Meeting report

Matters of Public Interest: Statistics South Africa Crime Survey

The Chairperson wanted to briefly discuss matters of public interest. The previous day, Statistics South Africa (StatsSA) released statistics of the victims of crime. He was concern that the study showed SA experienced a 5% increase in total crime. Also, approximately 1.2 million households experienced crime during the reporting period. He asked the Committee to note and discuss at a later stage the steady decrease in the public’s confidence in the police from 54.4% to 54.2%. Burglary and self-help crimes are the most prevalent in the country. The South African Police Service (SAPS) has to intensify community policing, visibility, tactical responses, more regular vehicle patrols, hotspots and efficient sector policing. It needs to increase cooperation with neighborhood watches, Community Police Forums and private sector security to find solutions to tackling crime.

 

The Chairpersons stated one of the main matters in the Annual Report was the SAPS response times. Community policing response times to crime reporting must be improved by police units. Detection rates remain low in many categories in the survey done by StatsSA- this therefore needs to be addresed. It is the responsibility of the Cluster and Station Commanders to work on improving public confidence in SAPS by ensuring there is more visibility by the police and increased communication with communities. The Committee would be having a meeting in two weeks to discuss the StatsSA report on crime.

Ms D Kohler Barnard (DA) agreed that public confidence in SAPS needs to be increased. SAPS’ visibility was high during the 2010 World Cup and people felt safe, however that has changed. The police ask people for bribes and police brutality has increased. That needs to change.

Mr Z Mbhele (DA) stated there is mismanagement in SAPS. This resulted in a lack of resources and understaffing. These fundamentals need to be improved or else syndicates will exploit loopholes in the system.

Ms M Molebatsi (ANC) said there are increased reports of dissatisfaction with SAPS. The problem also lies in management not supporting the Accounting Officer. SAPS need to address matters raised by the Committee to increase public trust.

2017/18 Annual Report of the Private Security Industry Regulatory Authority (PSIRA)

Mr Manabela Chauke, PSIRA Director, began the presentation with an operational overview and key highlights of PSIRA’s 2017/2018 Annual Report. PSIRA obtained an unqualified audit opinion. Its performance improved significantly. It would have been a clean audit but one of the findings qualified one of the key performance indicators thereby resulting in an unqualified audit. PSIRA achieved over 80% of its planned strategic objectives. Over 40 000 security businesses and security officer inspections were conducted. PSIRA and its partners made 375 arrests out of 63 operations. Its partners include the SAPS and the Department of Labour. There were over 1 300 firearm inspections at companies that possess firearms. There was a 6.2% increase in the number of security officers renewing their certificates for registration. There was also a 6.2% increase in females employed in the industry. PSIRA had a 49% reduction in its significant audit findings.

 

Mr Chauke then spoke about PSIRA’s financial performance. He stated the financial report was not impressive as expenditure exceeded revenue. PSIRA’s revenue increased by 10% mainly because there was an 87% (R8.8 million) increase in the sale of goods such as identity cards and certificates issued to security providers. Expenditure increased by 20% mainly because of operational costs of its new offices and additional capacity to improve service delivery. Its new offices opened in Mthatha, Mpumalanga and Limpopo. A new office is due to open in Cape Town to replace the existing small one. PSIRA also launched a mobile application (app) to address the problem of long queues at its offices. The app allows members to make bookings. The app has had over 3 000 downloads in a month.

Mr Chauke discussed PSIRA’s performance information by using graphs (see presentation). He drew a comparison between the 2016/17 and 2017/18 financial years. For compliance inspections conducted, there was an improvement in 2017/18 in three categories. For total inspections conducted, in 2016/17 there were 35 646 inspections and in 2017/18 there were 40 692. For security business inspections, in 2016/17 there were 6 001 inspections and in 2017/18 there were 6 253. For security officer inspections, in 2016/17 there were 29 645 inspections and in 2017/18 there were 34 439.

