Correctional Centre Public Private Partnerships (PPP): briefing by DCS & Mangaung & Kutama Sinthumule correctional centres

Public Accounts (SCOPA)

12 October 2009
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Meeting Summary

The Portfolio Committee on Correctional Services met jointly with the Standing Committee on Public Accounts (SCOPA) to hear briefings from the Department of Correctional Services, G4S Care and Justice Services, and South African Custodial Services on the operation and management of the Public Private Partnership correctional centres - Mangaung Correctional Centre, near Bloemfontein, opened in 2001, and Kutama Sinthumule Correctional Centre, in Limpopo, opened in 2002. The meeting's objective was to determine whether or not the Partnerships, as an extension of the Department, represented money well spent. The Standing Committee on Public Accounts had not been satisfied with its previous discussions with the Department on the Partnerships.

The rationale for the Public Private Partnership initiative was to improve on the cost effectiveness of the correctional system by making additional accommodation available more quickly and flexibly than would otherwise be possible. The Department vouched that it was managing adequately challenges such as the reclassification of inmates, which appeared to be a particular problem currently, and that the Mangaung and Kutama Sinthumule operations had gone well from the beginning. The Public Private Partnership partners described their operations. The Mangaung Correctional Centre afforded inmates an empowering environment including an onsite hospital and dental surgery, a shoe factory, a bakery, school and library. As many as 31 different faiths were accommodated. Extensive efforts were made to rehabilitate the 2 928 prisoners, and mother tongue education to grades 11 or 12 was provided free of charge. Vocational education and community outreach programmes were also offered. Kutama Sinthumule Correctional Centre, which also provided a wide range of services to its 3 024 inmates, offering a structured day programme of educational and work activities for a total of 30 hours per week per inmate, was awarded the International Standards Organisation 9001 certification in August 2003. There had been no cost variations from the original project.

Members’ concerns included reported outbreaks of violence, whether rehabilitation was cost-effective for prisoners serving life sentences, reclassification of inmates, measures to prevent smuggling of dagga into the Correctional Centres, redress for victims of rape and punishment of perpetrators, activities of gangsters, security, the composition of the inmate population, availability of vocational training for agriculture, supporting local agriculture by procuring food from neighbouring emerging farmers, alternatives to Eskom, water supply, and preventing escapes. Responses were not entirely to Members’ satisfaction. Of especial concern were financial and governance matters. Members experienced difficulty in obtaining clear answers to all their questions.

It was therefore agreed that copies of the contracts between the contracting entities and the Department be provided to the Committees for scrutiny. Also written responses to outstanding questions were to be submitted in writing within seven days. These included the names of shareholding members of the contracting entities, a response to the Standing Committee on Public Accounts' resolution on a cost benefit analysis, and a definitive list from the Department of its officials who allegedly resigned to join the contracting entities in an exercise described as 'javelin throwing'.

Meeting report

Co-chairperson Mr V Smith (ANC) welcomed delegates from the National Treasury, Members of the Standing Committee on Public Accounts (the Standing Committee), Portfolio Committee on Correctional Services (the Committee), the Department of Correctional Services (DCS) and management of the two Public Private Partnerships - G4S Care and Justice Services [Mangaung Correctional Centre], and South African Custodial Services (SACS) [Kutama Sinthumule Correctional Centre]; he asked delegates to combine their introductions with their presentations.

Mr Smith said that the objective of the meeting was to ensure that the two Public Private Partnerships (PPPs) as an extension of the DCS were giving value for money. The cost to the Department of the PPPs was in excess of R670 million in the previous year. 'We want you to convince us that that is money well spent.' He emphasised that the Committee was very serious about service delivery and controlling use of public funds. He would be disappointed if Members of Parliament did not interrogate expenditure in detail. He hoped that there were present from the Department individuals who would be able to answer questions about the day-to-day administration of the facilities under discussion.

Members of Parliament had already had the opportunity to read the documents. Mr Smith therefore emphasised that the presentations should be brief, since the discussion, in which he invited the representatives from the National Treasury to participate, would be of greater interest.

