The Private Security Industry Regulatory Authority (PSIRA) presented its Annual Report 2010/11. At the outset it described the steps it had taken to address the audit qualifications in the previous financial year, including the appointment of an Audit Committee, and noted that in this year it had achieved an unqualified audit, although there were some matters of emphasis. The goals of PSIRA were listed, noting that it had to reduce the risks to the State and South Africans through industry compliance with the PSIRA Act, and to develop an enabling environment for itself to operate effectively and efficiently. Various goals in relation to its own business operations were also set out. It was noted that during the year the strategic objectives were revised, because certain targets were not achievable, and there was no link between the strategic objectives and budget. In addition, PSIRA wanted to prioritise law enforcement and address financial constraints. Programmes 1, 3, 5, 6 and 7 had achieved all revised objectives. PSIRA only managed, under Programme 2, to compile 1 471 dockets against non-compliant security service providers, instead of the targeted 1 600 (a revision down from the original 1 800). It had not been able to perform the human resource audits under Programme 4. PSIRA reported a deficit of R23.75 million for 2010/11, which was an increase from the previous year’s deficit of R2.25 million. Although revenue and income had increased, these increases had not kept pace with a 24% increase in operating expenses. A large amount of debt was written off. The volume of business registrations, and numbers of security personnel, had also declined. It was reported that PSIRA had R1.036 million of irregular expenditure, because the incorrect procedures were followed for a contract for cash-in-transit services, and there was also fruitless and wasteful expenditure arising from penalties on incorrect earnings and late delivery of invoices. Other concerns of the Auditor-General related to material losses or impairment of accounts, poor revenue collection, unknown deposits, inadequate processes and system capabilities, inadequate reporting of performance information and lack of established procedures and policies to deal with this, as well as PSIRA’s lack of a financial disclosure policy. PSIRA was intending to amend the PSIRA Act, and was reviewing training regulations, in view of complaints that the training was unaffordable.
Members noted the improved audit results, but raised a number of concerns about the financial matters, interrogating the large increase in PSIRA’s deficit, the steps that PSIRA was taking to control operating expenses, the reasons why debt was written off, what criteria were used when incurring the debt and how the decisions were taken to write off. They also sought more details on the irregular expenditure, and said that the deficit could not continue to grow, and asking how PSIRA could cut costs. PSIRA claimed that it could not do so if it was to grow, and in order to do that it would need more budget, and had already approached National Treasury. Members also commented that the targets should not have been changed, since the budget and strategic plans should have been aligned from the start, and cautioned that they would be unwilling to allow this to happen in future. The Committee asked for more details on the debt, the companies whose debt was written off, and other matters where they did not feel that sufficient detail was provided in the Annual Report. They also asked about the vetting procedures for staff and issuing of licences, asked how many security officers and personnel were found to have been involved in illegal activity, enquired why the numbers had declined, and whether companies registered were active or dormant. They questioned whether PSIRA could keep track of the numbers and types of firearms and ammunition in the security industry, asked why different arms were issued, and how these might differ from those issued to the security and defence forces, asked if PSIRA was able to track whether the weapons were kept safely and what its role would be if they went missing. Members were also interested in vetting, and whether PSIRA could control the infiltration of criminals into the private security sector. Written answers would be given to a number of questions by 1 November.
Chairperson’s opening remarks
The Chairperson welcomed President Jacob Zuma’s decision to investigate allegations of misconduct levied against National Commissioner of Police Bheki Cele, since it was correct that any allegations of wrongdoing must be investigated and the correct protocol must be followed. The decision to appoint Major General Nhlanhla Mkwhanazi as Acting Police Commissioner, was also welcomed, as he had the right education and experience for this position.
Private Security Industry Regulatory Authority (PSIRA): Annual Report 2010/11
Mr Manabela Chauke, Director, Private Security Industry Regulatory Authority, presented the Annual Report of the Authority (PSIRA) for the financial year 2010/11. He noted that he would firstly summarise the measures put in place to address the audit qualifications and matters of emphasis raised in the previous year’s audit. He noted that risk management processes had been put in place, procurement policies had been implemented and, in November 2010, an Audit Committee was appointed to resolve some of the issues raised by the Auditor-General in 2009/10.
He said that PSIRA had had to revise its objectives during the year because certain targets in the original strategic plan were found to be not achievable, nor were the original strategic objectives linked to the approved budget. The need to reprioritise law enforcement matters (by clearing the backlog of cases) as well as the need to address financial constraints during September 2010 also led to PSIRA revising its original strategic objectives.
