New prisons: progress report by Correctional Services; Public Works and National Treasury
Correctional Services
02 May 2006
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
CORRECTIONAL SERVICES PORTFOLIO COMMITTEE
2 May 2006
NEW PRISONS: PROGRESS REPORT BY CORRECTIONAL SERVICES; PUBLIC WORKS AND NATIONAL TREASURY
Chairperson: Mr D Bloem (ANC)
Documents handed out:
New Generation Correctional Centres: Briefing Synopsis
Virement and Related Matters
SUMMARY
The Department of Correctional Services, the Department of Public Works and the National Treasury appeared before the Committee to give a report on the progress of the new generation prisons as well as on the virements of the Department of Correctional Services. All stakeholders agreed that the Department of Correctional Services had acted within the parameters provided by the Public Finance Management Act. No unauthorised re-channeling of funds had occurred. The Committee was given the assurance that the new generation prisons would be built. Members raised questions relating to the rehabilitation facilities at the new prisons as well as their location. Some were concerned about apparent discrepancies between the figures presented in this meeting and those presented during the earlier budget presentation.
MINUTES
Minister’s opening remarks
Minister of Correctional Services N Balfour welcomed the opportunity to lead the delegation in the briefing on the virement and reprioritising processes within the Department of Correctional Services (2005/6), on its expenditure in relation to facilities and security during that year as well as on the process of procuring four new generation facilities. He pointed out that these prisons should not be confused with the four prisons which would be built later.
Speaking as a fellow Member of Parliament (MP) he said that South Africa’s Constitution defined very clearly the powers of the National Assembly (NA). It stated that the NA must provide for mechanisms to ensure that all executive organs of state in the national sphere of Government were accountable to it. The NA had to maintain oversight of the activities of the National Executive Authority.
Members of Portfolio Committees had a constitutional obligation and should conduct themselves in a manner consistent with the status of the Constitution. It was an important principle of South Africa’s Parliament that their responsibilities were exercised in full public scrutiny. All MPs had to conduct themselves in a manner that would not detract from the public forum in which it performed. They had a responsibility to investigate the veracity of all allegations of impropriety in all spheres of government. It was also of critical importance that they withheld their judgment until the facts and explanations before them had been fully interrogated.
South Africa’s vibrant media played an important role in the area of investigative journalism. One had to recognise however that the ethics, interests and obligations of MPs and journalists were very different. It was very inappropriate for public representatives to be driven by what was reported in newspapers. MPs should recognise that journalists had different agendas. It was important to rise above being manipulated by others’ agendas. Public utterances should be based on sound investigation and analysis of the facts.
As Minister of Correctional Services he had to alert the Portfolio Committee to various developments within the Department over the last few years that might well have "antagonised various interest groups". He raised this issue in order for the Committee to be better equipped to interpret the statements made by various role players.
Over the past five years the Department significantly closed the space for corruption and irregularities in the area of information technology (IT) and addressed the unnecessary plethora of applications for diversion in the IT environment.
The Department has also made systematic progress in the area of procurement thereby ensuring that they enabled Black Economic Empowerment. At times this resulted in traditional service providers to the Department no longer occupying a secure space.
The Department took direct responsibility for the procurement of security, effectively shifting this function from the Department of Public Works (DPW). New service providers now also had the opportunity to be considered for contracts.
The Department made a significant policy shift away from public private partnership (PPP) prisons. This was based on the cost of the two already existing PPP prisons, on the basis of international debate about the constitutionality of private companies being responsible for the incarceration of citizens and on the basis of the assessment that in a number of respects the current situation was not enabling the management of the correctional system in a fashion that was in line with the Department’s White Paper. Private companies did not have a clear understanding of the White Paper, they were not as focused as Department officials and they were not addressing critical problems such as overcrowding and rehabilitation.
These processes had a direct impact on the financial interests of role players in the Department and there was much dissatisfaction with the direction the Department has taken. The Department was creating better institutional capacity that would enable delivery on the White Paper. The interests of individual service providers would not sway him. The Department was mandated to ensure that South Africa had correctional services that would contribute to the protection of a just, peaceful and safe society. It had to ensure the safe custody of offenders as well as their human dignity and the promotion of social responsibility.