Department of Correctional Services briefing on Public Private Partnerships (PPP
Mr Joe Maako, DCS Director, Contract Management
, who was the overseer of the management of the two projects, indicated the original rationale for the projects. The DCS's relationship with the two PPP partners dated from 2001. The rationale for the PPP initiative was to improve on the cost effectiveness of the correctional system by making additional accommodation available more quickly and flexibly than would otherwise be possible. The fundamental principles of the relationship were value for money and affordability. The duration of the contract was 25 years. The parties were the Republic of South Africa and Bloemfontein Correctional Contracts (Pty) Ltd in the case of Mangaung PPP Centre, and the Republic of South Africa and South African Custodial Services (Pty) Ltd in the case of the Kutama-Sinthumule Centre (slides 5 and 6). Shareholders were indicated on the right-hand side of the two slides, with lenders on the left. The fixed fee was for 15 years only. The variable fee was for the duration of the contract. The scope of operations was mentioned in Schedules A, B, C and D of the contract. Schedules A, B and C detailed the construction, the equipment and the maintenance of the facility; Schedule D detailed the operational specifications, including goals such as the safe custody of inmates, maintaining order, control, discipline and safe environment, and providing decent conditions for inmates. All these specifications were scrutinised when the DCS monitored the contract on a daily basis. The risk profile was described. It was the onus of the DCS to ensure that every bed was occupied on a daily basis otherwise there would be no need to pay the contractors on a monthly basis. The DCS ensured that there was always an offender, from a neighbouring prison, available to replace any prisoner who transferred from the facility or who died to make sure that the per capita cost could be justified. The management structure of the Directorate of Contract Management was described. Mr Maako's most important deputy was the Deputy Director of Contract Compliance. At both facilities there was a DCS Controller and four officials to monitor on a daily basis. There was also a supervisory committee. There was also an inspectorate as an overseeing body. The Auditor-General from time to time conducted audits. The judicial inspectorate had inspectors on site. Monitoring was carried out firstly by the DCS Controller and his staff. The Directorate of Contract Management played a similar role but also had an advisory role to play. The budget was described. Challenges such as reclassification of inmates, which appeared to be a particular problem currently, and hunger strikes were described. Inmates were required to be reclassified from time to time, since the two facilities were maximum security prisons, and reclassification was intended to enable some prisoners to be reclassified as medium security. The DCS thought that it was managing the challenge adequately. Also many offenders asked for transfers. Despite these challenges, Mr Maako vouched that these operations had gone well from the beginning. Operations would be described by the PPP partners.

G4S Care and Justice Services South Africa (Mangaung Correctional Centre) presentation
Mr Frikkie Venter, Managing Director, G4S Care and Justice Services (formerly known as GSL), began his presentation with a short video clip illustrating the Mangaung Correctional Centre, near Bloemfontein, which had opened on 01 July 2001. The contract had been signed on 24 March 2000 and construction begun on 01 April 2000. In particular the video illustrated the facilities for the 2928 adult, male inmates, which included an onsite hospital and dental surgery, a shoe factory, a bakery, inmates engaged in gardening and in the kitchen, admission procedures, consultations with social workers, a multipurpose consultation room, facilities for as many as 31 different faiths, school, and lending library from which inmates borrowed in total an average of 3,630 books per month. The chaplain was supported by 53 external religious workers. There was a comprehensive assessment system for new inmates. On average, inmates consulted a nurse 66 times a year, a primary care physician twice a year, and a specialist or dentist 1.4 times a year. Manguang Correctional Centre offered an empowering environment for inmates, each of whom had a sentence plan. Special diets and health needs, including HIV/AIDS prevention and management, were catered for. Mother tongue education to grades 11 or 12 was provided free of charge. Inmates requesting tertiary education were required to pay their own fees. Vocational training, including that for hospice care workers, was provided. He would not talk about reclassification. The problem of dagga was managed by various means. Dagga had been found smuggled in wheelchairs and babies' nappies worn by visiting children. Dogs assisted in the detection of dagga. All employees were required to be trained and approved by the DCS. Community outreach programmes included refurbishing desks for schools. There were visiting hours daily, with a 48 hour pre-booking system, and special accommodation for children who visited. To maintain family contacts, inmates were allowed to receive mail within 24 hours of receipt at Manguang Correctional Centre. One free letter (stationery and postage) was offered per inmate per week. Unlimited telephone calls were allowed at inmates' personal cost. Manguang Correctional Centre had won praise from overseas officials, including the former British Commissioner of Correctional Services. Of the 563 employees, 29% were women working within this all male offender prison. Former Minister N Balfour had described the facility as 'the White Paper in action'. Incidents of gangsterism had decreased. The Eskom tariff increases had an impact of R1.8 million. It was a challenge to retain staff, since the high level of training acquired at Mangaung attracted recruiters.