Mr Chauke presented the revised goals, and related key performance indicators, and compared the original target to the revised target, also giving the performance results and reasons for variance across each of PSIRA’s seven programmes (see attached presentation for full details).
He listed the goals, which were to ensure PSIRA’s financial viability and sustainability, to reduce the risks to the State and
All the goals under programmes 1, 3, 5, 6 and 7 were achieved under the revised strategic objectives. Under Programme 2, PSIRA had aimed to take appropriate action and compile 1600 dockets (revised down from the original goal of 1800) against non-compliant security service providers. However, it had managed to review only 1471 dockets. Under Programme 4, PSIRA failed to implement the recommendation of doing human resources audits by May 2010, due to delays caused by negotiations with the Unions.
Mr Nick Ligege, Deputy Director: Finance, PSIRA, presented PSIRA’s governance and financial results for the financial year 2010/11. PSIRA reported a deficit of R23.75 million for this year, which was an increase from the previous financial year’s deficit of R2.25 million. This was partly due to an increase of revenue of only 2%, although other income had increased 17%, when compared to the increase of 24% in operating expenses. Investment revenue also declined significantly, while impairment and finance costs increased significantly from the previous year, contributing to the larger deficit for 2011.
Mr Ligege noted that most of PSIRA’s revenue came from registered security services providers and the number of security officers employed by the security service providers, fines imposed in code of conduct enquiries or settlements, the volume of training courses reports processed and the volume of business and individual registrations. The volume of business registrations, and security officers and personnel decreased by 39% and 38% respectively.
Irregular expenditure of R1.036 million was reported by the Auditor-General (AG). He explained that a contract for cash in transit services was entered into without adhering to the Public Finance Management Act (PFMA) regulations. PSIRA stressed that it had not suffered any loss as a result of this non-adherence. Fruitless and wasteful expenditure amounted to R12 356. Of this amount, R9 669 was due to penalties incurred due to incorrect earnings declared, and R2 241 was because of the late delivery of invoices.
The AG’s report identified some areas of concern. These included material losses or impairment of accounts, poor revenue collection, unknown deposits, inadequate processes and system capabilities, inadequate reporting of performance information and lack of established procedures and policies to deal with this, as well as PSIRA’s lack of a financial disclosure policy.
Mr Ligege noted that the Private Security Industry Regulation Amendment Act should be introduced shortly, and the Private Security Levies Act of 2002 should come into operation. Training regulations, which were published in 2003, and about which entities in industry had commented, were being reviewed. The main issue with these was the unaffordable cost of the training.
Rev K Meshoe (ACDP) asked if the “infrastructure inspections” conducted by PSIRA included inspections of the working conditions of security staff stationed at boom gates in residential areas. If not, then he asked who did ensure the regulation of the quality of working conditions at these boom gates.
Mr G Schneemann (ANC) also asked about the conditions of security personnel at suburb’s boom gates, and commented that this needed to be looked at it.
The Chairperson asked what PSIRA actually did when it performed “inspections”. If PSIRA found that the situation did not conform to expectations, then she asked what was done to address this. She noted that some of the working conditions of members affiliated with PSIRA were very poor. The abuse of guards, many of whom received low salaries with few benefits, worked long hours of overtime, and were prone to dismissal without notice, was an issue raised by the Committee on a number of occasions. She wanted to know how PSIRA was attending to this.
Mr Thula Bopela, Chairman of Council, PSIRA, replied that infrastructure assessments were conducted when a security company applied for a licence to operate. Site inspections were mostly conducted as a result of a security guard having lodged a complaint about poor conditions of his or her working premises. This could include complaints received by security guards posted at boom gates. PSIRA took action on reported contraventions relating to labour issues, and referred these to the labour courts when it was appropriate to do so.
Rev Meshoe asked how long it took to process applications by security firms for firearms.
Mr Pilati Mthethwa, Deputy Director: Law Enforcement, PSIRA, replied that the issuing of firearms was the responsibility of the South African Police Service (SAPS), in terms of the Firearms Control Act. Mr Mthethwa described PSIRA’s role in the firearm application process, noting that a security company would apply to SAPS for a specific number of firearms. PSIRA would then be required to respond, within 48 hours, to an enquiry from SAPS about the status of the security company applying for the firearms. PSIRA would indicate whether or not the security company was registered with PSIRA, whether or not the security personnel at the company had firearm licences, and whether they were employed by the company. PSIRA would also vet the people who would potentially be using the firearms, to ensure that they did not have criminal records. PSIRA was therefore not responsible for processing the applications for firearms as such, but it did assist in the process by providing information on the applicant.