The Committee should have a clear understanding of the fact that the reprioritising of expenditure and virements were legitimate financial management processes, which took place within the guidelines as specified by the Public Finance Management Act (PFMA) and the National Treasury.
During the course of the financial year, quarterly shortfalls and surpluses enabled the Department to shift money from certain areas into others. These shifts could occur within a budget programme or across budget programmes and were subject to certain restrictions. Moneys allocated to personnel salaries could not be reallocated without the authorisation from National Treasury. Moneys allocated to capital works programmes could not be shifted outside of the infrastructural programmes of the Department. The accounting officer had to report virement processes to National Treasury while National Treasury had the responsibility to ensure that such virement processes complied with the regulations.
In the 2005/06 financial year, Commissioner of Correctional Services, Mr Linda Mti on recommendations from all the Chief Deputy Commissioners (CDCs) made virements in terms of the PFMA. National Treasury had made no queries regarding the virements. There had been no virement to the value of the about R1, 8 billion allocation for building and other fixed structures. The only virement in the capital assets section was made with the permission of the National Treasury - a saving from the compensation for employees budget was shifted to machinery and equipment.
Hopefully the explanations the Committee would hear would assist them in better understanding the process of budget allocations, reprioritising and virements as well as to show that the Department had acted responsibly in their financial management.
He assured the Committee that the programme to build all eight new generation prisons was on course albeit with some delays. He was convinced that the delays had been due to the complexity of the coordination of the procurement of capital works through the Department of Public Works (DPW), Department of Correctional Services (DCS) and National Treasury as well as due to the meticulous manner in which the Commissioner has sought accurate information before making decisions involving massive amounts of the capital works allocation.
The DCS was faced with the need to build correctional facilities overnight while being committed to ensuring that procurement would be properly managed. It was the accounting officer’s responsibility to ensure that before taking any major financial decision he and his senior management were comfortable with the costing information that was presented to them. The processes that took place indicated that the Commissioner had limited control over the functioning of the procurement and delivery process in relation to capital works. This function lay with the DPW. DCS raised this issue in a presentation to the National Treasury in September 2005. In the past 9 months the DCS has interacted with the DPW to address some of the issues related to this problem. The CDC Finance, Mr Patrick Gillingham, systematically addressed the lack of control over budget expenditure due to decisions that lay with the DPW.
The last two months had been a "very bruising" time for himself, the Commissioner as well as for the Department. They had suffered at the hands of the media as well as the hands of some MPs. He hoped that everyone would learn to handle their responsibilities in a manner that would not result in premature attacks on individuals. He also hoped that oversight responsibilities would not be marred by premature judgments and accusations. He urged that the "very important oversight responsibilities of the NA not be sullied by premature judgments".
He reminded the Committee that the capital works programme of the DCS was very complex. He, as well as his predecessor, tried to keep the Committee informed. He would continue to brief the Committee on the status of the delivery of the four new generation prisons as well as of the costing and challenges of the procurement of correctional facilities. It had to be noted however that DCS was concerned about making public comments on sensitive procurement issues for fear of jeopardising the process. The Department had to make sure that the balance between ensuring "uncompromised procurement processes" and accountability to the Committee was found. The responsibility of improving the systems to ensure appropriate control over budget expenditure and budget allocation while controlling procurement processes lay with the DPW.
The DCS trusted that the Committee would on the basis of the facts presented today ensure that none of these issues were raised again. The Minister, Deputy Minister as well as the accounting officer should be called to appear before the Committee to give a balanced view of what was happening. He reiterated that the DCS was always at the Committee’s disposal. He hoped that the Committee would see that there had not been any wrongdoing by the DCS.
Department of Correctional Services Presentation
New Generation Correctional Centres – Briefing Synopsis
Mr Patrick Gillingham, Chief Deputy Commissioner: Finance briefed the Committee on progress that has been made with the first four prisons since 2000. This covered the bidding phase, the adjudication phase as well as current developments. His briefing also included developments on the second group of prisons, which were in the feasibility studies phase.
Virement and Related Matters
Mr Gillingham presented a detailed outline of the Estimates of National Expenditure (ENE) for the DCS’ facilities programme over the 2005/6 – 2007/8 financial period as well as the virements for 2005/06. The DCS had been allocated a budget of approximately R1, 2 billion for capital assets. R390 million had been spent on new facilities. No unauthorised amounts had been reprioritised and reprioritisation had occurred within the parameters set by the Public Finance Management Act (PFMA).