South African Custodial Services (Kutama Sinthumule Correctional Centre) presentation
Mr Indiran Pillay, Director, Kensani Capital, South African Custodial Services, and Mr Dennis McCarthy, Financial Director, South African Custodial Services, jointly presented. The Centre was named after two local chiefs, Chief Kutama and Chief Sinthumule. It was located in the Limpopo province, in the small town of Makhado 400 kilometres north of Johannesburg. Contract negotiations had begun in 1997. The contract between Government, represented by the Department of Correctional Services, and the private sector (the contracting entity) was signed on 16 August 2000. Building had begun immediately; the facility was opened on 16 February 2002, and had operated at full capacity since August 2002. The facility was awarded the International Standards Organisation (ISO) 9001 certification in August 2003. There had been no cost variations from the original project. The relationship between Kensani Corrections and the Geo Group, and South African Custodial Services (SACS) (the contractor) was illustrated. Kensani (KCM) provided maintenance, programmes, and procurement. SACM provided security, operations, health, and administration. Royal Food Services provided catering. (Please see unnumbered slide). Inmates ranged in age from 23 to 88 years. Rehabilitation included physical education, basic occupational skills, special education, and vocational training for catering and hospitality, horticulture, the building trade, woodwork, the textile industry, and the motor trade. A structured eight hour day programme began with a wake-up call and muster check at 07h00. Breakfast followed at 07h15, lunch at 12h15, and evening meal at 16h30. Except for being locked up from 13h00 to 14h00, inmates were busy with a variety of activities until a final muster check at 20h30 after which they were locked down for the night. Mr Pillay invited Members to visit.

Mr R Ainslie (ANC) reminded the DCS that the Standing Committee had resolved that the DCS should provide a cost benefit analysis. He asked the cost to the tax payer of the two facilities.

Mr McCarthy responded that a report on costs had been presented to the Portfolio Committee a number of years previously. That report had concluded that the private sector costs were broadly comparable with those of the public sector and was probably more relevant now because the
Consumer Price Index (CPI) had caused increases to the private sector.

Ms Kelley Starke, Managing Director, Kensani Capital, responded that, in the PPP process, the assets, the prison itself, belonged to Government from the first day. For a 25 year period the cost was born by the private sector by the raising of debt from the beginning. Therefore the comparison should be made between the debt which was raised when the prison was built and paid off, and with the operational side of the prison which was very broadly comparable with DCS. This was in accordance with the service levels that Kensani Capital was contractually obliged to provide at all times. Kensani Capital provided these service levels in partnership and consultation with the Government represented by the DCS. It was an ongoing partnership with Government throughout the life of the contract in which the parties worked together in compliance with the contract. Kensani Capital service levels were always guaranteed. The contract also made provision for levels of spending throughout the area to affirmable business enterprises, that is, black owned enterprises in partnership with procurement and black empowerment in the area. Kensani Capital delivered on the contract by ensuring that its spending went to people in that area who previously would not have had any job or business. Kensani Capital regarded this as a substantial contribution to the economic multiplier effect in the area.
Mr Ainslie said that the Standing Committee had been concerned that senior officials in the DCS had become directors of the contracting entities, in an exercise that he described as 'javelin throwing' and had requested a list of those directors.

Co-Chair Mr Smith insisted that the DCS answer.

Mr Maako said that the question had been asked twice when he attended the Standing Committee and that he was responsible for compiling the list of officials for the Standing Committee. 'We provided all the information'. He offered to ensure that the DCS had submitted the list.

Mr Venter replied that he was the only one in that category who had been in the DCS and had joined the private sector. He denied 'javelin throwing'.

Ms Starke replied that Kensani had no director on its board who was involved in the prison negotiations. ‘I think that is pretty important to clear up because that's something we're quite proud of.' Most members of Kensani’s staff were black, and some of them were women. 'We're quite proud of our track record in that regard.'

Mr Ainslie asked the cause of the sporadic violence, especially the incident of two weeks previously, at Mangaung Correctional Centre, near Bloemfontein. There had been no reference to this in G4S Care and Justice Services' list of challenges.

Mr Venter replied that the prisoners’ main complaint was that they want to be transferred or reclassified. A recent incident had been contained within three days.

Mr J Selfe (DA) was sure that costs per inmate were higher in private prisons, but observed evidence of 'a Rolls Royce operation'. That, according to Mr Venter, was useful in establishing norms of best practice. However, Mr Selfe asked the DCS why inmates serving very long sentences were sent to the two PPP prisons. Such prisoners could little benefit from the high standard of rehabilitation since they had little hope of release and becoming useful members of society. This did not bring a good return on the investment.

Mr Maako replied that the appropriate official was not present to respond. He added that from the beginning the DCS had examined the risks regarding long serving inmates.

