ATC201125: Budget Review and Recommendation Report of the Portfolio Committee on Police on the Private Security Industry Regulatory Authority (PSIRA) performance for the 2019/2020 financial year dated 25 November 2020
Police
Budget Review and Recommendation Report of the Portfolio Committee on Police on the Private Security Industry Regulatory Authority (PSIRA) performance for the 2019/2020 financial year dated 25 November 2020.
1. Introduction
The Money Bills Procedures and Related Matters Amendment Act, (Act 9 of 2009) requires that a Budget Review and Recommendation Report (BRRR) be tabled in October every year. The Minister of Finance agreed to exemptions to allow departments to hand in their Annual Reports in the middle of November 2020. This was primarily because of the effects of the COVID-19 pandemic on the business of Parliament and government. The Portfolio Committee held a preliminary annual report assessment hearing on 13 October 2020 and the BRRR hearings on 18 November 2020. The Portfolio Committee on Police, having considered the 2019/20 Annual Report of the Private Security Industry Regulatory Authority (PSIRA) reports as follows:
1.1 Mandate of the Committee
The mandate of the Committee therefore is to fulfil its constitutional function to:
- Pass legislation; Scrutinise and oversee executive action and the organs of state including the South African Police Service (SAPS), the Civilian Secretariat for Police Service (CSPS), the Independent Police Investigative Directorate (IPID) and the Private Security Industry Regulatory Authority (PSIRA);
- Facilitate public participation and involvement in the legislative and other processes; and
- Engage, participate and oversee international treaties and protocols.
1.2 Purpose of the Budget Review and Recommendation Report
In terms of Section 5 of the Money Bills Amendment Procedures and Related Matters Act, No.
9 of 2009 the National Assembly, through its Committees, must annually compile Budgetary
Review and Recommendations reports (BRRR) that assess service delivery and financial
performance of departments and may make recommendations on forward use of resources. The
BRRR is also a source document for the Committees on Appropriations when considering and
making recommendations on the Medium Term.
The Money Bills Amendment Procedures and Related Matters Act, section 5 (3) highlights
focus areas on the budgetary review and recommendation report as:
- Providing an assessment of the department’s service delivery performance given available resources;
- Providing an assessment of the effectiveness and efficiency of the departments use and forward allocation of available resources; and
- Including recommendations on the forward use of resources.
This report is structured as follows:
Section 1: Mandate of the Committee. This sections sets out the mandate of the Committee, the purpose of this report (Budgetary Review and Recommendation Report) and the process to develop this report.
Section 2: Overview of the Private Security Industry 2019/20
Section 3: The section provides a summary of the AGSA Report for 2019/20.
Section 4: Financial overview 2019/20 The section provides an overview of the financial performance of the Authority.
Section 5: Performance against predetermined targets for 2019/20. The section provides an analysis of the Authority’s performance against predetermined performance indicators and targets.
Section 6: Human Resources. The section provides for an organisational development initiative.
Section 7: Committee observations. The section provides the key observations made by the Committee during engagements on the 2019/20 Annual Report of the Authority.
Section 8: Committee recommendations. The section provides the recommendation made by the Committee.
2. OVERVIEW OF THE PRIVATE SECURITY INDUSTRY 2019/20
The figure below shows that South Africa has 2 495 899 registered security officers and 10 289 registered security businesses. However, the mandate of PSIRA largely extends to active officers and businesses. In terms thereof, less than a quarter of the total number of security officers are actively registered (548 642 officers) and 9 744 registered security businesses are active.
Table 1: Total Security Service Providers as at 31 March 2020
|
Total Number of Registered security businesses |
Total Number of Registered and Active security businesses |
Total Number of Registered inactive security businesses |
Total number of registered security officers |
Total number of registered and active security officers(employed and independent operators) |
Total number of registered inactive security officers |
|
10 298 |
9744 |
554 |
2 495 899 |
548 642 |
1 947 257 |
Source: PSIRA 2019/20 Annual Report, page 59
Since 2014, active security businesses increased from 8 144 to 9 744 in 2020 (19.6%) and active security officers increased from 487 058 to 548 642 (12.6%) over the same period. The number of both active security guards and businesses increased with 3% in 2020 compared to 2019.
In 2020, the private security industry remained male dominated, comprising of 71% male officers and 29% female officers. Compared to the previous year, the number of female officers increased to 29% (from 22%) and male officers decreased from 78% (to 71%). In terms of age profile, the most guards are between 30 and 40 years of age (216 615 guards), followed by 40 to 50 years (158 894 guards).
The largest concentration of active security officers and businesses are located in Gauteng, KwaZulu-Natal and the Western Cape. While the number of active security guards in provinces remained relatively unchanged, Gauteng had an increase of 5 395 guard in 2020 compared to the previous financial year (2018/19:197 369; 2019/20: 369 202 764).
3. REPORT OF THE AUDITOR-GENERAL OF SOUTH AFRICA (AGSA)
PSIRA received its first clean audit in 2018/19, which continued in 2019/20. This means that the Authority did not record any financial misstatements and there were no material findings on reporting on performance objectives or non-compliance with legislation. Importantly, the AGSA did not identify any significant deficiencies in internal control.
