Private Security Industry Regulatory Authority: 2009/10 Annual Report hearings

Meeting report

Chairperson’s opening remarks.
The Chairperson welcomed the arrest of suspects who were wanted for the murder of six people, but the death of two suspects should be looked into by the Independent Complaints Directorate (ICD).

The Chairperson bid farewell to the former Deputy Minister of Police, Mr Fikile Mbalula, thanked him for the role he had played, and congratulated him and wished him well on his new appointment as Minister of Sports and Recreation. She further welcomed the appointment of Ms Magdeline Sotyu, a former Chairperson of this Committee, as the new Deputy Minister of Police, and looked forward to working with her.

The Chairperson then referred to a Court ruling granting an interdict against a newspaper from investigating and publishing on matters that related to crime intelligence. The Chairperson pointed out that it was unfortunate if former officials divulged matters of intelligence, and the media should not allow itself to be drawn in to this matter.

Private Security Industry Regulatory Authority: 2009/10 Annual Report briefing
The Chairperson noted that the Annual Report by the Private Security Industry Regulatory Authority (PSIRA) had been tabled late to Parliament, and she called upon that entity to explain this. She also noted the disclaimer given by the Auditor-General (AG), who had stated that there were serious matters that needed to be addressed within PSIRA, and it would need to explain how it intended to manage and improve these issues. The Committee would be having frequent meetings with PSIRA in the future.

Mr Thula Bopela, Chairperson of PSIRA Council, stated that PSIRA did not have “anything that remotely resembled” a structure. The Council had been doing the work that management was supposed to do. He added that all the requests for documents that were needed at the Parliament had been sent through from South African Police Service (SAPS) and PSIRA had received these requests late due to problems at SAPS. This late submission would not be allowed to recur.

Mr Mhahbela Chauke, Director, PSIRA, noted that PSIRA had recently been re-branded, following the request from this Committee that PSIRA should move away from using its old logo, which was rooted in and reflected the past.

Mr Chauke then discussed issues raised in previous meetings by the Committee. The first matter related to PSIRA’s non-compliance with National Treasury (NT) Regulations. There were three issues. Firstly, there had been no council, which was the accounting authority, there had also not been an audit committee, nor had there been an internal audit function. The issue around the council had been addressed by the appointment of a new council by the Minister of Police, which had been effective from 1 January 2010. The issue of no audit committee had also been resolved by the appointment of three independent persons to form the audit committee, consisting of the Chairperson, Deputy Chairperson of Council, and an additional member. The issue of the internal audit function had also since been resolved, with the audit function having been outsourced, from October 2009, for a period of three years.

He then outlined the issues around irregular expenditure. The first matter of concern was the Johannesburg lease agreement, and the second concerned cartridges that had been bought at a cost of R617 043. Both issues were still unresolved, although both had been referred to the SAPS, where an investigation was still in progress.

The VAT liability had been partially resolved. PSIRA had applied for its de-registration from VAT, due to it being listed as a Schedule 3A public entity. The South African Revenue Services (SARS) had refunded PSIRA, so as to close the VAT account.

There was also the issue around unallocated deposits, but this had been resolved, with the unallocated deposits from the previous financial year now having been allocated in the books.

He then discussed the core business report, in relation to compliance inspections per active business that had been done by PSIRA. In 2009, there were 6 392 businesses in total, and 6 453 inspections had been done. In 2010 the total number of businesses was 7459, and 6971 inspections had been conducted. An analysis of first-time inspections compared to new businesses had been done. In 2009 there had been 888 new businesses, and there were 1 573 first time inspections. In 2010 there were 1 067 new businesses, and 1319 first time inspections.

Mr Bopela requested Mr Chauke to explain to the Committee why there were fewer new businesses and more inspections.

Mr Chauke responded that the inspections also covered businesses that already existed in the PSIRA database.

Mr Chauke then outlined the analysis of infrastructure, compared to new businesses. For the year 2009 there were 888 new businesses, and 1 587 infrastructure inspections were carried out. In the year 2010 there were 1 067 new businesses and 1578 inspections in relation to infrastructure were carried out.

Rev K Meshoe (ACDP) interjected to ask how many businesses were on the PSIRA database.

Mr Chauke responded that there were about 7 459 new businesses.

The Chairperson asked what a “new business” was.