Mr Venter replied that long sentences were a cause of concern. Not all such prisoners were as incorrigible as suggested by the length of their sentences. He added that the contracting entity could not return inmates to the DCS or send them to other prisons.

Mr Pillay replied that, given the high-quality and ongoing rehabilitation interventions in the facilities, it was indeed questionable whether the inmates would benefit from the study facilities and rehabilitation programmes available to them. SACS had no problem in engaging the DCS on reclassifying prisoners and was aware that the issue had been raised. SACS looked forward to further discussions.

Ms M Mangena (ANC) asked for an analysis of the facilities' inmate populations by race.

Mr Venter replied that he would forward such an analysis to the Committee Secretary.

Mr Pillay replied that he did not have the required information immediately available but would forward it to the Committee. A large proportion of the prison population consisted of African males. A small percentage was composed of white, Indian and Coloured males.

Ms M Nyanda (ANC) asked about the effectiveness of searching all employees and inmates for dagga, who brought it in, and if any staff members were responsible. How many staff members had been suspended?

Mr Venter replied that none of his staff were suspended for smuggling dagga into the facility.

Mr Pillay said that at least of his three staff members had been suspended and subsequently dismissed for such contraventions, and his entity had embarked upon an extensive programme of monitoring and detection of dagga smuggling into the prison. Dogs had assisted in the stopping of smuggling at the gates of the facility.

Mr McCarthy responded that SACS was constantly vigilant to the dagga issue. A case had been won against an employee dismissed for dagga smuggling. The employee had challenged his dismissal at a tribunal.

Mr S Abram (ANC), noting that both facilities were situated in rural areas, asked if they offered inmates any form of agricultural activity, and to what extent the contracting entities purchased food from newly settled farmers in the area. This was important to support black economic empowerment and emergent farmers.

Mr Venter replied generally that many prison inmates had run away from farms. Mangaung Correctional Centre did not have a farm and bought food from contractors whom the facility obliged to support local black economic empowerment suppliers. There were specific targets in the contracts

Mr Pillay responded that horticultural training was given to prisoners at the facility. The food services contractor was required to make use of local black suppliers. More detailed information would be forwarded to the Committee.
Mr Abram asked about the impact of the recent Eskom tariff increases on sustainability, and if the contracting entities had investigated alternative sources of energy.

Mr Venter said that solar power was under consideration.
Mr Pillay replied that the impact of the announced price increase had been quite significant. SACS had explored various means of reducing energy consumption at the facility. These included a strategy on co-generation. Solar energy was an expensive technology to deploy at any facility. However, it was a measure that SACS was investigating at present. SACS had also examined the use of isolation of electricity usage distribution boards. Generally what seemed to happen in large facilities was that there were major points of electricity distribution from which it was possible to isolate and control electricity usage by breaking down the circuits into smaller areas to ascertain which areas were using the most. This had worked very well in reducing electricity usage.

Mr McCarthy responded that in new facilities alternative sources of power were being investigated.

Mr Abram asked also whether there were difficulties with the supply of water.

Mr Venter replied that water was no problem since there was a reservoir on site.

Mr Pillay said that old supply pipes were prone to bursting from time to time. There was also a local water shortage. There was an emergency water system which ensured that water was constantly available at the facility. For the sake of maintaining pressure, it was possible, if necessary, to shut down supply to certain areas.

Mr N du Toit (DA) asked if all recommendations were adhered to.

Mr A Fritz (DA) asked if the contracting entities could not do more.
Mr Pillay responded to a question on best practice and transfer of information between the PPP prisons, SACS had various interactions with members of the DCS. This was not limited to interactions with the controllers on site but extended to the local DCS employees at the nearby public facilities. Members of DCS had travelled from Pretoria to visit the facility. Not only were a number of inspections conducted at the facility but a variety of interactions were held with the DCS directly with regard to operational issues. SACS encouraged a greater interaction and involvement with the DCS and supported skills transfer and best practice transfer with the DCS.

In response to a question on the structure of shareholdings, he said that the companies were established in different ways. The South African Custodial Services entity was held jointly by Kensani Corrections which was a 100% black-owned entity, a level one empowered company which was a fairly significant rating to obtain in terms of the empowerment scorecard. Kensani Corrections represented a broad base of shareholders. At Kensani Corrections management there had been established an employee trust for the benefit of all black staff employed at the prison.

Other questions were asked on youth in prison, whether there was a parole board, violent sexual crimes, acquisition of HIV/AIDS in prison, gangsterism, and the risk of escape.