Mr Chauke stated that in enforcement investigations, there were also better results in the year 2017/18, as shown on the graph. For total investigations, in 2016/17 there were 2 571 investigations and in 2017/18 there were 3 144. For security business investigations, in 2016/17 there were 1 780 investigations and in 2017/18 there were 2 514. For security officer investigations, in 2016/17 there were 791 investigations and in 2017/18 there were 630.

Mr Chauke stated that in criminal investigations and cases, there were better results in the year 2017/18 as shown on the graph. For investigated matters, in 2016/17, there were 863 matters and in 2017/18 there were 996 matters. For finalised matters, in 2016/17, there were 2 571 matters and in 2017/18, there were 3 144 matters. For opened cases, in 2016/17, there were 846 cases opened and in 2017/18, there were 960 cases opened.

Mr Chauke pointed out there were improvements in the number of dockets from varying security business sizes. For total improper conduct dockets, in 2016/17, there were 2 292 dockets and in 2017/18, there were 2 350. From small businesses, in 2016/17, there were 1 061 dockets and in 2017/18, there were 1 084. From medium businesses, in 2016/17, there were 461 dockets and in 2017/18, there were 418. From large businesses, in 2016/17, there were 770 dockets and in 2017/18, there were 848.

Mr Chauke stated there was an increase in the number of firearm enquiries processed. PSIRA assists the Central Firearm Registry in deciding whether to grant security companies firearms. For applications received from the Central Firearm Registry, in 2016/17, there were 1 509 applications and in 2017/18, there were 1 902 applications. For applications not recommended, in 2016/17 588 applications were not recommended and in 2017018, 907 applications were not recommended by PSIRA. For applications recommended, in 2016/17, 921 applications were recommended and in 2017/18, 995 applications were recommended.

Mr Chauke pointed out the improvement in the number of improper conduct prosecutions. For Regulation 3(4) Notices, in 2016/17, 1 749 notices were issued and in 2017/18, 1 902 notices were issued. For cases finalised in respect of code of conduct enquiries, in 2016/17, 146 cases were finalised and in 2017/18, 201 cases were finalised. For cases finalised (settlements), in 2016/217, 1 489 cases were finalised and in 2017/18, 1 378 cases were finalised.

Mr Chauke stated that PSIRA has a regulatory subcommittee which deals with compliance by service providers registered with PSIRA. The following information relates to the work done by the regulatory sub-committee. In relation to security businesses, there were 989 withdrawals from paying annual fees, 84 voluntary withdrawals, 27 withdrawals based on code of conduct enquiries, 101 upliftment of suspensions, six withdrawals relating to infrastructure and capacity and 1 270 registrations suspensions due to not paying annual fees. In relation to security officers, there were four withdrawals, six withdrawals at code of conduct enquires and seven registrations suspended.

Mr Chauke then discussed the growth of the security industry in terms of registrations with PSIRA. He noted there is slow growth. The number of registered active businesses decreased by 1% from 8 995 in 2017 to 8 916 in March 2018. The number of active (employed) security officers increased by 4.8% from 498 435 in 2017 to 522 542 in March 2018. The decline in registrations is one of the reasons PSIRA has less revenue because PSIRA relies on registrations for its revenue.

Mr Chauke then looked at the trends in the number of security officers. For total number of security officers (employed and unemployed), in 2016/17, there were 2 365 782 security officers and in 2017/18, there were 2 288 689 security officers. For males, in 2016/17, there were 1 654 671 security officers and in 2017/18, there were 1 560 097. For females, in 2016/17, there were 711 111 security officers and in 2017/18, there were 728 592 security officers. The number of female security officers increased by 2.5%.

Mr Chauke looked the number of employed security officers. For total number of employed security officers, in 2016/17, there were 498 435 security officers and in 2017/18, there were 522 542. For employed male security officers, in 2016/17, there were 390 201 employed male security officers and in 2017/18 there were 407 561. For employed female security officers, in 2016/17, there were 108 237 security officers and in 2017/18 there were 114 981. The number of employed female security officers increased by 6.2%.

