Security related activities & business abroad: Involvement of South African companies: Committee Workshop

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International Relations

07 March 2012
Chairperson: Mr T Magama (ANC)
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Meeting Summary

The South African Institute of International Affairs (SAIIA) and Institute for Global Dialogue (IGD) briefed the Committee in its workshop on the involvement of South African companies and personnel in security-related activities and business abroad. There were negative reports about South African companies doing business on the Continent, and complaints that many were not complying with the law in their host countries. This issue was first brought to the attention of the Committee in 2010, when there was some discussion around the perceptions of South African businesses in foreign countries. The Committee had agreed that it would be useful to enact a code of conduct, but there had been no agreement on exactly what form this should take, or who should bear responsibility for it.

SAIIA noted that South Africa was one of the few countries that had an advanced legislative code to control the activities of Private Security Companies (PSCs), arising from the time of demobilisation of soldiers from the apartheid armed forces. Any response by South Africa to mercenary and PSC activities should take into account the potentially negative impact that PSC activities may have on the policy of the country and its international image. There should be an evaluation of the current system, which allowed PSCs to operate outside South Africa. Most other states confronted with this issue had opted to develop stricter regulatory regimes around their activities. A number of issues around the activities and decisions of military and security bodies would need to be considered. Members asked about the role of embassies in the countries where PSCs operated, whether any companies were providing protection for foreign mercenaries in South Africa, how many South African companies and people were involved in security activities over the world, and whether there were any monitoring mechanisms. The possible conflict between restrictive legislation and the Constitution was discussed, and it was noted that although there was little media coverage, South Africans were certainly operating. Members noted that the current legislation would need review.

SAIIA gave another presentation on the use of Codes, and the options available, and suggested that there had to be more comprehensive interaction between government and business, and this should include Parliament, organised labour, and civil society. Business should communicate more about its approach to development, especially success stories. The advantages and possible disadvantages of Codes were outlined, as well as the principles applicable to businesses operating abroad. Existing information on Codes should be consolidated. Members asked how the recommended Codes should be applied, asked if there was information on which companies performed well and poorly abroad, asked how relationships in Nedlac could be improved and asked how contradictions between host country and South African laws could be addressed.

The Institute for Global Dialogue highlighted the lack of real dialogue between government and business sector, commenting that business was perceived as too aloof, and pursuing a different agenda, whereas business mistrusted government. It recommended that, prior to drawing any Code, South Africa ha to resolve on a balance between political and economic objectives. It must also think broadly about foreign policy and how to move forward. South Africa should look at complementary measures, and to focus on building compliance and regulatory mechanisms. Three options were outlined: either a Code, a Charter or to enhance existing regulations. Perceptions about South Africa, both internally and on the Continent, also had to be addressed. Members agreed that perceptions could be dangerous, and commented that South Africa would have to move quickly to establish a footprint on the Continent, and think laterally on how to communicate and use other tools of diplomacy. They asked if the nature of South Africa’s political settlement was problematic, and noted the need to debate even unpopular issues.

Meeting report

Workshop: involvement of South African companies in security-related activities and business abroad
The Chairperson opened the workshop by giving a background to the issues. He noted that in 2010 this Committee had met to discuss conduct of South African companies and personnel operating abroad. Although the Presidency had released plans on economic policy to ensure growth and building partnership across the globe, some of the reports about the conduct of South African companies and personnel were negative, especially in Africa. There were perceptions that South Africa was orchestrating plans to overthrow some states, and there were serious concerns about some South African companies failing to comply with legal issues in foreign countries. The Committee decided to look at this matter, examine the reasons behind the perceptions, and deal with them. It was recognised that the dealings of South African businesses in foreign countries should be complementary to South African foreign policies.

The Committee supported the idea of establishing a code of conduct (Code), but noted that it should not impede trade and business. This Code should rather stipulate compliance with fair labour practices, uphold South African values and insist upon respect for the laws of other countries. Issues including image, paramilitary and mercenaries’ operations should be covered. It was believed that the enactment of such a Code would enhance business relations between South Africa and host countries, and help economic diplomacy by supporting the tools that enabled business with foreign countries. One issue that was not resolved was a consideration of who should be in charge of the Code, whether it should be business or government, and whether there should be a self-regulatory body or regional protocol.