Mr Venter replied that a parole committee was in operation. Consensual sex was allowed. Condoms were provided. Prophylactic drugs were provided for non-consensual sex. It was hard to reform a gangster.

Mr Pillay replied that parole boards and case management committees sat at the facility. Whenever a parole board decided that a prisoner was to be released, he could not be released directly into society but had to undergo a pre-release phase administered by the DCS itself. Mr Venter had assisted in answering the question on sexual violence. Whilst drug testing was mandatory for all prisoners, HIV testing was voluntary. Therefore one might not be aware of a prisoner's HIV status until certain symptoms began to manifest themselves. Therefore it was difficult to know if a prisoner contracted the HIV virus in prison or before entering prison. In terms of consensual sexual activity between partners, condoms were made available. Similarly, prophylactic drugs were available when sexual assault had taken place. Gangsterism was present in Kutama Sinthumule Correctional Centre also. It was not something that could easily be eliminated. However, it was very well managed by the engagement of all prisoners in various activities - recreational, educational, social work, and psychological programmes. The fact was that prisoners were out of their cells for eight hours a day and busily occupied, so that they had little opportunity to interact with fellow gangsters. Thus gang activity was kept to a minimum.

He said that every prison had the risk of escape. Kutama Sinthumule Correctional Centre had been blessed in that it had not sustained a single escape from the facility. There had been one attempt to escape, but it had been thwarted. However, the risk was always there. It was essential to manage the security envelope within the facility to ensure that the risk was minimised or eliminated altogether. Complacency was the worst thing that could ever happen in a correctional facility.

Mr McCarthy responded that both PPPs had similar processes to manage the risks of gangsterism and HIV.
Co-Chairperson Mr Godi said that the Standing Committee on Public Accounts (SCOPA) still awaited, firstly, a response to its earlier resolution on a cost benefit analysis, and secondly, a definitive list from the DCS of the names of the DCS officials who were part of the negotiations, and who then resigned to join the companies. All that the Standing Committee had received was an incomplete list with the excuse that the major problem was lack of documentation in the DCS. He recalled that the matter of the PPPs had been discussed previously in SCOPA on not less than two occasions with the DCS, and on both those occasions SCOPA had not been given satisfactory answers.

Mr S Thobejane (ANC) asked the DCS to furnish a copy of the contract with the two entities.

Co-Chair Mr Godi endorsed Mr Thobejane's request and asked for it within one week.

The DCS agreed.

Mr Thobejane asked the DCS to inform Members of the specific areas that the DCS had identified, when the DCS was conducting monitoring, as challenges to the two entities. If the challenges were financial, he asked if the auditors had confirmed that these were challenges in relation to the implementation of the contract. The DCS would know that the law, in particular, the Public Finance Management Act (PFMA) required that before the DCS transferred any money to any entity it must satisfy itself that the entity was compliant. It was in that context that he wanted the DCS to be specific in informing the Committee and SCOPA which were the areas in which it was experiencing challenges in implementation.

The DCS responded that it had four officials on site - the Controller, the Deputy Controller, and two other officials - to monitor the contract from Schedule A to Schedule D. It was not aware of any financial challenges which related to the monitoring. It conducted monthly meetings. There was compliance.

Co-Chair Mr Godi asked the DCS if it claimed that there was absolute compliance.

The DCS responded that if there was no compliance, the contract specified that the DCS must issue a notice.

Co-Chair Mr Godi said that Mr Thobejane wanted to ascertain whether, in monitoring compliance, whether the DCS had identified problems.

The DCS responded that it there were challenges, although they were few. One that could be mentioned was.

Co-Chair Mr Godi asked the DCS to list all of them.

The DCS replied that the first was an observation that the DCS would not classify as a breach of contract, such as a death in prison, for one needed an inquest report. There was a delay in obtaining an inquest. Hence some of the cases were long outstanding. That was the challenge that the DCS faced now in monitoring contract compliance. Secondly, there were inmates’ requests for transfer whilst they were in the middle of programmes that were beneficial to them. This was a challenge both for the DCS and for the contractor because such requests could not be acceded to.

Co-Chair Mr Godi said that the DCS had not responded to Mr Thobejane's question, which concerned compliance by the contractors in terms of implementing their side of the contract. 'When you monitor compliance, are there areas where they are failing to comply?'

The DCS responded 'No'.

Co-Chair Mr Godi accepted the DCS's response.

