Security Industry Regulation Bill: Security Officers Interim Board Input on Funding

Meeting report

SAFETY AND SECURITY PORTFOLIO COMMITTEE
20 June 2001
SECURITY INDUSTRY REGULATION BILL: SECURITY OFFICERS INTERIM BOARD INPUT ON FUNDING

Chairperson: Mr George

Relevant Documents:
Security Officers Interim Board Funding Model

SUMMARY
Currently the Board levies R200 per month from businesses. They propose to change this to R2 per employee for businesses. The Committee noted concern that this will affect the impartiality of the Board as the Board will be more financially dependant on big businesses. This concern is especially grave in light of the allegation that the Board has victimised smaller operations.

The Board also levies R7 per month from individual security officers. The Committee felt that the Board was not looking after the interests of security officers enough to justify levying this amount.

MINUTES

Security Officers Interim Board Presentation
Mr Birch (Senior Manager Finance and Administration on the Security Officers Board) made the presentation. Professor Visser, Mr Rolan, and Mr Mabena of the Security Officers Interim Board (SOIB) were also present.

Presentation
Sources of the Board's funding
Between 1996 and the present time the Board's income stream has increased. The money comes from fees collected from security officers, registration fees, and finances levied on business (amongst others). Thus, there has been significant growth. The growth in the income stream is also due to the increase in the number of security officers. Sixty percent of the funding comes from security officers who contribute to the Board monthly from their pay cheques. Businesses must also pay contributions on a monthly basis.

Thus the growth of the industry and the revision of the fee structure has led to an increase in funds. Additional revenue has been collected through the productive utilisation of the Board's assets.

Financial highlights and activity
Expenditure has grown and amounts to R30 million for the year 2000/2001. There has been a reallocation of this funding. In the past 5 years expenditure has switched to core business and away from administration.

The Board pays for fingerprinting applicant security officers. This amounted to R8 million in 1996/1997. Currently there is a staff complement of 121 people. This has been slightly reduced, previously there were 123 staff.

In 1999/2000 all the positions held at the Board were graded and this determined pay packages. Deloitte and Touche was involved in this process. The Board still maintains and pays for this service.

In 1997 only 24% of staff were Black. Currently 60% of staff are Black.

Staff is a major cost. Board member costs are currently R1.6 million. One reason for this is the Board must regularly attend meetings across the country and travelling expenses are high.

There are also legal fees and consultancy fees which must be paid.

In 1996/97 there was a R1,2 million deficit. The Board has increased its staff and legal resources with the result that the Board accumulated R1.7 million in reserves in 1996/1997. The Board now has reserves valued at R5.5 million. Some of this is tied to long-term investments. The cash reserves are currently approximately R3 million. This illustrates some growth.

In January 1999 to December 2000 the number of security officers increased dramatically. 3.3% of officers are not registered. This rate is considered unacceptable. The risk to the public is that these people (who are not registered) may be criminals.

Has SOIB become a cumbersome structure which does not work? They believe that the answer to this is ''no''. The cost of regulation is reasonable in respect of the service that is provided to the industry. The Board does not feel that they are placing an unfair burden on the industry.

The Board also presented proposed funding models.

[For details of the presentation please see annexure]

Discussion
Mr Ndlovu (IFP) asked if charging R2 per member was in fact a better option than charging R200 per company. Where a company had only one security guard the company would not contribute R200 but only R2.

Mr Birch replied that the Board feels that a subscription fee of R2 per month per guard is a more appropriate fee structure. The decision was taken with the Minister's approval.

Professor Visser emphasized that the Board is not happy with the current distribution of funding. It is not justifiable for the big companies to pay the same as the small ones. The Board wants to change the current formula.

Adv Swart (DP) commented on the proposed funding model. He said that fines should be listed as a surplus and not be a part of the financial plan. He asked what would happen if the level of compliance increases.

Mr Birch agreed with the comment on fines. The Board should not rely on fines for funding. Model 2 (which is the model the Board proposes) includes fines in the income. With this model they would have a surplus of R2.4million/annum. Therefore if the Board generates no fines this would not affect the ongoing operations of the Board. He noted that the ability to sustain operations with the current funding structure would not exist without fines.

Rev Meshoe (ACDP) commented that the presentation showed that the money for training dropped from 4% in 1996/97 to 3% in 2000/01. He asked if the Board has new recruits. He pointed out that there should be an increase in the amount of training since the need for security was increasing.

Rev Meshoe also pointed out that security officers pay R7/month to the Board. He asked how the security officers benefit from the amount of money that they pay to the board. Further, Rev Meshoe asked whether the security officers have a pension fund or medical aid and if the family receives some benefit if the security officer dies. In effect he asked how SOIB justifies taking the contribution from the security officers if the security officers receive nothing in return.