South African Institute of International Affairs briefing
Policy challenges
Mr Petrus De Kock, Senior Researcher, South African Institute of International Affairs (SAIIA), focused his presentation on the policy challenges facing South Africa. He South African id that South Africa and the United States of America (US) were the only countries in the world that had domestic legislation aiming to control Private Security Company (PSC) activity. PSC activities had, in the past, undermined the foreign policy human rights principles of South Africa. For example, there were allegations in 2011 that South African PSCs were hired by Muamar Gaddafi, with another rumour also being circulated that South African PSCs had fought on or supported the cause of the rebels. This did a lot of damage to the image of South Africa in the African Union and to its role of mediating in the conflict. The net result of such reports was that it eroded the vocal opposition of South Africa to the no-fly zone imposed by NATO.

Mr De Kock noted that PSCs may be contracted for operational deployments and command services in conflicts, training, advisory, and intelligence services, or for counter-insurgency operations, or for non-lethal security and operational support functions. In cases where PSCs were used in conflict, the International Humanitarian Law (IHL) did not make provision for them, whether they were contracted by state or non-state actors. This left PSCs in a no-man’s land. PSCs were often contracted by governments who did not want to risk regular military personnel or reputation in domestic or international operations.

South Africa had one of the most advanced legislative codes in the world aimed at controlling PSC activities. This was largely as a result of its history and the demobilisation of soldiers from the apartheid armed forces. For instance, the Executive Outcomes was initially created by former 32 Battalion Officers and staffed with soldiers from its units. Although the international humanitarian laws had not been able to criminalise mercenary activities, PSCs could be held accountable in cases where they might commit war crimes.

Mr De Kock stressed that this was an indication that the response of the South African government to mercenary and PSC activities had to bear in mind the potential negative impact PSC that activities might have on South African policy and international image. Government would also have to evaluate the current system that granted approval to PSCs to act outside the borders. Most states confronted with this issue had opted not to outlaw PSC and mercenary activities, but rather to develop stricter regulatory regimes to monitor and prevent such activities. It may be necessary to interrogate the extent to which the National Conventional Arms Control Coordinating Committee (NCACC) decisions on foreign military assistance were informed by the Department of International Relations and Cooperation (DIRCO), South African diplomatic activities, the South African secret service and domestic intelligence operations.

Mr De Kock noted that any decisions whether to allow PSCs to act in specific arenas had to be assessed against the backdrop of ongoing South African diplomatic, economic and other engagements in those countries where PSCs applied to render services. This may help to prevent unnecessary embarrassment or negative impacts on South African foreign policy.

Discussion
Ms W Newhoudt-Druchen (ANC) asked about the role of embassies in those countries where there were PSC activities. She wondered if any South African PSCs were involved in training child soldiers. She further enquired if there were any companies who were presently providing protection for mercenaries hiding in South Africa.

Dr de Kock explained that the role of embassies was to monitor the country and alert its government on operational functions. He noted that child soldiers were linked to rebel forces as they were often recruited to cook food and assist troops in various other capacities. He noted that it was the duty of the Department of Home Affairs to investigate any mercenaries who were hiding in South Africa, and who applied for political asylum.

Mr B Elof (DA) wanted to know about the number of South African companies and people involved in security activities all over the world. He asked if there was a monitoring mechanism in place when a South African company was operating in another country.

Mr de Kock said that there were a number of people and companies that had been identified, but it was difficult to ascertain for whom they were working, as this information was not released. The actual number was also unknown. There was monitoring of this, at an unofficial level. It was possible to reveal some of the details around monitoring if research was done in the security sector.

Mr I Davidson (DA) enquired what legislation South African had around prohibiting mercenaries and if it interfered with the operations of PSCs.

Dr de Kock answered that the main issue was how to regulate; any policy had to recognise the constitutional rights to work.

Mr E Sulliman (ANC) commented that there was little in the media about the illegal activities of the South African PSCs in foreign countries.

Dr de Kock explained that although they may not receive much media coverage, there were people identified in Iran and some other places, who were from South Africa.

The Chairperson suggested that it would be necessary to review the current legislation on these matter and to identify particular areas of focus.

Mr de Kock said that it was important to look at the chain of command and resources used.

Codes
Ms Catherine Grant, Programme Head of Economic Policy: South African IIA, stated that codes provided direction to good and acceptable conduct, especially on business-to-state relations or state-to-state relations. Codes were established by business, an industry or sector, professional bodies, global business, government, and international organisations, and by anyone ranging from blogger to law enforcement agencies. The necessity for establishment of codes arose as a result of globalisation and associated growth in competition, the increasing size of companies and their influence, and the competition of companies to attract talent, as well as the growth of global civil society activism.

