A law requiring foreign-owned security companies to sell at least 51% of their South African businesses to South Africans could lead to the country being suspended from African Growth and Opportunity (Agoa) participation.

Agoa is a piece of US legislation which aims to economically assist sub-Saharan Africa and to improve economic relations between the US and the region.

The Security Industry Association of America (SIA) on Wednesday‚ however‚ welcomed the addition of a new provision to Agoa which establishes “an out-of-cycle review mechanism to ensure compliance with fair trade practices required of Sub-Saharan countries receiving export preferences under Agoa”.

The Private Security Industry Regulation Amendment Act (PSIRA) under consideration by the South African government contains a “forced localisation” measure‚ the SIA said.

A provision of the act‚ “inserted at the last minute during parliamentary consideration”‚ requires foreign-owned security companies‚ including technology firms‚ to sell at least 51% of their South African operations to local concerns.

The new Agoa review mechanism “allows firms to petition the US Trade Representative (USTR) to investigate actions they believe may violate Agoa eligibility criteria”‚ said the SIA.

“If found in violation‚ the USTR would be authorised to limit benefits or suspend the country from Agoa participation.

“Additionally‚ the bill singles out a country for immediate review‚ requiring South Africa to undergo a six-month review beginning within 30 days of enactment.”

Prior to the new addition‚ such a review could only occur at the end of Agoa’s five-year cycle‚ making it difficult to hold beneficiaries accountable to their commitments‚ the SIA explained.

The SIA’s director of government relations‚ Jake Parker‚ said it is hoped that President Jacob Zuma will heed those in the industry who oppose the foreign ownership limitation clause “and send the PSIRA Act back to Parliament for the removal of the offending section on expropriation”.

“If the South African Parliament does not remove the discriminatory clause from the PSIRA‚ it is highly likely such an issue would be raised as a matter of concern during the South Africa review required under the Agoa reauthorisation moving through Congress‚” Parker said.

SIA said it hopes the US House of Representatives will act expeditiously on Agoa reauthorisation.

It is important to note that the out-of-cycle review mechanism is not an additional eligibility requirement‚ but rather a provision to ensure compliance with Agoa‚ Parker concluded.