Mr G Mluleki (COPE) asked if SAPS informed PSIRA which applications for firearms were successful or unsuccessful.
Mr Mthethwa replied that PSIRA had a good relationship with SAPS as far as information sharing was concerned. PSIRA had access to the SAPS database of how many firearms were owned by each security company and was vigilant about updating its own database. SAPS and PSIRA jointly operated in investigating and taking action against security companies that were no longer in operation but were still in possession of firearms.
Mr Schneemann asked whether the applications for firearms emanated from existing security companies or newly registered companies. He noted the difference in the figures from the previous year.
Mr Mthethwa replied that new security companies did not have the capacity to apply for firearms and so it was mostly the existing security companies who applied for firearms.
Mr Schneemann asked if PSIRA was keeping track of the number of firearms in circulation in the private security industry. In the Annual Report, PSIRA had noted that some security companies were applying for a greater number of firearms than the number of people they employed. He asked what the reasons for this might be. He also enquired how much ammunition was held by the private security industries. He questioned if PSIRA was monitoring the degree to which the firearms in the security industry were kept safely. Finally, he commented that he was expecting the total number of firearms, and other details, to be reflected in the Annual Report.
Ms M Molebatsi (ANC) said there was a major problem with the control of firearms in South African Police Service (SAPS). She too asked how PSIRA controlled firearms.
Mr Mluleki asked what happened to the firearms owned by security companies that were “untraceable” and deregistered from PSIRA, and whether PSIRA was able to trace these firearms.
Mr Mthethwa replied that he would respond in writing to these questions. All losses of firearms were reported to the police as required by the Firearms Control Act.
Rev Meshoe noted that the collection of registration fees from private security service providers was a “key driver” of revenue. He asked what PSIRA charged the new private security service providers to register.
Rev Meshoe asked why PSIRA’s “untraceable debtors” could not be traced. Slide 27 of the presentation and slide 30 reported different figures of untraceable debt. He therefore asked for clarity on this point.
Mr Ligege replied that slide 30 reflected current information, as at September 2011, whereas slide 27 reflected data as at March 2011.
Ms Molebatsi asked that PSIRA should expand on what it meant by “financial constraints” experienced by PSIRA in September 2010.
Ms Molebatsi asked if guards that were already registered with PSIRA would have to reregister.
Ms D Kohler-Barnard (ACDP) said that PSIRA should be congratulated for having managed to turn itself around and achieve an unqualified report for this financial year.
Ms Kohler-Barnard asked for an update report on the allegations against the former Chief Executive Officer, asking if criminal charges were laid.
Ms Kohler-Barnard asked what happened with two cases of irregular expenditure that had been referred to SAPS in the previous year.
Mr Chauke replied that the trial of the case involving a former senior manager in the Human Resources division was under way and was nearing completion. Mr Chauke was not sure how many matters were still outstanding.
Mr V Ndlovu (IFP) asked what had happened to PSIRA members suspended on allegations of corruption, and also enquired about the status of these cases.
The Chairperson asked for the ratio of staff to security personnel for 2010/11. She questioned whether the information provided in the Annual Report was reliable.
The Chairperson noted that on 3 March 2011, at a previous meeting between the Committee and PSIRA, PSIRA had reported that five employees had been suspended on allegations of corruption, five employees had been dismissed for dishonesty and investigations of four employees for alleged dishonesty were pending. These numbers were not reflected in the Annual Report. She asked for more information on this.
Mr Chauke replied that he did not have this information with him, but would provide a written answer to the question.
Ms Kohler-Barnard asked how PSIRA had afforded to hire a debt collection agency when it was effectively bankrupt, and who had paid this agency.
Mr Ligege replied that the debt collectors charged 18% of the amount of debt that they collected, and so were not paid by PSIRA as such.
Ms Kohler-Barnard said that vetting of staff members had been a problem in PSIRA. Two of its former CEOs were found to have had criminal records. She asked PSIRA if it could assure the Committee that its vetting procedures, of its own staff as well as of security officers and companies applying for licences, were adequate.