As in previous financial years, the AGSA identified two matters of emphasis that the Authority should address, both of which were previous identified. These are –
- Material impairment: Provision for an impairment to the amount of R40 759 816 was raised on trade debtors. This is a slight deterioration from the R38 770 242 provided for in 2019.
- Uncertainty relating to litigation: PSIRA is a defendant in several legal actions. The estimated liability amounts to R1 950 000, which is an increase from R1 050 000 in contingent liabilities in the previous financial year (2018/19).
The table below show the audit outcomes for PSIRA over the past decade (2009/10 to 2019/20). PSIRA has made significant gains to clear previous material findings, especially in terms of its financial sustainability.
Table 2: PSIRA Audit Outcomes
|
Financial year |
Audit outcome |
|
2009/10 |
Qualified |
|
2010/11 |
Unqualified with material findings |
|
2011/12 |
Unqualified with material findings |
|
2012/13 |
Qualified |
|
2013/14 |
Unqualified with material findings |
|
2014/15 |
Unqualified with material findings |
|
2015/16 |
Unqualified with material findings |
|
2016/17 |
Unqualified with material findings |
|
2017/18 |
Unqualified with material uncertainty relating to the entity’s ability to continue as a going concern. |
|
2018/19 |
Unqualified with no material misstatements and findings (Clean audit). |
|
2019/20 |
Unqualified with no material misstatements and findings (Clean audit). |
4. STATEMENT OF FINANCIAL PERFORMANCE 2019/20
PSIRA’s financial sustainability decreased in 2019/20 compared to the previous financial year. At year-end, PSIRA closed with a surplus of R2.163 million against R3.286 million recorded in the previous financial year. (Note: In 2017/18, PSIRA recorded a R12.4 million deficit).
During the year under review, the Authority collected R316.144 million in revenue compared to the R286.168 million revenue of the previous financial year (10% increase). The overall increase in revenue was mainly due to a significant increase in non-exchange transactions. The main driver of this increase was revenue collected from Fines and Penalties. The expenditure of PSIRA increased from R282.622 million in 2018/19 to R313.909 million in 2019/20.
The table below provides a breakdown of the Authority’s financial performance in 2019/20 compared to the previous financial year.
|
Table 1: Statement of Financial Performance |
||
|
Financial year |
2019/20 |
2018/19 |
|
Operating Revenue |
|
|
|
Total revenue from exchange transactions |
287 850 900 |
248 132 892 |
|
Revenue from non-exchange transactions |
28 293 272 |
37 324 886 |
|
Total Revenue |
316 144 172 |
286 168 075 |
|
Total operating expenditure |
(313 909 695) |
(282 622 608) |
|
Operating surplus (deficit) |
2 234 47 |
3 545 467 |
|
Profit/(Loss) on disposable assets |
(71 488) |
(258 901) |
|
Surplus/ (Deficit) for the year |
2 163 029 |
3 286 566 |
Source: 2019/20 Annual Report
The Authority lowered its provision for debt impairment from R24.13 million in 2018/19 to R15.78 million in 2019/20.
In terms of contingent liabilities, the Authority is a defendant in a number of legal actions. The cases are yet to be brought before the court. It is not possible to determine the losses that PSIRA would suffer in the event that the Court found against PSIRA. The estimated liability amounts to R1 950 000 in 2019/20 compared to R1 050 000 in 2018/19.
The Authority did not incur irregular expenditure during the 2019/20 financial year. This is the third consecutive year in which the Authority did not incur irregular expenditure.
During the 2019/20 financial year, fruitless and wasteful expenditure increased significantly from R20 958 in 2018/19 to R92 595. According to PSIRA, R82 800 was for the retention fee for fundraising.
5. PEFORMANCE AGAINST PREDETERMINED TARGETS FOR 2019/20
The Authority has achieved 96% of its predetermined performance indicator targets at the end of the 2019/20 financial year (24 targets achieved from 25). The Finance and Administration Programme underperformed on one performance target (failed to achieve target on employee training).
The graph below shows a visual representation of performance between 2015 and 2020. In 2019/20, the Authority recorded its best performance in five years.
Table 3: Comparative performance between 2015/16 and 2019/20
5.1. Administration Programme
Purpose: Provide leadership, strategic management and administrative support to the Authority.
Measurable Objectives: The programme aims to ensure effective leadership, management and administrative support to the Authority through continuous refinement of organisational strategy and structure in line with appropriate legislation and best practice.
The Administration Programme achieved six out of seven performance targets, which is an achievement rate of 85.7%, which is similar to the previous financial year.
According to the Authority, it achieved 83% of the planned 85% training interventions as per the Annual Training Plan (two training programmes were not completed). According to the Authority, this was due to the shutdown of training institutions due to the COVID-19 National Lockdown. However, the lockdown came into effect on 27 March 2020, which was five days before the end of the 2019/20 financial year. Why did the Authority leave two training programmes to the last week of the financial year? At the end of the third quarter (2019/20), the Authority was ahead of its training schedule for employees (achieved 63% against a target of 50%).