Codes could work because they facilitated the flow of accurate information, secured improved performance, built credibility, and established trust. It was also believed that they could contribute to a better understanding of the private sector across governments, could inform more efficient allocation of resources across economies and could establish constant dialogue between private investors and public officials. However, she also noted that codes had the possibility of impeding honest analysis and disclosure, risk return analyses, accountability, and future casting.

Ms Grant gave examples of some of the existing codes of conduct that governed South African companies.  These included international codes, such as the International Labour Organisation (ILO) Convention, UN Global Compact, and Universal Declaration of Human Rights. An example of a regional code would be the Southern African Development Community (SADC) Social Charter, and New Economic Partnership for Africa’s Development (NEPAD) Business Foundation Covenants.

Some common principles applied to codes. Firstly, they must comply with local law and regulations. They should support anti-corruption practices, and local procurement of supplies. Due diligence exercises must be carried out. Finally, they were to adhere to labour standards.

There was a requirement that any guidelines to be developed for businesses in South Africa must focus on South African  businesses operating in the rest of the African continent. They should recognise a greater cooperation between the South African  government and private sector. They should cover corporate governance and corporate social responsibility. They should aim to apply South African  regulatory standards in the rest of the Continent. They should be voluntary and be adopted by business organisations, and compel South African embassies to monitor compliance.

She recommended that there should be a more comprehensive interaction between government and business, and this should include Parliament, organised labour, and civil society. Business should communicate better about approaches to development, and especially publicise the success stories. The National Economic Development and Labour Council (NEDLAC) had undertaken a study on perceptions about South African companies on the Continent. This was seen as a good start, and the research was long overdue.

Finally, Ms Grant recommended that there should be a consolidation of information on existing codes and compliance by South African companies. There was a need to upscale the skills of government officials so that there was a better understanding of the interests of the private sector, especially on economic diplomacy. She noted that SAIIA had trained 32 graduates to be economic diplomats, but they lacked training or background in economics.

Discussion
Ms L Jacobus (ANC) commented that SAIIA had not given any illustration of how the recommended Codes should be applied. She wondered if there was information available on companies who had behaved well and poorly when operating abroad.

Ms Grant explained that information was available on who signed the codes and the reasons for this. She could provide it to the Committee. The companies signing codes were from different sectors. Standard Bank was one, but most of the other companies were listed on the Johannesburg Stock Exchange (JSE). In regard to the behaviour of companies abroad, she noted that it was quite difficult either to assess the numbers or to specify which of those companies had behaved well or poorly. The Fridge Study by NEDLAC was a good initiative, since it was a qualitative study that would identify good and poor business practices.

Ms Jacobus asked what could be done to improve relations with NEDLAC.

Ms Grant said that one of the problems was that NEDLAC did not have sufficient space for interaction between government and business, as it was very formalised. Whilst she felt that it had a role to play, other institutions were also needed to ease matters in that space. NEDLAC tended to be more effective when there was draft legislation being worked upon.

The Chairperson commented there were various codes in place and at one stage it was felt that there was no need for new codes. However, it was now apparent that some of the codes were not sufficiently applicable to all situations and that it was not enough to expect companies merely to adhere to them.

Ms Grant said that the problem was that the signature of the codes was voluntary, and the Codes were not legally binding. Although there were laws in place, people continued to break them, and it was the enforcement of compliance that could be improved upon. It was only now that the Broad Based Black Economic Empowerment codes were dealing with good corporate governance issues and recognising the need for strict adherence to codes.

The Chairperson asked what SAIIA was proposing to navigate the contradiction between applicability of the law between the host country and domestic law.

Ms Grant noted that the main contradictions in regard to operations in a foreign company, and conflicts between host country and domestic law, arose through competitiveness and the paying of low cost wages. Some retailers had agreed to pay the South African minimum wage as it would apply in South Africa, to the workers they employed in neighbouring states, but this was done voluntarily. It was important for the country to continually question its values and principles. Some of the countries where South African companies operated were poor, and there was a need to ask whether South Africa could assist them to improve their regulatory environment, which would, in the longer term, improve South Africa as well. It was time to start discussing and debating the BRICS code and set own standards, and this was one possibility that could be pursued.