Mr Chauke responded that new businesses were businesses that had been registered, and the numbers talked to those that had been inspected for the first time by PSIRA. An analysis was done in relation to new businesses and infrastructure, as was required by the PSIRA Act, which was distinct from compliance inspections. After businesses were registered, an infrastructure assessment would be done, which would show whether the business was in compliance with the regulations. The new business would, where this was the case, be given another opportunity to get matters in order, and would then be inspected again in the year after it had been registered. This explained why the number of new inspections were higher than the number of new businesses.

Mr Chauke noted that an analysis was done of the number of documents that had been opened, in comparison to the prosecutions that were instituted against businesses in terms of the PSIRA Act. He distinguished these from prosecutions by the National Prosecution Authority (NPA), explaining that the prosecutions under the PSIRA Act were conducted by PSIRA. In 2009, 1 302 dockets had been opened and there were 748 prosecutions. In 2010 there were 1568 dockets that had been opened, and 683 prosecutions. In 2009 there were 104 criminal cases and 44 prosecutions and in 2010 there were 177 criminal cases and 54 criminal prosecutions.

Mr Chauke then gave a presentation on the organisational performance of PSIRA. In relation to law enforcement, PSIRA had strategic goals. One goal was to reduce the time taken to register security officers and security businesses, but this goal had not been achieved, because there was no Customer Relations Management (CRM) in place. Other strategic objectives were to improve the quality and operational efficiency and effectiveness, to grow businesses in line with PSIRA’s legal mandate, by ensuring compliance with existing legislation through comprehensive enforcement of the provisions of the Act, and to achieve targeted metrics of stakeholder satisfaction, by establishing productive relationships with key stakeholders. None of the three targets had been achieved, due to poor data integrity, goals not being aligned to expected outcomes, and lack of planning to drive the achievement of the goals.

Other strategic objectives were to develop a competent private security industry, establish an ombudsman’s office, to implement effective performance management and to align staff, systems and organisational design behind the PSIRA strategy. The objective to develop a competent private security industry had not been achieved, due to the fact that training regulations regarding new standards had not been promulgated. The goal to implement an effective performance management had been achieved, and that for aligning staff was partially achieved.

Mr Chauke said that in terms of the financial and administrative strategic objectives, a target had been set to increase operating revenues, which had been achieved. PSIRA also intended to collect its outstanding and recoverable debts, and so this target had also been achieved. The goal for maintaining an effective system of corporate governance had been partially achieved. This was because a fraud prevention plan had been drafted, but policies that had not been identified by internal audit had not been drafted.

In relation to human resources management, there were two strategic objectives set. The first was to have the right people in the right place at the right time, and to implement effective performance management. The first goal was not achieved, because the output was not aligned to the goal. The second goal was partially achieved, and the reason given was that comprehensive performance management would be implemented in the new financial year, since the entity had now appointed a Human Resources manager.

For information technology (IT), there were four goals. PSIRA had aimed to develop an IT plan with costing to support registration, to develop a plan to ensure overall data integrity, to ensure that the target of 95% system uptime was achieved and to hold annual IT reviews and recommendations. The first three goals were partially achieved, and the last goal had been achieved.

Mr Chauke then described the progress that had been made in implementing audit matters. The first item related to fruitless expenditure, in relations to asset purchases from branch offices. Two generators had been purchased for Durban and Eastern Cape office premises, but these had not been used because the generators could not fit into the premises. Management had decided to keep the generators, with a view to using them in the future.

In relation to irregular expenditure, there were three issues. Firstly, the AG had noted that there had been acquisition of software licences, amounting to R1 245 114, without informing  National Treasury of the deviation from the requirement to invite competitive bids. Secondly, there had been outsourcing of professional accounting assistance, in the amount of R1 589 105, and legal fees amounting to R683 000. PSIRA explained that in respect of the first two matters, three quotations had indeed been obtained. PSIRA had not suffered any loss, despite the non-compliance. With regard to the third issue, a new policy on procurement had been put in place, which required legal services to be rotated between a panel of legal advisers and attorneys.

Another issue related to the material loss that had been suffered by PSIRA through impairments. It was stressed that a debt collection agent had been appointed in September 2010 to collect all outstanding debts.

