PRESENTATION OF THE PROPOSED SECURITY INDUSTRY REGULATION BILL, 2001 by Francois Slabbert Manager: Legislation and Policy Development 02 May 2001

INTRODUCTORY OBSERVATION  To our understanding certain operations, operational divisions and personnel of Telkom are required to comply with specific provisions of the Bill, which in terms of its objects is meant to apply to the private security, private investigations and related industries only.

BUSINESS UNITS POTENTIALLY EFFECTED BY THE BILL  The following in-house operational units, functionaries and support personnel of Telkom are potentially effected by the Bill:  its in-house security and investigations section,  its market research section,  its market intelligence section,  its mergers and acquisitions section,

 its credit control section,  its collections division,  its personnel division,  its risk management section, and  its information technology (IT) security division.

 The aforementioned functional units, functionaries and support personnel will fall under the jurisdiction of and be regulated or prescribed to by inter alia: ADDITIONAL REGULATIONS FOR REGULATED INDUSTRIES

 the Security Industries Regulations Act;  regulations promulgated pursuant thereto;  the Minister of Safety and Security;  the Security Industry Regulatory Authority;  the Security Officers Board; and  the code of conduct for security service providers.

REGISTRATION AS SECURITY SERVICE PROVIDER  Telkom and other non-security entities might arguably be obliged either to:  register as security service provider with the Security Industry Regulatory Authority, or  if unable to comply with the qualifying registration criteria or a failure to obtain exemption from the Minister close down its business investigations, intelligence and associated activities.

OBJECT OF THE BILL  The sole stated purpose of the Bill is "To provide for the regulation of the security industry; for that purpose to establish a regulatory authority; and to provide for mattes connected therewith".

MOTIVATION FOR THE EXCLUSION OF NON-SECURITY INDUSTRIES FROM THE APPLICATION OF THE BILL  Telkom submits that as a public company -duly incorporated in terms of the Companies Act of 1973 with as its principle object the rendering telecommunications services- it should be exonerated in all of its capacities from compliance with any of the provisions of the Bill.

 It is submitted that only those persons or entities that have as their principal business objective the rendition of security or associated services do in fact belong to the security industry or constitutes a security business within the meaning of the object of the Bill.

PROVISIONS THAT MAY IMPACT ON TELKOM'S OPERATIONAL AND BUSINESS INTERESTS  The definitions and other provisions hereafter listed probably has the cumulative effect of making the Security Industry Regulation Bill applicable on Telkom's management, employees, activities, operations, business associations and activities to a greater or lesser extent; the relevant provisions being:

 the definition of "code of conduct"  the definition of "private Investigator"  the definition of "security equipment"  the definition of "security industry"  the definition of "security officer"  the definition of "security service"  the definition of "security service provider"

 the definition of "the Act"  section 2 of the Bill  section 20 of the Bill, and  section 28 of the Bill  These provisions, are potentially onerous, disruptive, and harmful to Telkom's business and operational interests, and will more fully be dealt with hereafter.

The Implicit Distinction between "Security Service Provider" and "Security Business"  Persons "… using …[their] … employees to protect or safeguard merely …[their] … own property and other interests, or persons or property on the premises or under the control of such person …" are excluded from the definition of "security business" but apparently not from the definition of "security service" or of "security service provider".

 Although the insertion of the phrase "for remuneration or reward" in relation to "security service provider" may have the effect of excluding Telkom in certain instances, it does not have a similar effect on its security investigations and intelligence personnel.

 The obligation to register with the Security Industries Authority and compliance with the industry code, for instance, will apparently apply to Telkom equally if is binding on members of its staff.

 The definition in the Bill of "private investigator" includes most of the activities normally performed by Telkom's security and investigations, IT security, business intelligence and many other sections also. This definition contained in section 1 of the Bill effectively transforms Telkom into a private investigator with all the attendant obligations of the Bill being imposed and binding on it. The Definition of "Private Investigator"

The Definitions of "Security Officer", "Security Service" and "Security Industry"  A "security officer" is defined as someone who is employed by another and performs for remuneration one or more security services. The definition includes many of Telkom's employees who render "security services" aimed at protecting company property, particularly in the form of incorporeal property such as business interests, but also the installation and servicing of "security equipment" and the monitoring of signals or transmissions from electronic security equipment. We have already noted that in terms of the Bill these personnel, as well as their supervisors and managers are all regarded as security service providers in their own right and therefore subject to all the provisions of the Bill relating to security service providers.

CONCLUSIONS  Whilst it has undoubtedly become imperative for the security and private investigation services industries to be regulated, the introduction of measures aimed at achieving that end should be contained within the confines of its original objectives and to the security industry in particular.

 Within the modern competitive business environment the services of efficient investigations, security and intelligence functionaries within commercial companies have become more than just a convenience. Businesses have come to rely on these functions to formulate policies and strategies on which continued competitiveness and profitability, and even its very existence depends.

 In that sense and in that environment it is extremely undesirable for either the operations themselves or for the staff performing those functions to be subject to undue regulation, disruption, scrutiny or interrogation. Because market forces and market movements are so volatile, timing is often vital to the effect and worth of the performance of an act or of the conclusion of a transaction or listing so that and any untimely interference or stoppage could amount to an effective derailment.

RECOMMENDATIONS  In view of the aforementioned considerations it is submitted that, notwithstanding any contrary provision or interpretation of the Bill, all in-house security, investigations and intelligence functions performed by commercial companies -that do not have as their principal business the provision of security or private investigation services to third parties- be expressly excluded from the application of the Bill.

 It is further submitted that the definition of "private investigator" in section 1 of the Bill be amended by the insertion of the following words at the end of the section: "but shall exclude any business intelligence operations which a company may undertake in the course and scope of its normal and reasonable endeavours to safeguard its security, strategic, operational, and business interests and that of its holding company or subsidiaries."

Thank you!