Mr Mthethwa replied that all potential staff were vetted before they were employed by PSIRA. This involved a preliminary vetting process called the “Personnel Suitability Check”. It investigated potential employees’ citizenship, financial position, qualifications and criminal record status. A full investigation was conducted to determine the risk of each applicant. Interviews were also conducted with applicants. A lie detector test was also used for recruiting top-secret security personnel. The process was extremely thorough.
Mr M Swathe (DA) asked why the number of security officers and personnel registered with PSIRA had declined.
Mr Mthethwa replied that the decline in the registration of security personnel was partly due to the strict vetting requirements of the Personnel Suitability Check. Each and every application was scrutinised, and so it was not as easy to register as it used to be.
Ms Kohler-Barnard asked for more information on the irregular expenditure on the
Mr Chauke replied that PSIRA was currently recovering its losses associated with the
Ms Kohler-Barnard asked if PSIRA had deregistered itself from Value Added Tax (VAT), as this had been a major issue costing PSIRA a lot of money in the previous year.
Mr Ligege replied that PSIRA had received confirmation from SARS that it was now deregistered, and this issue had been finalised.
Ms Kohler-Barnard asked if the huge issues around “unallocated deposits” - money that was coming in to PSIRA from unidentified sources – had been resolved.
Mr Ligege replied that the majority of the “unclaimed” and “unallocated” money was written off in 2009. A process had since been put in place whereby unallocated money relating to registrations was reconciled on a regular basis. Listings were now being followed up by the finance department on a daily basis. Text messages (SMSs), with a specific reference number to be quoted on when deposits were made, were now also sent to companies owing money.
Ms Kohler-Barnard said that PSIRA had bought two generators last year, one for each of its
Mr Chauke replied that the generators had been sold and PSIRA had managed to recover some of their cost, but not the full amount.
Mr Ligege added that R471 000 had been recovered in the sale of the generators, but that one generator was still being used in the Head Office.
Ms Kohler-Barnard asked how many of the 8 828 companies registered with PSIRA were active. She understood that a lot of these companies remained dormant for some time and that there were issues with writing off and removing dormant companies from the database.
Mr Chauke replied that the total number companies registered with PSIRA was approximately 25 000, of which 8 828 were active.
Mr G Lekgetho (ANC) asked what criteria had been used to appoint PSIRA’s new Audit Committee appointed in September 2010, and who had been appointed to the Committee.
Mr Chauke replied that the positions for members of the audit committee were published in the national newspapers. Audit Committee members were required to have a background in finance, accounting and forensic services. A number of applications were received, after which short-listed candidates were interviewed. Members of the audit committee were then appointed by the Council.
Mr Lekgetho asked what the vacancy rate within PSIRA was, given the redeployment of inspectors.
Mr Chauke replied that the total vacancy rate was 15%.
Mr Lekgetho was concerned that debts of R15 million were written-off in 2009/2010 and debts of R20 million were written off in 2010/11. He asked what criteria were used when incurring the debt, and asked also what debtors were written off. The increase in the write-offs was of concern.
Mr Chauke replied that he was not sure of the details of which debtors had been written-off but could submit a response to the Committee in writing.
Mr Ligege added that debts were separated into two categories. The first category comprised outstanding amounts owed by individual security officers, and the second was outstanding amounts owed by security companies. In the previous year, all debt owed by individual security officers was written off. Security officers were required to pay annual fees only if they were employed. Many unemployed officers had been mistakenly billed. The cost of recovering this debt did not warrant further action, especially as many of the individuals who owed money were unemployed. PSIRA therefore focused on collecting debt from companies and referred the task to a debt collection agency. The debt collection agency reported the status of its debt collection efforts to PSIRA on a weekly basis. PSIRA wanted the owners of companies who had their debt written off to face a penalty, and be barred from operating in the industry in future because of their inability to meet their debt obligations.
The debt grew as interest and penalties accrued, although since the debt was irrecoverable anyway, the interest and penalties would also not be recovered.
Mr Ligege confirmed that he would provide the Committee with the details of what debts had been written off.
Mr Schneemann said that PSIRA’s deficit had increased significantly, and this was attributed to the fact that the revenue only increased by a small amount whilst the operating expenses had increased significantly. He noted that new registrations also increased only marginally. He asked what steps were being taken to reduce expenses so that the deficit did not continue to rise.