Mr Chauke then discussed training undertaken in the security industry. In 2017/18 there were 405 accredited training providers compared to 366 in 2016/17. There were a total of 428 843 course reports processed compared to 418 307 in 2016/17. He noted the increase was not significant and stated the number of course reports processed would increase in 2018/19 as PSIRA suspended the moratorium on registration of new training providers. The number of course reports processed also affects PSIRA’s revenue.

Mr Chauke then looked at the decisions made by PSIRA’s training subcommittee. Regarding training instructor applications, a total of 154 were received, 147 were approved, six were rejected and one required further information. Regarding Recognition of Prior Learning applications, a total of 102 were received, 92 were approved, eight were rejected and two required further information.

Mr Nhlanhla Ngubane, Acting Chairperson of the PSIRA Board, briefed the Committee on the governance report. PSIRA has a small Board which consists of about five people in terms of the Private Security Industry Regulation Act. The Board is short of one person and waiting on the Minister to issue instructions regarding the employment of another member of the Board. PSIRA has subcommittees that provide guidance and support to assurance providers to help improve the status of internal controls. PSIRA outsources its audits. It has a combined assurance model that supports the Audit and Risk Committee and internal audit. The Operational Risk Management Committee is chaired by an external chairperson to ensure independence and adequate guidance and capacity to identify and monitor risk to PSIRA’s acceptable risk appetite and tolerance matrix.

Mr Ngubane stated stakeholders were being approached to engage on security matters. For instance, it engaged with the KwaZulu-Natal province on the increased use of illegal firearms and dangers this poses. The Head of the Department of Health in KwaZulu-Natal was held hostage by people using illegal firearms and demanding tenders. The private sector industry was implicated in that incident. Through forums with stakeholders, PSIRA is able to communicate how it enforces law enforcement. PSIRA plans on engaging with MECs in various provinces on matters of private security and its role as a regulator.

Mr Chauke moved on to discussing human capital management in PSIRA. The staff composition according to programmes is as follows:

-12%: law enforcement

-32% is tasked with communication and training

-56% is tasked with finance and administration.

 

In terms of gender equity, 40% of PSIRA employees are male and 60% are female.

 

Ms Mmatlou Sebogodi, PSIRA Deputy Director: Finance and Administration, then briefed the Committee on PSIRA’s financial information. PSIRA obtained an unqualified audit opinion for the 2017/18 financial year.  PSIRA has material uncertainty relating to its going concern principle. There are two matters which she wished to emphasise. The first matter relates to material impairments relating to revenue management. A provision of impairments valued at R55 768 534 (compared to R44 389 024 in 2017) was raised on trade debtors because there was uncertainty regarding the recovery of money due to PSIRA. The second matter emphasised was significant uncertainties. For instance, PSIRA is the defendant in a number of legal actions and these cases are yet to be heard in court. PSIRA has an action plan to address these findings. The legal department is finalising cases and as at the reporting date, PSIRA did not incur any losses. PSIRA is demolishing its Arcadia office. The demolition costs will only be incurred when PSIRA decides to build a new office on that site. The matter is still under discussion with National Treasury and will depend on PSIRA’s reserves.

Ms Sebogodi stated there is an action plan to address findings regarding material impairments. Firstly, PSIRA will review its funding model by implementing the Levies Act. Currently PSIRA bills debtors that are incapable of paying it. To avoid deficits in revenue, PSIRA needs to change its funding model. Secondly, PSIRA will develop the Going Concern Turnaround Strategy to enable it to build reserves. This strategy is working as PSIRA has reserves amounting to R67 million. PSIRA will employ debt collectors to help with collecting money due to it.