Co-Chair Mr Godi then asked about the challenge mentioned in the Kutama Sinthumule Correctional Centre, a challenge from the contractor's side: 'maintain contractor compliance record'. From the DCS's side, the DCS did not see a challenge. In the Mangaung Correctional Centre presentation there was a challenge mentioned from the contractor's side ‘to manage the contract cost effectively without impeding on service delivery'.

The DCS responded that it was a challenge to them, but it had not reached the extent that the DCS had issued an observation.

Co-Chair Mr Godi said that the Department was very lenient.

The DCS denied that it was lenient.

Co-Chair Mr Godi asserted that the contractor saw it as a challenge but that the DCS saw it as a 'non-issue'. He asked what was meant by the challenge 'maintain contractor compliance record'.

Mr Pillay responded that 100% contractual compliance records were maintained for the seven years of operation. 'The statement was made consistently around ensuring that it remains cost effective, because these contractual compliance requirements do generate high amount of costs required in terms of maintaining the operation.' The Co-chairperson was probably correct to infer that the contractor was harder on itself than the DCS was.

Co-Chair Mr Godi said that he did not understand. He asked what the Kutama Sinthumule Correctional Centre meant by the challenge of maintaining a contractual compliance record.

Mr McCarthy responded that 'our compliance record is 100%'. The supervisory committee had issued a report after visiting the facility and examining all records in great detail. There were challenges with suppliers in terms of uniformity of supply. A correctional centre was a hostile environment; complacency was the biggest risk; all staff worked very hard to maintain standards.

Co-Chair Mr Godi suggested that from time to time some problems occurred.

Mr McCarthy said that from time to time things would go wrong in a prison environment.

Co-Chair Mr Godi was not entirely convinced, but suggested that Members probably understood the matter better than he.

Mr Venter replied that from Mangaung Correctional Centre's viewpoint there was a contractual requirement. In other words the contractor had to deliver everything in that contract. Contractual compliance basically meant that if one failed, the DCS issued a notice. The DCS was basically checking compliance in various structures through its four resident officials. If they were not satisfied, the matter was referred to a supervisory committee. The supervisory committee issued an annual report which Mr Venter assumed was available to Members. The Department of Public Works inspected the facility every second year to see that the contractor was maintaining the buildings in accordance with the terms of the contract. There was also an external audit report on maintaining the building, not in terms of the contract, but in terms of what the external auditor expected in terms of maintaining a building. That report was also available. The Auditor-General visited the facility once a year and inspected, but had not found fault with anything. Also Mangaung Correctional Centre's internal auditors reported yearly. There were many checks and balances to ensure that the contractor followed its obligations.

In response to a Member's concern, Co-Chair Mr Godi reminded the DCS about the long-outstanding resolution about the youth inmates of the PPP facilities.

The DCS responded that the issue had been raised in a previous meeting and hoped to provide a report on progress in the next meeting.

Co-Chair Mr Godi asked who would have the answer.

The DCS responded that the answer lay with the Corrections division of the DCS. The DCS was represented in the meeting by the supply chain division.

Co-Chair Mr Godi asked if Corrections was a unit within the DCS.

The DCS responded that Corrections was indeed a unit within the Department. It dealt with classifications.

Co-Chair Mr Godi expressed the expectation that there would be a conclusive response in the next meeting.

Mr Thobejane said that it would be fair to advise the delegates that misrepresentations of facts were an offence that could lead to prosecution. There were contradictions in the delegates’ responses. On the seven or eight years of operations, he asked if the audit reports had been completely satisfactory.

Co-Chair Mr Godi asked for a 'yes' or 'no' answer.

Mr Venter replied that he had not seen the Auditor-General's reports. In terms of the inspectorate reports, last year the inspectors had said that they had found bread in a drawer in an inmate's cell. That was not a contractual outcome. In terms of contractual outcomes his entity delivered what it was contracted to deliver.

Mr Pillay replied that his entity had never received a qualified opinion on its audit reports. In terms of the supervisory committee reports no issue of contractual non-compliance had been raised.

Co-Chair Mr Godi acknowledged the response.

A Member said that he regard these two prisons as the safest in South Africa. He asked if members of the staff were vetted. The greatest challenge was the most sophisticated, professional, wealthy inmates. This was the reason for corruption in the prison service. He asked if the PPPs, with their advanced facilities, were able to help the DCS manage that kind of prisoner. Some of the prisoners were foot soldiers for criminal bosses who were free men. Such were known to police as untouchable on account of having much money.