Comment by National Treasury
Mr V Mbethe (National Treasury: Chief Director Protection Services) said that in terms of the Public Finance Management Act (PFMA) the DCS was allowed to shift up to 8% of their funds from one programme to another. For an amount greater than 8% the DCS needed National Treasury’s authorisation. For an amount of 8% or less only the Minister’s authorisation was needed. He informed the Committee that virement could not be authorised if it would lead to an increase in personnel expenditure or an increase in transfer payments. The DCS had acted in compliance with the PFMA.
Mr Mbethe reminded the Committee that due to savings incurred from the phasing in of the Seven Day Establishment (overhaul of overtime policy) and the overhaul of the medical aid fund (officials now contributed to the medical aid fund) the DCS had managed to cut a lot of costs.
DCS had approached National Treasury for additional funds. National Treasury could take the savings that had been made and then allocate an additional amount to attend to the urgent things that needed to be done.
The savings were originally intended to appoint new officials as part of the phasing in of the Seven Day Establishment. He pointed out that there was a limitation on the number of new recruits that could be trained in one year. The DCS then asked whether the money that would not be used for training could be spent on the prisons. He reiterated that the DCS had been fully compliant with the PFMA. The Auditor-General’s report would be included in the DCS’ annual report. As part of budget reform the National Treasury had initiated some changes to the budget agreement precisely to enable the Committee to affectively address issues around the budget. National Treasury appreciated the Committee’s involvement in the process.
Discussion
The Chairperson reminded the Committee that they now had the Department of Correctional Services (DCS), the Department of Public Works (DPW) and National Treasury before them and should therefore ask for all the information they needed in order to get clarity on issues related to the new prisons.
The Chairperson said that Minister Balfour and Mr Gillingham had made clear that the R1,2 billion that had been set aside for the prisons had not been re-channelled. This had been the Committee’s main concern.
Mr J Selfe (DA) noted that the presentation indicated that the earthworks (amounting to about R80 million) for three of the prisons were complete. What was the status of the earthworks at the moment? If the DCS decided to continue building the prisons would the earthworks require further work? He was particularly concerned about the status of the earthworks at the Leeuwkop prison.
Mr Gillingham indicated that the DCS was in discussion with DPW regarding the rehabilitation of the earthworks at the Leeuwkop and Nigel prisons. He added that there were many reasons, such as the prevention of erosion, why the preservation of the earthworks was important.
Mr Selfe was also concerned that the figures Mr Gillingham quoted in the presentation of the ENE appeared to be different from the figures quoted in the ENE in the budget.
Mr Gillingham responded that he would only be able to respond once he had the documents before him. He would respond to this question at a later stage.
Mr Selfe pointed out that on 21 June 2005 the DCS gave a presentation on the construction of the prisons. In this presentation the DCS indicated that the main building works of the Kimberley prison amounted to R499 million, which was the recommended tender. Today’s presentation however indicated that the cost of the Kimberley prison, as adjudicated in April 2005, came to R571, 7million.
Dr Shaun Philips (Acting Director General: DPW) explained that the recommended tender price for the Kimberley prison was R499 million. The DPW had a standing clause in its contract that provided for a contract price adjustment. This allowed contractors to claim additional amounts due to escalation in the cost of building. The figure quoted in the latest presentation included the estimated 15% increase due to the contract price adjustment provision.
Ms W Ngwenya (ANC) noted that the presentation indicated that the Polokwane prison, which would be part of the second set of prisons to be built, was still at the negotiating stage. Mr Gillingham had explained that there was a shortage of funds for this prison. The budget on the other hand indicated that there was enough money.
Mr Gillingham indicated that funds were available but that the DCS was experiencing difficulties in securing a suitable site for the prison. The DCS had identified a piece of state owned land but subsequently found that the land was not suitable for the project. The DCS then identified a piece of privately owned land. The offer to sell the land was later withdrawn.
Adv S Swart (ACDP) said that everyone was concerned about when the first set of prisons would be completed. The Kimberley site was to be handed over by September, but it was reported that there was a two-week delay. He wondered when this prison would be complete and ready for occupation?