Ms Sebogodi then discussed the audit of annual performance information. For its law enforcement programme, PSIRA obtained an unqualified audit. For its Communication, Registration and Training Programme, PSIRA obtained a qualified audit. One of the main reasons the audit was qualified was because PSIRA needs to improve its document management system. She then discussed PSIRA’s compliance issues. Firstly, PSIRA did not take effective steps to prevent fruitless and wasteful expenditure amounting to R216 428 in contravention of section 51(1) (b) (ii) of the Public Finance Management Act (PFMA). Secondly, PSIRA did not take adequate, effective and appropriate steps to collect all monies due to it in terms of section 51(1) (b) (i) of the PFMA and Treasury Regulations. Thirdly, PSIRA lacks a document management system. Lastly, it has an inadequate oversight role regarding performance information.

Ms Sebogodi then discussed PSIRA’s commitment to improve its internal controls. PSIRA made the following commitments in relation to financial management and performance:

-review the funding model to introduce the Levies Act

-to review processes to ensure adequate accountability to improve performance

-to implement compliance checklists and monitor effectiveness controls, for both legislation and standards, that is the PFMA, the Private Security Industry Regulation Act and the Standards of Generally Recognised Accounting Practice

-to maintain proper record keeping of all transactions

-to maintain effective controls over daily and monthly processing and reconciling of transactions

-to maintain regular, accurate and complete financial performance reports

 -to implement an adequate record or document management system

 

Ms Sebogodi then discussed PSIRA’s financial position as at 31 March 2018. PSIRA’s total assets amounted to R52 099 000 and current liabilities at R42 984 000. Its total revenue amounted to R240 893 000 and total expenses amounted to R253 271 000. It had a deficit of R12 378 000. It was acknowledged that PSIRA’s funding model was not effective because it resulted in a deficit at the end of the year and therefore the model should be changed. PSIRA’s cash and cash equivalents for the year ended 31 March 2018 was R6 719 000, which is about R20 million less than the previous year. PSIRA has a turnaround strategy which it hopes will improve cash flow for the 2018/19 financial year.

Discussion

The Chairperson stated the Portfolio Report of the Auditor-General of SA (AGSA) is important and the findings of the AGSA must be honoured as it is the authority that sets the framework for reporting in SA. There is a trend in how departments have been responding to reports from the AGSA. In this week, three departments chose to ignore the AGSA’s report. It was unacceptable for departments to ignore the reports. He asked why there was underperformance in PSIRA. He noted that although PSIRA has a small Board, this was not sufficient justification for underperformance. PSIRA needs a financial oversight plan. He asked that the Committee be given assurance in that regard or else it would make recommendations.

Ms Molebatsi congratulated PSIRA for the unqualified audit. She asked for further information on the deployment of women security guards and what kind of work they do. She also asked for more information on PSIRA’s Arcadia building that was due to be renovated. She asked for some reasons why PSIRA refuses to recommend applications for firearms to the Central Firearm Registry. What are the reasons for the firearms not recommended? She asked why there was a moratorium on registrations of new training providers and why it was suspended.

Mr Mbhele noted there were complaints from medium sized security firms about PSIRA. They find that PSIRA does disproportionate inspections on companies by inspecting the big companies and pay less attention to the unregistered ones. When the bigger firms report unregistered companies, they are ignored because it seems as if they are reporting the smaller companies in bad faith. He asked what type of record management system PSIRA uses and whether there are shortcomings in PSIRA’s IT systems.

Ms Kohler Barnard asked PSIRA to clarify why there is a deficit in its finances every year. She noted that PSIRA had not taken active steps to retrieve the money owed to it by debtors in the past few years. She personally tested PSIRA’s complaints system and was still waiting for a response after three months – why did this system not work? She asked why its record keeping system was not in order. Also, why was there ongoing legal action against PSIRA? She asked what the progress was on the PSIRA Amendment Bill.

Mr Ngubane responded that PSIRA is a young organisation which is still figuring out how to run its operations. One of the major decisions taken by the Board was to not have a fulltime chairperson so as to ensure management is held accountable because management handles to daily operations and not the chairperson. PSIRA has noted the concerns of the AGSA and measures will be put in place to address the concerns. One of the concerns raised is the deficit in funds. One of the reasons for the deficit is that companies to do pay their annual fees. PSIRA has had difficulty collecting annual fees. PSIRA aims to address this problem by implementing a new financial model in compliance with the Levies Act.