Mr M Steele (DA) said that he was very concerned with some of the answers. One of the contracting officials had responded on bench marks in terms of setting standards for the monitoring of compliance. He had said that his entity would be happy to provide input on the bench marking exercise. Mr Steele asked the DCS why the contracting officials, rather than the Department, felt that they had to offer to provide such input. He asked the bench marks for best practice had not been established, so that one could all monitor for compliance according to the same standard.

Mr Venter responded that if much was required of the contractor that was an outcome that the DCS was delivering. 'So the compliance in our one is much higher, and they expect much more of us than of themselves, so that if they want to do a bench-marking in all prisons specifically ours, I think that the contract is quite clear and we will assist, because we also learn from best practice in America and the UK and we are bringing that to South Africa, so that needs to be shared.'

Mr Steele asked secondly why there were four officials to monitor compliance permanently at the facility as part of the staff. He felt that surely someone should have realised that this was not the best way to monitor compliance.

Mr Venter replied that the four officials of the DCS were not part of his entity's staff and had separate offices. As explained previously, there were several audits being done beyond the checking by the four DCS officials on site.

Mr Pillay responded that the four DCS staff on site had their own offices and were separate from the entity's staff.

Co-Chair Mr Godi asked the entities if they vetted their staffs.

Mr Venter responded that all his entity's staff were vetted and had to comply with many requirements. His entity had no choice as to the prisoners sent to it. This was decided by the DCS. If his entity had a choice, it would prefer prisoners that needed to be kept in a safe environment but could also benefit from rehabilitation.

Mr Pillay responded that all his entity's staff was vetted as a precursor to employment. The entities did not have a choice as to which prisoners were sent to them by the Department. Dangerous criminals had been housed in the segregation unit.

Mr T Bonhomme (ANC) said that he was very pleased to hear a report on these prisons. The prisons seemed to be well run and very comfortable, so comfortable that inmates even received condoms and were even allowed to sodomise each other. Nobody liked to be a victim of sodomy. Yet HIV/AIDS was growing there. It was the vulnerable, the weak and the young who were victims - they received the death penalties imposed by the thugs in the prisons. He questioned human rights legislation that prevented compulsory testing of inmates for HIV. It was surely not the case that human rights supported sodomy of the vulnerable and the youth. There must be something wrong in the system. He asked how many inmates had been charged with rape, and how many inmates, having paid their debt to society by having served their sentence, emerged from prison under the death sentence of HIV as a result of rape.

Mr Venter responded that condom supply was in accordance with policies, some of them international. In terms of how many inmates were charged with alleged sodomy, he would find out how many charges were laid and how many of them went before the courts, and forward the information to the Committee.

Mr Pillay responded that his entity always allowed prisoners to lay charges for assault, but that he did not have figures to hand. He would forward information to the Committee.

The DCS responded on the policy of transfers. Transfers initiated by the inmates themselves became a problem, especially if they came at random during the middle of a rehabilitation programme. Overcrowding had been raised as a challenge for the DCS and that comparisons was always made. The lack of ability to retain critical staff had always been a challenge for the Department with regard to rehabilitation.
Co-Chair Mr Godi acknowledged the response.

Mr Abram required, in writing, information on the commodities that the entities procured, the time frames, and names of the suppliers, and the composition of the supplying companies so that the Committee could monitor compliance with the contractual obligation.

Mr Pillay said that his entity would send details of the commodities that the entities procured.

Mr Abram asked that Mr Venter's entity would please do likewise. He asked why the leather factory at Mangaung Correctional Centre had closed. He said that South African farmers sold many animals to slaughter houses but few tanneries existed, therefore it would be unfortunate to reduce still further the number of outlets for tanneries.

Mr Venter replied that the leather factory shop had not been financially viable but had been replaced by another making candles. However, the leather skills programme was still running. . However, the clothing factory still operated, as did the bakery, which supplied much bread to the prison. The DCS had declined the bakery's offer of a supply of cheaper bread. Mr Venter could not be responsible for that. 

Mr Venter responded to a question on incidents of natural death in prison, which had been reported as 'rocketing' but which other sources said had been reduced. He said that the all the deaths from natural causes had been HIV related.

Mr McCarthy referred to seven deaths in the prison in 2009 deaths due to natural causes. In 2003 there were 29. There had been a decrease after introduction of an HIV programme. He could provide as much detail as the Committee required in writing. He said that his entity's numbers were in line those of the DCS.

Co-Chair Mr Godi observed that the two entities had information readily available on their laptops, unlike the commissioners.

Co-Chair Mr Smith asked about fixed costs and the percentage escalation.

Mr Venter replied that the percentage escalation was zero.

