Opinion: Private security as a driver for economic growth

The global private security industry is estimated to have a total value of about US$68 billion. It is also one of the highest employers of labour. In Nigeria, the demand for private security has risen over the last decade, no thanks to the rising tide of insecurity across the country and the consequent strains on government security organisations. The potential for growth in the industry and the positive impact it could have on the nation’s economy is obvious.

Current estimates indicate that there are just over 100,000 operatives employed in private security. To put things in perspective, the UK with about a third of Nigeria’s population (approx. 64 million) has triple the number of active private security operatives (over 350,000). There is clearly some scope for growth. Alongside the on- going police reforms, the Nigerian private security industry has huge potentials to position itself as a vital partner for law enforcement in the country.

The reality however is that the impact of private security effort in Nigeria is limited as the sector is largely informal with many private security businesses operating under the radar. This is effectively robbing the country of huge revenue potentials. It is the direct result of an ineffective regulatory system. A number of adjustments to the current regulatory setup could unlock the growth and economic potentials of the industry.

The industry is currently regulated in accordance with the ‘Private Guard Companies Act’ of 1986. This Act mandates the licensing of all PGCs in Nigeria via a licensing authority. The NSCDC (Nigeria Security and Civil Defence Corps) is the licensing authority and derives its powers from the NSCDC Act No. 2 of 2003 and Amendment Act of 2007. The NSCDC Act is widely available on the Internet. For the purpose of this article I will only discuss the general regulatory scope and how it impacts the industry’s potential to boost economic growth.

The current scope of regulation is limited to only businesses. It is shocking that individuals are not subjected to rigorous residency and criminality checks. How can we be sure that PGCs are not deploying criminals and illegal immigrants to protect the public? Also, focusing on only businesses means that individuals operating outside a corporate body, such as vigilantes, are free to provide security services without being subjected to any form of industry regulation.

Regulatory scope must be activity-driven and industry-wide as opposed to organisation driven. Licensable activities must also be clearly articulated to remove any ambiguity because regulation only makes sense if the activities that are to be controlled are well defined and understood. Individuals should be required by law to wear and display a valid licence card issued by the Authority after passing mandatory checks on their criminal history, mental health, work permits/residential status and relevant licence-linked training qualifications.

A regulatory scope that includes individuals will help to reduce criminality and raise the standard of competence and professionalism across the industry. In the UK, research by FDS International has shown that licensing individuals helps to increase their chances of gaining more responsibility in the future, gives them more ability to do their job and could lead to better pay and conditions in the long term.

The PGC Act does not mandate standardised training and so the quality and extent of training varies widely across private security businesses. In some cases, no training is provided at all to the operatives! One of the objectives of regulating the industry must be to increase and standardise the skills and professionalism of those employed in the Industry. To achieve this, a mandatory standard sector-based training must be required for all private security operatives.

Enforcing this licence condition is only feasible with a regulatory scope that includes individuals. Mandatory licensing for individuals will provide an opportunity for standardised training to be included as pre-requisite for a licence application. This is certainly more effective than the current process that requires the PGCs to provide evidence that all of their employees have undergone the relevant training.

Regulating private security is onerous and quite complex. It should not be just about increasing business overheads in the name of licensing fees or arbitrarily shutting down allegedly non-compliant businesses. It is not meant to impose unnecessary bottlenecks, which become disruptive to industry growth. Regulation is more effective and less disruptive to the economy when it is light-touch and agile. That means regulating only when necessary and doing so in a way that is proportionate to risk. Better regulation promotes efficiency, productivity and value for money.
In the absence of effective regulation, many PGCs will operate without licences and without regards to standards or basic security principles. This means that instead of being an effective partner for the police in the protection of lives and property, they pose significant risks to the public as poorly trained and potentially criminal operatives. There is need for a major shift in the regulatory culture towards one based around the rigorous consideration of risks, a proportionate response to such risks, and a streamlined, more consistent and more effective regulatory system.

The PGC licensing cost is a huge barrier to entry and is antithetical to economic growth. One of the conditions for obtaining a licence is that the prospective PGC must have a minimum share capital of N10 Million. PGCs are grouped into two categories for the purposes of licence fees; category A for companies with over 500 employees and category B for those with less than 500 employees. The NSCDC

charges N1 Million as application fees for category A companies and N800 thousand for category B companies.
There are additional ‘sundry’ levies imposed on the applicants during the licensing process. These fees are excessive and do not in any way reflect the actual effort required to assess a PGC’s application for a licence. It costs less than fifty thousand naira (N50000) to obtain an equivalent licence in South Africa! Regulatory agencies are not profitmaking organisations. The fees should reflect the effort required to assess the suitability of the applicants for a licence.

The assessment process is also riddled with bureaucratic inefficiencies and unnecessary bottlenecks that result in long processing times for a PGC licence. It creates an incentive for PGCs to attempt to circumvent the process and operate illegally, further raising the cost of enforcing compliance across the industry. An expensive licensing regime that prevents start-ups, small businesses and self- employed players from entering the industry is bad for the economy, especially when the unemployment rate is so high and the current administration has made job creation a centrepiece of its economic policy.

Another issue is this bizarre policy of ensuring that foreigners do not operate PGCs in Nigeria. There is no economic justification for this exclusion. If anything, it suggests that foreign investment, which Nigeria is actively soliciting, is not welcome in the country. Anyone legally resident in Nigeria, or in possession of a valid work permit should be allowed to run a PGC as long as they satisfy the relevant licensing conditions.
There is clear evidence that the presence of large international companies in the local industry, especially in a developing country like Nigeria, promotes knowledge transfer, accelerates sector growth, and improves competence and professionalism. The success of the South African private security sector for example, is often attributed to the presence of international PGCs such as Group4Securicor, Chubb and ADT.

In conclusion, regulation does not end with granting a licence to operate. It is only the beginning of the process. A more effective regulatory approach is to define and attach clear conditions against licences granted to both businesses and individuals. The Authority should then actively and consistently monitor and enforce compliance with those licence conditions. The aim must be to help raise and maintain standards of professionalism across the industry and for PGCs to win the trust and confidence of government security agencies as effective partners in law enforcement.

Globally, private security is big business and a massive employer of labour. If properly regulated, the industry can boost the Nigerian economy by creating opportunities for new businesses to enter the market, helping to reduce unemployment and providing further support for government security agencies in fighting crime and protecting lives and property.

Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija

This article was written by Buchi Madu, a UK based management consultant specialising in change management within public sector organisations. He is currently managing the implementation of business readiness strategies at the UK Department for Education in support of the government’s universal ‘academisation’ policy. Buchi spent several years at the UK Security Industry Authority (SIA) implementing a new regulatory regime for private security. He is an associate fellow of the Nigerian Leadership Initiative (NLI) and is passionate about improving public sector efficiency to deliver better public services.

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