Mr Nick Ligege, Deputy Director: Finance, PSIRA, then outlined the financial presentation of PSIRA. He stated that the deficit of PSIRA had been reduced, from R12 384 343 in 2009, to R4 252 740 in the 2009/10 financial year. He gave a detailed analysis of the expenditure. Employee related costs amounted to R39 236 712, a rise from R38 544 142 in 2009. The amount for fingerprint costs had increased from R5 155 323 in 2009, to R8 313 834 in 2010. Consulting and professional fees had also increased from R4 461 476 in 2009, to R7 211 449 in 2010. Legal fees and local travelling costs had also increased to R3 748 371 and R2 555 271 respectively. There was also an increase in other operating costs. He gave a brief statement on the financial position of PSIRA. The total net assets and liabilities for 2010 had dropped to R49 253 975, compared to R57 009 300 in 2009. PSIRA’s ability to settle current obligations had worsened, since the current ratio had decreased from R1.09 in 2009, to 93 cents in 2010. The net assets had declined. This worsened financial position was attributed to poor debt collection practices, the fact that the funding model had not been reviewed, and increased operating costs. It was noted that between 2004 and 2006 PSIRA had posted surpluses, but from 2007 onwards it posted deficits, because of the funding model, the increased workforce of law enforcement, provision for doubtful debt, rising fingerprint costs and increased legal fees.

Mr Chauke presented a situational analysis, under the headings of the stakeholder perspective, the financial perspective, business processes and resources, and the human perspective. The stakeholder perspective raised issues around the national footprints, lack of a law enforcement strategy, unacceptable registration times and lack of communication with the industry. The financial perspective highlighted the lack of a debt collection strategy, no real-time billing and financial distress. Business processes and resources raised aspects around database integrity and the ageing IT. The human perspective issues concerned low morale, lack of management skills, the lack of alignment between the  organisational structure and objectives, and a lack of corporate and HR policies.

Mr Chauke lastly outlined the strategic direction and turnaround. A strategic plan had been approved for the years 2010-2012, which included strategic objectives such as the need to ensure PSIRA’s financial viability and sustainability, to reduce the risks to the State and South African citizens through industry compliance with the PSIRA Act, to ensure that the right people were in the right place at the right time to deliver on PSIRA’s strategic and operational requirements, and to develop an appropriate and enabling regulatory environment. Management would continue to build on the current strategic plan and implement a turnaround strategy to address the current crisis that PSIRA was facing.

Mr Bopela stated that a Ministerial Intervention Task Team (MITT) had been appointed by the Minister of Police to deal with the problems in PSIRA. The first matter that he had seen on his appointment was the report from the MITT. A Director would immediately be appointed. Council should not run PSIRA, but should only be overseeing it, and giving strategic direction. While PSIRA had not had a Council, some members of the former management (who had since left) took advantage of the situation and PSIRA, which led to a very poor situation.

Discussion
The Chairperson agreed with Mr Bopela that the situation that PSIRA had painted was disturbing. Out of about 25 strategic objectives, only five had been achieved, with seven partially achieved, and 15 were not achieved. She asked how PSIRA could claim that it had achieved some success.

Mr G Lekgetho (ANC) thanked the new management for the job it had done. He asked when the vacancy mentioned on page 5 was to be filled. He stressed his concerns in relation to the amount of 208 million that was outstanding, although he was pleased to see that someone had been appointed to collect this money. He asked that PSIRA must inform the Committee of the progress in collecting, when it next appeared before the Committee.

Ms D Kohler-Barnard (DA) asked how many companies, out of the 7 459 on the PSIRA database, were active. She asked how a person with a criminal record could be appointed without being vetted. She was also concerned about firearm licences being renewed, asking whether PSIRA was involved, and what had been happening. She asked whether those who were responsible for buying generators that could not fit into the premises were still employed, and how PSIRA was planning to recover its money. She questioned the full amount of the losses.

Mr G Schneemann (ANC) thought that the presentation should have referred to how PSIRA intended to deal with the problems that it faced. The Annual Report painted a gloomy picture. He suggested that PSIRA should submit a written report on the steps it was taking to address problems that it faced. The Committee could not wait for this to be submitted in 2011. He asked if the legal services unit was adequately resourced. He also asked whether licences were granted prior to the companies being inspected.