Co-Chair Mr Smith remarked on the basing of operational costs on the number of spaces available. He observed that in the past year the entities had operated at 100% occupancy, so therefore it should mean that there should be no escalation in the contracts, because the fixed costs had no escalation. He observed that the entities' increase was based on the Consumer Price Index (CPI).

This was confirmed.

Mr Smith observed that the increase from 2007-2009 was 9.6%. The increase for the current year 2008-2009 and 2009-2010 was 12.9%. The entities were saying that for the building there was no increase. The increase could be only on the basis of inflationary increases; 'and it went up by 12.9% for this current year, and it went up by 9.6% the year before?' He said that Members and delegates had agreed that the fixed costs had not increased. However, according to the DCS's annual report, the DCS' costs had increased. He was approaching the point where he would have to ask the DCS why the entities were making accommodation for increased costs. For the operational costs, bed space and food, for example, there was an increase based on inflation. He asked why.

Mr Venter replied that the CPI increase from August 2007-2008 was 13.7%; if inflation had caused that increase, then the figure quoted by the Co-chairperson 'could be correct'.

Co-Chair Mr Smith said that he would follow-up the funding model. He asked what the entities funding model was.

Mr McCarthy said that there was a CPI adjustment, and what was called a key factor adjustment, which levelled out the payments to the contract over the life of the project. In some years it went up; in other years it went down, but it was predetermined in the original contract. When one looked at the increases, one needed to consider the CPI factor.

Co-Chair Mr Smith said that the Committee would demand the contract. He asked the delegates as operators if the increase sounded reasonable, because on the basis on their answer the Members would study the subject after the meeting and interrogate the subject subsequently. If the increase was not reasonable, either the operators were trying to confuse the DCS or the DCS was trying to confuse the Committee. He observed that the trajectory was progressing in the wrong direction. On that basis one could argue against the contention that the state was saving money by using the PPPs and that thereby the DCS had made a mistake. 

Mr Venter agreed with the Co-chairperson that it was best to examine the specific contract, in which there was a specific formula agreed with the DCS. He said that one had not seen a CPI of 13.7% for a considerable time in South Africa. If one examined the current CPI it was about 6%. So he doubted, in terms of his own financial projections, that the increase for the coming year would be much less than that in the previous year, and that it would be linked purely to the CPI increase. He did not know how the Government had projected that. Moreover, that component in the DCS budget included not only the costs paid to the PPPs. Moreover, it was projected against a CPI that was unknown to Mr Venter.

Co-Chair Mr Smith said that the DCS's current annual report mentioned under financial arrangements the figures for the DCS's payments on a monthly basis of a daily contract fee per available inmate place to private companies. It was from here that Mr Smith understood the increases of 9.6% and 12.9%. He understood from the entities that it should be going down and not up. He agreed with the entities that indeed it should not be escalating, but instead decreasing, and that therefore the budget for the DCS for these projects should be following suit. He would have to take up the matter with the DCS.

Mr Venter said that if South Africa had an inflation rate of less than zero, then the price would decrease. However, what one was observing was a steady decline because of inflation. In the current year, the price would still increase because the inflation rate was not less than zero, but it would not increase to the same extent as in the previous year. In terms of the contract, the price could decrease only if there was a negative inflation factor and if there was a rebasing every five years.

Co-Chair Mr Smith said that the cost to the state was R675 million in 2008-2009, and the cost to the state in 2009-2010 would, according to the presentations, be more than R700 million. From the information given to the South African public, it was increasing by R79 million a year approximately. The Committee would interrogate the matter more thoroughly in due course.

Co-Chair Mr Smith asked Mr Pillay about the shareholding of the Geo group and South African Custodial Services, and who were their members. He asked Mr Venter for similar information on G4S. He asked that this information be provided in writing to both the Committee and SCOPA. He also asked about the extent of collaboration between the South African Custodial Services and G4S.

Mr Pillay said that the Geo Group was a publicly listed company.

Mr Venter said that the two entities were distinct and were competitors. He would provide information for the past three governmental financial years on his entity's income from the Government. G4S was a publicly listed company on the London Stock Exchange. He was a director. Mr Venter held no shares in the company.

Co-chairperson Mr God asked Mr Venter to confirm his response in writing within a week.

Co-Chair Mr Godi thanked the Portfolio Committee for inviting Members of SCOPA, and said that he was pleased to meet with delegates from the two entities, since SCOPA had spoken of the two entities on a number of occasions. It had been one of SCOPA's main concerns to enhance the integration of its work in Parliament. He suggested that the Committee make an oversight visit to the two facilities.

The meeting was adjourned.

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