Mr Gillingham answered that DPW was better able to respond to this question. As far as DCS was concerned the prison should be complete within 24 months of the tender being awarded. Dr Philips concurred that construction should take 24 months.
Adv Swart requested clarity on the financial model that would be used for the Klerksdorp and Nigel prisons.
Mr Gillingham replied that the DCS invested lot of time, energy and money into the design of the prisons. The DCS could however not guarantee that the design would remain the same. He reminded Members that there were many new developments as far as prison design was concerned. These needed to be taken into account and improvements to the design might need to be made.
Mr Gillingham added that in terms of the finance model the private sector would design a concept facility and would then also finance the building of the facility. The private sector would then maintain the facility for a minimum of 15 years with the option of extending the contract for a further 5 years. Since major maintenance issues normally arose within 12 to 15 years, this arrangement would ensure that the DCS had access to a properly maintained facility. The maintenance would extend to electronics, furniture, etc. The DCS was considering a number of options. It was also considering making a contribution to the costs since this would reduce the monthly payments it would have to make.
Adv Swart requested clarity on the process surrounding the award of tenders for the fencing, X-ray scanner and the TV monitors.
Mr Gillingham informed Members that as far as the progress on the X-ray tender was concerned the tender had been published and the adjudication process was underway. The fencing tender was advertised for the required 30 days, the adjudication process had been completed, and the bid committee had awarded the tender to the successful company.
The Chairperson wondered what the R1, 2 billion would be spent on since the prisons were to be built by a private company.
Mr Gillingham explained that the approximately R1, 2 billion mentioned in the presentation would be spent on a number of things and not only on the prisons.
Commissioner Linda Mti wanted to know whether the Chairperson was concerned about what role the private sector had to play if R1, 2 billion was clearly available.
The Chairperson explained that he was not concerned but that he merely wanted to know what the R1, 2 billion would be spent on.
Mr Gillingham reiterated that the money would not be spent on the new prisons but would be spread across a number of activities. Looking at the medium term expenditure framework (MTEF) the DCS had money available for new facilities. According to their projections they would have money available for new facilities. He pointed out that one of the benefits of the project finance model (PFM) process was that the DCS would not have to pay the full amount for the construction of the facility in one payment but would be able to make a once-off contribution followed by monthly instalments. This would leave much room for reprioritisation in terms of other projects should there be a need for it.
Mr N Fihla (ANC) said that the rehabilitation of offenders was one of the government’s fundamental policies. He wondered what facilities the new prisons would have that would assist in terms of rehabilitation.
Ms Jenny Schreiner (Chief Deputy Commissioner: Central Services) said that the new generation design process was started before the DCS started their work on the White Paper. Parallel to the refinement and finalisation of the design for the new generation prisons the DCS had been working on the draft discussion document on the White Paper. The new generation prison design was then revisited to ensure that the facilities the DCS deemed necessary for rehabilitation would be present. She added that throughout the process DCS was aware that the project needed to be cost effective. The prototype design provided the facilities required for rehabilitation and would be cost effective. The design was based on the principles of unit management and moved away from large communal cells to smaller residential units. It allowed for consultation rooms that would enable social workers, psychologists and other health workers to interact with the offenders. Multi purpose facilities that could be used for spiritual care, educational purposes or for development programmes run by the DCS or non-governmental organisations were also catered for. There would also be workshops and other such facilities. She assured the Committee that the DCS went through a fairly complex, albeit tedious process to ensure that the new generation prisons would have the facilities that would allow for rehabilitation.
Mr Fihla was concerned about the fact that some of the new prisons would be built in areas where there were already prisons. He asked whether it would not be a better idea to spread prisons across regions as this would also aide job creation.
Ms Schreiner replied that the DCS was well aware that they needed to revisit the parameters used in terms of the existing sites, which were determined a long time ago. She said that in addition to the creation of employment and contributions to the economy the DCS also had to determine which communities offenders came from. It was important to ensure that facilities were located as close as possible to these communities so that the relationship between offenders and their families and communities could be maintained.
Ms Schreiner thought that there was a need to move away from the kinds of facilities that were currently being used and to review the process. It was critical that the Committee understood that the capital works programme was a medium term process.
Mr Selfe wondered whether the revisiting of the sites implied a serious intention by the DCS to relocate facilities.
