`s view
that it very likely does.

US law states that "the Treasury shall instruct the US executive
director to vote against any use of IMF funds for the benefit of any
country that has, after 1956, nationalised or expropriated US property
without compensation or adequate arbitration unless the funds are
directed to programmes that serve the basic human needs of citizens of
that country".

Similar provisions apply to World Bank loans, as well as to official
bilateral lending and loan guarantees such as those provided by the
Overseas Private Investment Corporation and the Export-Import Bank,
whose operations are currently suspended.

Pending the implementation of reforms agreed on in 2010, but stalled
by the US Congress, the US has by far the largest share of votes on
the boards of both the IMF and the World Bank, at about 16%.

Lack of progress in the reallocation of power in the Bretton Woods
institutions and the United Nations Security Council has become a
major sore point in SA-US relations and has been an important factor
in the Zuma administration`s downgrading of ties with Washington in
favour of a closer partnership with Beijing and Moscow.

SA had to lobby hard to secure US approval of a $3.75bn World Bank
loan for the Medupi and Kusile power stations in 2010. The Obama
administration was under pressure to veto the loan on environmental
grounds.

The US Ex-Im Bank underwrote Transnet`s recent purchase of locomotives
from GE.

An expropriation finding would also render SA ineligible for benefits
under the African Growth and Opportunity Act (Agoa) regardless of the
outcome of the current out-of-cycle review of SA`s compliance with
Agoa`s conditions, which is now being concluded by the office of the
US Trade Representative.

Section 20 aside, the US has no problem with the security bill, seeing
it, in the words of one official, as "a step forward in organising a
very important industry".

The US and European Union had voiced concern about section 20 since
the legislation was introduced in 2013. SA has no World Bank loan
applications pending.

SA`s ambassador to the US, Mninwa Mahlangu, assured the office of the
US Trade Representative in August that Mr Zuma had returned the bill
to Parliament for "reconsideration". But last month, Mr Zuma said the
government was "still processing" it.

Companies that stand to be affected include ADT, Chubb, Securitas and
G4S, Panasonic, Sony, Fedex, Bosch, Honeywell, Motorola and Siemens.

Opposition parties and organisations representing European and
American interests have lobbied Mr Zuma and Parliament not to place
the bill on the statute book in its present form. The private security
industry is worth about R50bn a year, employs 2-million people and
consists of about 12,000 different firms.

An attorney representing some of the players in the industry, Martin
Hood, said a foreign diplomat had told him that "SA is doing its best
to destroy its relationships with its major trading partners".

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