Mr Schneemann said that little had been said about human resources management. He asked whether the inspectors were paying enough attention to the inspections they did. He questioned why there were eight people listed as “communication” staff, and whether it was really necessary to have so many. He also asked why there were no females among the senior management staff, and whether there were any plans to change that.

Ms M Molebatsi (ANC) raised a question about the unresolved cases. She asked why the issues around VAT were said to have been “partially achieved”, and indicated that “partially achieved” was in fact the same as saying that no goals had actually been achieved. She also asked what PSIRA was doing to remedy the situation around its deteriorating finances. She asked what happened to the levies of a dormant company.

Rev Meshoe asked whether there was a plan in place to ensure that PSIRA would be overhauled effectively. He noted that most strategic objectives had not been achieved, and asked if there were plans to ensure that in future, they would be achieved. He questioned the notion why the right people were not in the right place at the right time, particularly since PSIRA claimed it had achieved performance management to meet its goals, and asked how this could have been done without the right people.

Rev Meshoe noted the accumulation of surplus amounts between 2004 and 2006. He wondered if the plans that were implemented in these years could be implemented successfully again, to counter the deficits recorded since 2007. He finally asked if those who had resigned had been given any “golden handshakes”.

Ms A van Wyk (ANC) said that the Annual Report was not very helpful. She asked what the current staff component was, and why there were more managers. She further asked why a debt collector manager had been appointed, if an outside debt collector was going to be collecting the debts. She also enquired what the monthly running costs were, what had happened to the surplus amount, why companies that were not paying their licences were not being deregistered, and whether new companies were being registered properly. She also raised concerns whether PSIRA was checking whether companies in the industry were paying the minimum legal wage. She noted that she had other questions on why it took so long to fill vacancies, why PSIRA could not receive fingerprint costs from the companies, why the travelling costs were so high, and why a huge amount of money had been paid for consultancy fees. She urged the PSIRA Council to come up with a measureable report. She further questioned the sudden increase in operational expenditure. She thought that the lack of understanding shown by PSIRA about the industry was shocking.

Ms M Dube (ANC) asked what sanctions had been implemented against those who had been responsible for PSIRA purchasing equipment that it was unable to use. She also asked what “other operating costs” included.

Mr P Groenewald (FF+) asked whether PSIRA was aware that the industry was not paying minimum wages. He asked if there was a totally new management. He asked why training standards had not been promulgated.

Mr M George (COPE) noted that the report did not show that there was any plan in place. He also stressed that the target for debt collection was said to have been achieved, yet PSIRA did not have any money. The security of the country was at risk because the industries under PSIRA had more weapons than the South African Police Service (SAPS), South African National Defence Force (SANDF) and the Department of Correctional Services (DCS) combined, yet there was very little regulation of the industry.

Mr M Swathe (DA) stated that the report that had been given to the Committee did not instil any hope. He asked which company had been appointed to do the audit. He also asked about the registered cases, and what had happened to the other cases.

Ms van Wyk asked who had paid the suspended Chief Executive Officer a bonus, and for what reason.

Mr Lekgetho noted that there were a very high number of inactive security officers. He asked what PSIRA was doing to address these issues. It was also noted that there were eleven temporary employees, and he asked how long they would be hired temporarily.

The Chairperson referred to the amount paid to the former Chief Executive Officer, and asked what the reference to “other” meant.

The Chairperson wondered if it was possible for the management to turn around PSIRA. She also asked who was brought to account for the problems that PSIRA had faced.

The Chairperson asked whether a PSIRA Amendment Bill was likely to be brought to the Committee before the end of the year.

The Chairperson asked what management of PSIRA meant by the statement that it did not understand the industry.

Mr Bopela requested that the answers to the numerous questions that had been asked by the Committee should be submitted in writing, failing which he would try to respond to some for which he had ready answers.

The Chairperson asked Mr Bopela to give any answers that he had now.

Mr Groenewald requested that answers should also be given in writing, so that the Committee could hold PSIRA accountable.

Ms Van Wyk stated that the management of PSIRA could be held accountable for whatever had been said in the meeting.

Mr V Ndhlovu (IFP) stated that there would be a problem if management could not understand what the Committee wanted.

Mr George suggested that the Council of PSIRA should firstly address the question of whether it was possible for the management to turn around the organisation.

Mr Bopela responded that it could do so, although the presentation may not have mentioned the detail of how this would be done.