Ms Schreiner explained that the location of sites would be considered in future decision making. Given that capital works programmes were medium term issues, decisions taken in the past might only be delivered in the present timeframe. Decisions taken in the past might not be consistent with the latest developments and might not aid the DCS’ goals in terms of rehabilitation.
Minister Balfour said that the DCS would be "naïve and stupid" to have put in so much effort to simply change their minds. This would be "very silly, wasteful expenditure". He assured the Committee that for the second group of prisons for which very little had been done so far, a number of issues would be considered. One of these related to the building of facilities in areas that already had facilities. If the DCS were to contribute to the Accelerated Shared Growth Initiative for South Africa (ASGISA), to poverty alleviation and to job creation it would need to address certain issues.
He reiterated that the second set of new prisons in East London, Polokwane, Port Shepstone and Paarl would be carefully considered in terms of their location. The first four for which the preliminary work had already been done would remain at the designated sites.
Mr Selfe said that he assumed that the sites for East London, Paarl and Port Shepstone would also not change since their sites had already been earmarked.
Mr E Xolo (ANC) asked what assurance the DPW could give that they would have completed the prisons within the specified timeframes.
The Chairperson added that the building of the prisons have been before this Committee since 2004. The Committee still had no explanation for why they had not been completed. One could not merely keep talking about them.
Dr Philips said that the first four prisons had been subject to many design changes and additions to the designs. As changes were made, the costing of the project changed. He thought it unlikely that there would any further changes to the designs. The DPW was committed to making the best informed decisions regarding the building of the prisons and completing the project within the specified timeframes.
Mr Selfe asked whether the contracts for information technology, fleet management and television monitors had already been awarded and to whom. If they had not been awarded he wondered why not.
The Chairperson suggested that the awarding of contracts to particular contractors should be addressed at a later meeting. He requested Mr Gillingham not to mention the names of the companies who had been awarded contracts.
Mr Gillingham said that as far as IT equipment were concerned the DCS made use of existing Sector Education and Training Authority (SETA) supplier contracts. The contract for the television monitors was awarded in early March.
Mr Selfe asked if it was possible to get a copy of the report of the transactional advisor on the two existing PPP prisons. This would assist the Committee in understanding the issues around possibly renegotiating these contracts.
Mr Gillingham suggested that due to the size and technical nature of the report the transactional advisor could prepare a presentation that could be made to the Committee.
Dr Philips indicated that he was satisfied with what had been reported to the Committee.
The Chairperson thanked all contributors and gave the Commissioner and the Minister an opportunity to make closing remarks.
Minister Balfour pleaded with Commissioner Mti not to say anything. He would say everything that needed to be said. The past few weeks had been "very tough" but the DCS was "getting there". DCS had received a lot of negative publicity. Everytime one read a negative report one wondered what caused it. Their names had been flung around.
The Chairperson said that he would rule the Minister out of order if he continued in the direction he was going. He urged the Minister to simply give his closing remarks.
The Minister pleaded with the Committee to approach the DCS when they needed any information. They were ‘a call away’. He realised that information was necessary if the Committee was to perform its oversight duties. He pointed out that sometimes there might be a schedule clash or officials might not be available. He pleaded with the Committee to give the DCS enough time to prepare for presentations. He urged the Committee to call upon the DCS when things were reported in the media of which they were unsure. DCS was in a position to give immediate clarification.
He concluded by saying that DCS was focused on rehabilitation, contributing to the country and ensuring that ASGISA was a success. DCS had to make sure that it functioned efficiently, effectively and humanely.
The Chairperson said that the decision to call the DCS to give clarification was based on an Imbizo that was held in Kimberley. Residents had raised issues around the building of the prison in that area. On 29 March the Minister, through Deputy Minister Jakobus said that he along with National Treasury and the DPW would at a later stage give a thorough briefing.
He pointed out that that day no Member had been prevented from asking any questions. He was satisfied that the DPW and National Treasury gave their side of the story. The DCS had assured the Committee that the funds for the building of the prisons were still available and that the prisons would be built. He was pleased that the DPW too had given their assurance that the prisons would be completed. He concluded by saying that the media now had first hand information from all the role players. He was sure that the meeting had cleared the air of any misconceptions.
The meeting was adjourned.
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