Mr Birch explained that training costs have decreased. This function is gravitating toward SETAs. Certain functions are gravitating away from the Board.

In respect of Rev Meshoe’s comments on the R7 /month contribution, Mr Birch said that there is no provident fund for officers on the ground. The Minister of Labour has now created an industry provident fund. This fund will be implemented within the next month or two. Currently no proper coverage is in place but there will be in future.

The primary focus of the SOIB is that the employment standards and the minimum wage levels are enforced. If organisations are not compliant then they will be fined. This has value for the officers.

The Chairperson pointed out that some of these functions mentioned by Mr Birch are performed by the Department of Labour anyway. These functions do not only apply to security officers but to other professions too. He asked what contribution the Board has made to the Labour Department's Provident Fund.

The Board replied that it ensures that the provident fund benefits are discharged.

The Chairperson commented that the gross minimum wage of security officers is
R 1 300. They work approximately 50 hours per week. He said that this amount is ridiculous considering security officers endanger their lives.

Rev Meshoe asked if the Board has considered paying the officers danger pay.

Mr Mabena said that this is not the worst scenario. The vast majority of companies do not comply with this minimum. The Board aims to ensure that people get at least R1300 per month. Some people get R 200/month. To them R 1300 is a fortune. SOIB has been forced to build up a network of inspectors to monitor this situation.

Mr Rolan said that the Board is not responsible for setting the minimum wage. The Department of Labour does this with the bargaining council. The Board at least enforces the minimum wage.

The Chairperson asked why the security officers are regulated by the Department of Labour if each officer pays the Board R7 per month. He asked what value the officers get for paying the Board R7 every month.

Mr Mabena insisted that the security officers do receive a benefit. The Board enhances the status of security officers by pressurising the Department of Labour to address issues. The Board calculates months for which officers were underpaid or not paid and ensures that these officers are paid accordingly. The Board is the Agency which ensures that security officers are accounted for in the Provident Fund.

The Chairperson said that the Committee was not in a position to answer to these claims and suggested that the Committee move on to other issues.

Ms Van Wyk (UDM) said that it is disturbing that the officers will in future be the main source of income and not be provided with proper protection. She commented that the funds allocated towards training officers in the budget was a very small part of the expenses. She was concerned that the regulatory part of the Board is not presently considered an expense and argued that this should be categorised as an expense. She also pointed out that there is a low turnaround of income from fines.

Ms Van Wyk remarked that there were allegations against the Board that it focuses on regulating smaller businesses and not larger companies. She asked if the Board’s neutrality would be affected if the Board requests R2 /employee.

Mr Birch replied that the annual fee paid by businesses is not enough. If business receives a benefit from the industry it should be responsible for regulation costs.

Mr Rolan insisted that the allegations of victimisation of small businesses are only in fact allegations. The industry has perceived victimisation because of increased regulation.

An ANC Committee member asked if there is any corrective strategy to ensure that people do comply with the regulations. He also asked why senior management staff were outsourced. He suggested that the Board should rather build in-house capacity.

Professor Visser replied that the Board faced a crisis in 1996 and had to appoint competent people fast. There was corruption. Mr Ronan and Mr Birch were appointed and their contracts were renewed on a number of occasions. It is not the Board’s intention to continue outsourcing senior management staff in the long term. It has worked for the Board up until this point. They have not been disappointed with the performance. This is an interim Board only and it will terminate upon the date of final extension – the 28^th February 2002.

Mr Swart pointed out that the new Board will consist of five members only and asked whether the Board will be able to manage all of its functions with this many members.

Professor Visser agreed that there is a lot of work. He explained that whether the number of members is adequate depends on whether the staff is full time or part time staff. If the current profile of Board activity is to continue then 5 part-time members is not adequate.

Professor Visser went on to explain that there is a discussion paper which contains a theory for some state funding. This funding could be used for a certain aspect such as the cost of fingerprinting (R2million/year). It will be a way of reducing the fee for security officers. The State could fund that particular expense.

Professor Visser said that there are 3 funding models. There could be exclusive state funding, exclusive industry funding, or mixed funding. SOIB prefers the idea of mixed funding. The Department of Finance said that they do not like this. They assume that the current draft of the Bill will go through which will create antipathy. This is bad if one needs SOIB for funding. SOIB suggests the mixed funding option.

In conclusion the Chairperson said that the Secretariat must look at the issue whether Board members of the new Regulatory Authority must be full-time.
The issue of mixed funding must be considered. If all funds come from the state, then a Money Bill is not needed.

Update on the Money Bill from the Secretariat
The Money Bill is in the process of being wrapped up. The Deputy President's office assured the Secretariat that the process will be fast-tracked to meet deadlines. The Minister of Finance will have to table the money Bill (in terms of the Constitution).

The meeting was adjourned.