Mr Bopela clarified the statement about not understanding the industry, by indicating that this was the impression of the new Council on taking office. The new Council did not have sufficient time. Had the new management not started when they did, then PSIRA would not have been able to fund the salaries of its employees. Some people within PSIRA had been working with syndicates in the private security industry, so there was an urgent need to clean up. When the new Council took office, there were no human resources (HR) policies in place, so a new HR manager had been appointed, and it was only recently that policies had been set in place. The appointment of internal and external auditors was part of the plan to turn around PSIRA. He pointed out that PSIRA was currently bankrupt. He added that the former legal services manager had been in charge of the legal service department, HR, finance and was also the acting Chief Executive Officer (CEO) of PSIRA. When this person had left PSIRA, he had attempted to steal some boxes of documents that contained evidence of his mismanagement of PSIRA. The Council had therefore decided to address this by appointing a company to conduct a forensic audit from 2001 till 2010.

Mr Bopela noted that when letters offering jobs at PSIRA were issued, they stated that the job offer was subject to a clearance being given. However, the former CEO had started his job in January, yet the security clearance only was issued months later. This had more to do with the procedure rather than any oversight on the part of PSIRA.

Mr Bopela noted that the debt collection company was hired on the basis that it would get commission on the amounts that it managed to collect.

Mr Bopela responded to the questions around the firearms by stating that PSIRA only checked for the compliance of the company. It was SAPS who would then issue the companies with firearms.

Ms van Wyk corrected Mr Bopela, stating that SAPS did not issue firearms, but licences for firearms.

Mr Groenewald asked what would happen to a company’s firearms if that company were to be deregistered.

Mr Bopela responded that it was not the duty of PSIRA to collect the firearms. PSIRA could not instruct the SAPS what to do.

The Chairperson stated that the uncertainty regarding what happened to the firearms had led the Committee to the conclusion that there was a serious security threat in the country.

Ms van Wyk stated that, particularly for reasons related to firearms, it was important to deregister companies.

Mr Bopela stated that there were companies that would temporarily run out of businesses, which would then apply for voluntary deregistration.

Mr George asked how the process was conducted.

Mr Chauke stated that PSIRA needed more time to research on the questions, in order to provide more comprehensive answers.

The Chairperson noted that some of the issues that PSIRA was facing resulted from an inadequate PSIRA Act.

Mr Bopela stated that in relation to the payments questions, the former Acting CEO had bought the cartridges, since he was the only person who was allowed to sign off payments more than R500 000. Forensic auditors were going to be appointed, and those found responsible for the mismanagement would be prosecuted, with the help of Deputy National Commissioner Lieutenant General Dramat.

Ms Kohler-Barnard noted that since PSIRA was bankrupt it could not afford to hire forensic auditors.

Mr Bopela said that forensic auditors were going to be hired, despite what Ms Kohler-Barnard thought.

The Chairperson rebuked Mr Bopela for the way he had responded to Ms Kohler-Barnard, stating that Members of Parliament (MPs) should be addressed with respect.

Mr George stated that Mr Bopela was not answering the questions. He asked where PSIRA was going to get the money to pay forensic auditors, and how the forensic auditors were going to be appointed.

The Chairperson stated that various problems were highlighted in the meeting, and asked whether it was correct that PSIRA had a turnaround strategy.

Mr Chauke stated that it would be reckless for PSIRA to say that it could provide the Committee with a turnaround strategy within two weeks.

The Chairperson asked what the time frames for the submission were.

Mr Chauke responded that the strategy could be ready by the end of November or early December.

The Chairperson stated that PSIRA would not be invited back to speak to the Committee again before the end of the year, and that it would thus have about three months to work on the strategy. Proper and thorough research had to be done. The Committee would be expecting written answers to those questions not responded to at this meeting, by 16 November 2010.

Mr George asked whether it was not possible for the Civilian Secretariat for the Police Service to start the process of drafting a Bill.

Ms Van Wyk stated that the prerogative of legislation lay with the Minister.

Mr Chauke stated that a snapshot on the progress in relation to the PSIRA amendment Bill was supposed to have been presented.

The Chairperson stated that the Committee was urgently waiting for the amendment Bill to come before the Committee. She stressed that those who were involved in the mismanagement must be held accountable, even for borrowing money.

The meeting was adjourned.