Mr Mluleki also asked about the increasing deficit, and asked what National Treasury had to say about this dramatic increase.
Mr Ligege replied that PSIRA needed to increase capacity and grow, and that it would therefore not necessarily cut expenditure. Depreciation increased as a result of clearing the asset register, and debts were written-off as part of the process of cleaning the company’s financial status. PSIRA had managed to contain the rest of its expenditure. PSIRA needed more income in order to grow, and had submitted a proposal to the Minister for an increase in the PSIRA annual fees to be paid by security officers and companies.
Mr M Swathe (DA) asked about the irregular expenditure reported on slide 28, and asked for further clarity on the assertion that no loss had been incurred as a result of PFMA regulations not being adhered to.
Mr Ligege replied that the money spent was not in vain, as the service that was paid for was indeed rendered. The problem was that the contract had not been properly signed and therefore contravened PFMA regulations.
Mr Mluleki asked what PSIRA did to control the level of criminal infiltration into the private security sector.
Mr Bopela replied that the infiltration of criminals into the private security sector was a constant headache for PSIRA. PSIRA was able to screen individuals prior to them entering the private security sector, but a number of security personnel turned to criminal activity only after entering the industry, and used their positions to commit crimes. This then became a matter for the police. If security personnel were found guilty of committing a crime, they would be deregistered.
Mr Ndlovu asked how many firearm-related contraventions were reported for the year, and how many were committed by foreign nationals.
Mr Bopela replied that he did not have the exact figure but estimated that approximately 700 cases of fraud, particularly identity fraud committed by foreign nationals, needed to be investigated.
Ms A van Wyk (ANC) said that while PSIRA should be congratulated for its unqualified report, it was now time to review the second part of PSIRA’s job. It was PSIRA’s responsibility to inform the Committee of the state of
Ms Zelda Holtzman, Deputy Chair, PSIRA, replied that PSIRA would ideally have liked to give the Committee an update on the status of private security in
Ms van Wyk was concerned about the comment that PSIRA had adjusted its original targets. PSIRA had given the reasons that the targets needed to be aligned, but she pointed out that targets were required to be line with the budget in the first instance. It was not acceptable to change targets half way through the year, to ensure that targets were achieved. She asked how the Committee could consider its performance, and asked also that PSIRA should carefully consider this matter in future, s the Committee would not be prepared to accept unachievable targets being set.
Ms van Wyk asked for the actual number staff members at PSIRA saying that figures reported in different tables in the Annual Reports did not add up.
Mr Chauke replied that he would respond to this question in writing.
Ms van Wyk said that the Committee had received a report of the training initiatives for PSIRA staff, but had not received a report of the outcome of those initiatives.
Ms van Wyk asked if the Council of PSIRA felt that the Council was now functioning better than in the past, and was fulfilling its strategic leadership function.
Mr Bopela said that Council was now functioning as it should. There were currently three members on the Council. Two further appointees who would bring the Council to five members, were still undergoing security clearance checks.
Ms Holtzman added that at the time that the first two Council members were appointed, PSIRA was dysfunctional. At this stage the Council met often, sometimes twice a month. PSIRA had, however, improved and the Council was now only needing to meet once every quarter. The right systems were in place and the executive was functioning.
Mr Schneemann said that PSIRA would have to start producing information on trends in the industry, including, for example, information on mergers, acquisitions, the number of security companies in provinces and the actual contribution to the reduction of crime made by private security companies. In order to know whether private security companies were contributing to the reduction of crime levels, a whole range of aspects would have to be investigated by PSIRA. Information was needed on whether private security companies were making an impact on crime reduction, or whether the public was being misled into thinking so.
The Chairperson asked if there were certain types of firearms that security personnel from different private security companies were not permitted to own. She asked this because she had seen different security personnel from different companies carrying different types of firearms.
Mr Mthethwa replied that the types of firearms issued to the security companies were not always the same as those issued to SAPS and the South African Defence Force. Although these firearms might look the same, they did not necessarily function in the same way. There were certain firearms that only SAPS and SADF were authorised to carry.
The Chairperson asked what the outcome of the skills audit of “staff morale” was.
Mr Chauke replied that PSIRA would submit a written response to this question, as it had produced a detailed report that dealt with this matter.
Mr Chauke added that he would also provide the Committee with written responses to any other unanswered questions.
The Chairperson asked PSIRA to submit its written responses by Tuesday 1 November 2011.
The meeting was adjourned.
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