Ms Molebatsi asked whether PSIRA has a way of tracking suspended companies.

The Chairperson asked whether the PSIRA Board engaged with the AGSA regarding its report and if any action plans were discussed to address the concerns raised by the AGSA.

Mr Ngubane said the Board met with the AGSA to finalise the Annual Report. There are records of this which may be made available to the Committee. The Board does have an action plan for its turnaround.

Mr Chauke addressed the deficit in PSIRA’s funds noting austerity measures have been put in place to ensure shortfalls in funds are not experienced in the years to come. The deficit in funds is a result of technical issues. For instance, PSIRA struggled to retrieve its funds from some of its debtors. PSIRA is making an effort to improve its collection system.

The Chairperson noted the AGSA suggested PSIRA puts austerity measures in place. He asked what measures were put in place.

Mr Chauke outlined some of the austerity measures included cutting down on travel time. On the moratorium on registrations of new training providers, the moratorium was put in place because there was upscaling of courses to bring the training to the standard of the national qualification framework level. There were a number of accredited trainers but there was a decrease in security training. Training under the upscaled courses can take up to three months. Security guards may still undergo that training but if it does not align with the work they wish to do, they may take up a shorter course. Regarding female security guards, they do the same work as male security guards. However, a number of female security guards work in retail and in control rooms operating CCTV cameras. Regarding the Arcadia building, a plan is in place. A satellite office has been set up in the central business district.

Ms Sebogodi responded on PSIRA’s financial position stating that before the Board met with the AGSA, a systems-thinking approach was taken to assessing PSIRA’s financial position and the AGSA’s report. According to the AGSA, PSIRA’s accounting authority inadequately reviewed the annual performance. PSIRA has an action plan to address the AGSA’s findings. The only reason the AGSA found the accounting authority did not adequately review PSIRA’s annual performance is because the AGSA did not find PSIRA’s action plan to be effective. Overall PSIRA’s management and Council obtained 98% for its performance from the AGSA which she deemed to be good. Shortfalls raised by the AGSA relate to an inefficient document management system and an inefficient money collection system. These are material uncertainties that prevent PSIRA from obtaining a clean audit.

Ms Sebogodi said PSIRA even approached the South African National Roads Agency to find out how it dealt with the challenge of people not paying for e-tolls. From those discussions, PSIRA realised government agencies experience the same problem of debtors not paying. The deficit caused by such non-payment needs to be better managed.

The Chairperson asked whether there is a system in place for the PSIRA head office to retrieve information from its other offices.

Mr Chauke answered that applications are filed manually with Metrofile as its service provider. When an audit is carried out, PSIRA has to request files from Metrofile. PSIRA has an action plan to put in place a better file management system.

Mr P Mhlongo (EFF) asked what financial model PSIRA intends to put in place to ensure that, in future, liabilities do not exceed assets.

Mr Mbhele made reference to findings 36 to 38 in the AGSA’s report about inefficient file keeping system. He asked for clarity as to whether the findings referred to the file management system as a whole or whether it related specifically to the AGSA having difficulty retrieving information from PSIRA.

The Chairperson asked whether there is an action plan by the audit steering committee to address the matter of retrieving information for the next audit period.

Mr Ngubane addressed the matter of collecting PSIRA money from debtors by stating the matter was linked to transformation in the security industry. Many small businesses do not understand PSIRA’s role. It is difficult for small business to stay afloat because, for instance, in order to get a tender, it must show it is in good standing and are required to pay a fee to PSIRA. Many of the small companies to do not understand why they have to pay the fee to PSIRA but paying the fee does not guarantee they will be granted a tender. There are about 9 000 security companies and the majority of them do not get jobs yet they have to pay a fee to PSIRA so as to be registered and qualify to render services. It is important for PSIRA to devise a collection system that will not only ensure PSIRA receives its funds but that the security industry is sustainable. Security is important in the country and many departments use private security. in KwaZulu-Natal, one of the governmental officials in the Department of Health was held hostage for not awarding tenders to certain companies. The Department of Health in KwaZulu-Natal spends about R700 million on security and the security is handled by 200 companies. He asked that the Committee look into that matter.