Institute for Global Dialogue (IGD) briefing
Mr Siphamandla Zondi, Director, Institute for Global Dialogue, highlighted some possible alternatives that could guide South Africa. He noted that any options on how South Africa should manage its business expansion should be based on the foreign policy guidelines of the country. The drawing of a Code must be premised on South Africa having already taken a resolution on how to find a balance between political and economic objectives, which were broadly neo-liberal. He pointed out that in most instances, the two objectives were not harmonised.

Mr Zondi suggested that South Africa needed to think broadly about its foreign policy and how to move forward. It should ask what had been the main drivers over the past 17 years and how to move forward. South Africa could not afford to maintain a global strategy based on luck, as the prestige of the country would dissipate. Instead, it had to take decisions on whether there was a need to build its currency or soft power (iconography). Because soft power dissipated over time, the country then needed to have an economic diplomacy strategy to avoid unintended consequences, because not every business was honest.

Domestically, there was no consensus in South Africa as to how to manage a Code, and the country was still divided, with no lines having been established where citizens could agree and disagree. He noted that there had been a collapse of true dialogue between government and the business sector. NEDLAC had become a mere “talk-shop”, and there was mistrust between government and business. Business was seen as aloof. There was also the issue that “white business” was seen as opposing “black government”, and government tended to view “white business” as an extension of white colonialism.

Mr Zondi suggested that, for these reasons, the country needed to look at complementary measures that were continental and international. Regionally, the focus would be on compliance and building of regulatory mechanisms. At national level there were three options. The first would be to focus on binding regulations, similar to the King Codes, although this would add regulatory burdens to business. The second option was to follow the lines of a Charter, to manage expectations between government and business, which could be organic. The third option was to enhance existing regulations.

Mr Zondi finally emphasised that the country needed to find a formula to address perceptions about South Africa, both internally and on the continent. There should be consensus on this, and better leadership across the board.

Discussion
Mr Elof commented that perceptions were dangerous. If a South African company failed to operate on the Continent, then it was assumed that all of South Africa was bad. South Africa was, unfortunately, already late in penetrating the African continent markets and China had moved in quickly. If South Africa wanted to export to India and Europe, it would face difficulties because the import taxes were at around 60% and South Africa tended to be a net importer rather than exporter.

Dr Zondi explained that perceptions could be addressed though marketing or public diplomacy. South Africa did not do well on public diplomacy because it did not communicate well. He noted that if government was unable to communicate well with the South African middle class, then it stood little chance of communicating with the rest of the Continent. DIRCO has not learned to use the tools of diplomacy fully. For example, South Africa had students from 42 countries, but DIRCO was not using them as brand ambassadors. South Africa was only used to using the State to State diplomacy, but more attention had to be paid to where South Africa wanted to be placed in the world, and how to get there. China and Brazil have indeed massed on the Continent and were aggressive in capturing the African market, because there was greater consensus between their governments and business.

Ms Jacobus asked Dr Zondi to share with the Committee his experience of South African companies outside the borders.

Dr Zondi indicated that the South African business sector had to think smartly about how it intended to do business in the rest of the Continent. It needed to think of reputational risks, and do something to mitigate them. He noted that perceptions were not generated by good, but by bad business practices. South African businesses had a mentality of assuming that they were doing well, but they should think of the contribution they wanted to make to the Continent, not only how much profit they could extract.

Mr Elof commented that Brazil was so strong because it had a strong Agriculture Structure, where research was constantly produced. South Africa could learn from this.

Dr Zondi agreed with Mr Elof, noting that the Brazilian government had overcome the impact of colonial power. Brazilians had dedicated a lot of resources and energy to ending poverty. In South Africa, the business sector had not done enough to address the wrongs of the past. China had taken 400 million people out of poverty, but in South Africa, business was reluctant to participate in poverty reduction and eliminating the inequalities of the past. Government needed business to address these issues, for a failure to do so would result in apartheid’s legacy remaining.

Ms Jacobus asked if the nature of South Africa’s political settlement was problematic.

Dr Zondi stated that nation building was not a five-year, but a 50-year process. It was necessary to debate issues that were not popular, because there had not yet been consensus on what South Africa actually wanted to achieve. There had been a shift away from nation building to implementation of policies.

The Chairperson commented that the Department of Trade and Industry was running initiatives to look at the conduct of South African businesses on the Continent.

The workshop was adjourned.


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