Ms Sebogodi responded that PSIRA intends on addressing the deficit in funds by implementing the Levies Act. In future, the focus will not be on collecting fees from companies that are just registered but those that are registered and have tenders as they are better capable of paying their fees. PSIRA also intends on partnering with the SA Revenue Service (SARS) to determine which companies are capable of paying. With retrieval of information for audits, PSIRA has developed a combined assurance model to address the matter. There are also internal audits run on a quarterly basis.

Mr Chauke then explained why certain applications for firearms are rejected - applications are often rejected when there are discrepancies in information the applicant supplies PSIRA and the Central Firearm Registry. Regarding unregistered companies, the industry is highly competitive. There are some that offer their services at a lower rate because they can afford the overheads. Where a security company operates unregistered, arrests are made. When a company is reported to PSIRA as operating illegally, PSIRA takes action.

Regarding record keeping, PSIRA’s complaints system is inefficient but that is not linked to the record keeping system. Some of the complaints addressed to PSIRA are not necessarily PSIRA’s responsibility. Some of the complaints should be directed to the Commission for Conciliation, Mediation and Arbitration (CCMA), the Department of Labour and the Pension Adjudicator. PSIRA addresses the complaints to addressed to it. Mr Chauke admitted to the shortcomings in the system and stated it was being reviewed and gave an undertaking to improve the complaints system. There have been more complaints over the past year because PSIRA did more marketing to inform the public about the role of the security industry and PSIRA as the regulator of the industry.

Mr Chauke then responded to the question about legal action being taken against PSIRA by stating the reason there are a number of pending cases is because PSIRA has been sued by multiple parties in the past for varying reasons. When PSIRA defended those cases in court, the plaintiffs did not appear in court again. As a result, there a number of pending cases. Regarding the progress of the PSIRA Amendment Bill, there is still an exchange of information between the Civilian Secretariat for Police Service and other stakeholders. The stakeholders are still deciding whether the Bill should be sent back to Parliament or sent to the President to sign.

Mr Mhlongo heard complaints about PSIRA from small companies. On one occasion he heard small security companies complain on the radio about how they had to pay an annual fee despite not having any work. This was stifling and had to be looked into by the Committee. The Premier of KwaZulu-Natal also engaged with small companies on the same matter so the Committee could discuss the Premier’s findings. The Committee needs to intervene because PSIRA cannot address the problems it faces on its own.

The Chairperson asked PSIRA to comment on the increased use of illegal firearms. He noted that some security companies investigate organised crimes. He asked whether there is training for security guards to do work of this nature.

Mr Mbhele asked how many active registered companies there are and whether stakeholder meetings are held to engage with companies and interested parties. Also, have the meetings been well attended in the past? He noted that PSIRA partners with SAPS in certain instances. He asked what sort of framework facilitated that partnership.

The Chairperson noted that the President advised government departments and agencies to carry out lifestyle audits of its management. He asked whether PSIRA conducted lifestyle audits on its management.

Mr Chauke responded to the matter of organised crime by stating that PSIRA has worked with the Hawks to deal with organised crime. On stakeholder engagements, there are multiple forums where PSIRA meets existing and new companies but he could not give an exact number.

Mr Ngubane said there are lifestyle audits at PSIRA. Members of the Authority must declare companies they are linked to.

Mr Mbhele asked whether PSIRA is involved in rail security given that the Passenger Rail Agency of SA (PRASA) deploys private security on its premises. There is under deployment of security at railway stations because there are often reports of cable theft and burning of trains.

Mr Chauke responded that PSIRA is aware of the security challenges at PRASA and has engaged with the Agency about challenges it experiences.

The Chairperson took note of the unqualified audit and stated that a clean audit is the goal. He commended PSIRA on the progress made and acknowledged areas of improvement.

The meeting was adjourned.