5.2. Law Enforcement Programme
Purpose: Ensure that there are effective regulations in the security industry and enforcement of law and compliance to the regulations.
Measurable Objectives: The programme aims to ensure that Security Service Providers comply with the regulations by doing regular inspections for both security officers and security businesses and ensure that those who are complying with the regulations are charged and prosecuted.
The Law Enforcement Programme achieved 100% of its nine predetermined performance targets at the end of the 2019/20 financial year, most of which were exceeded. It is the second consecutive year in which the Programme achieved 100% of its performance targets.
Selected highlights of the Law Enforcement Programme include:
- PSIRA inspected 7 155 security businesses in 2019/20 compared to 683 in 2018/19. The Committee should note that, according to PSIRA, there were 9 744 registered active security businesses in 2019/20, which means that PSIRA inspected 73.4% of all security businesses (unless some businesses were inspected more than once).
- Total enforcement investigations increased from 3 725 in 2018/19 to 3 838 inspections in 2019/20.
- Total cases opened based on criminal investigations increased from 1 056 cases in 2018/19 to 1 150 cases in 2019/20.
- PSIRA issued 1 634 Regulation 3(4) notices on improper conduct prosecutions.
5.3. Communication, Training and Registration Programme
Purpose: Provide effective stakeholder engagement. Ensure that training standards are adhered to and the registration process is done in accordance with the PSIR Act.
Measurable Objectives: Ensure effective and meaningful stakeholder communication. Ensure that all training institutions are aligned to the required standard of training. Ensure that the registration process is effective and authentic. Continuous research to support core business initiatives and policy development.
The Communication, Training and Registration Programme achieved 100% of its performance target for 2019/20. The performance improved compared to the 79% achievement rate of the previous financial year.
6. HUMAN RESOURCE MANAGEMENT
At the end of March 2020, the PSIRA had 319 permanent staff members, of which most is attached to the Law Enforcement (176 staff), followed by Finance and Administration (97 staff) and Communication and Training (46 staff). PSIRA further had 12 employees on a fixed-term contract and 35 interns.
Personnel expenditure constitutes 58% (R172 958 461) of the Authority’s budget which provides for remuneration and other additional benefits which are paid to employees.
As at 31 March 2020, the average vacancy rate for the Authority was 1.85% overall, which represents six vacancies. During the 2019/20 financial year, 16 employees resigned, one employee went on retirement, 26 employees’ contracts expired and the Authority dismissed one employee on misconduct charges.
7. COMMITTEE OBSERVATIONS
The Committee made the following key observations during the 2019/20 Annual Reporthearing:
Audit Opinion: The Committee congratulated and appreciated the Authority for obtaining a clean audit during the 2019/20 financial year. The Members of the Committee expressed satisfaction with the positive audit outcomes of the Authority. The Members further encouraged the Authority to remain consistent in achieving clean audit outcomes.The Committee noted the concerns highlighted by the AGSA on the Audit findings. The Authority should explain what the action plans to address these findings are and how they will monitor the implementation and progress in terms of the action plans on the audit findings.The Committee took into account the fact that the Authority is aself-funding institution without receiving any funding from the government.It is creating its own initiatives to sustain itself by generating income through collection of funds from the security industry and used it effectively.
The Authority stated that it has house-keeping findings only. The action plan was presented to the Audit Risk Committee. The action plans will be implemented and tested by the Internal Audit company to ensure that they have addressed the process.
Delay in appointment of Council Members:The Committee strongly expressed its dissatisfaction that the appointment of new Council was not finalised within thestipulated timeframes. The Authority should provide reasons why the process of filling the position of Council Member has not yet been finalised. The Committee will write a letter to the Minister to express its dissatisfaction in this matter as the delaycannot be allowed. Members understood that the vetting process should be done before the information is submitted to the Cabinet.
The Deputy Minister explained to the Committee that the Minister has completed all the required processes but that the security clearance was still outstanding, hence the delay in the process. The Committee concerns were noted regarding the appointment of Council Members. The Authority has been raising these concerns and the Ministry is also not satisfied about the fact that the matter is not finalised. The Deputy Minister agreed with the suggestion that they should urgently handle this process before the term of the Board lapses.
Levies: The Committeestated that one of the reasons that have affected the Authority in implementation, relates to the Private Security Regulatory Authority Amendment Bill. The Authority is still waiting for the President to sign the Bill into law.The Authority responded that there wasthe Private Security Industry Levies Act which they are currently trying to put into operation. The process is being managed through National Treasury and the Authority is waiting for the National Treasury to table the amendments to Parliament on the Act before it can come to operation. It will enable the Authority to be adequately funded. Thelevies will only be implemented for business that are active. If the businesses have no contracts they will not be expected to pay levies.
Small security businesses:The Committee questioned what percentage of debt held by Small Security Businesses with 0 to 5 security officers employed and are struggling to get contracts, which is affecting revenue collection. It was noted that the provision for bad debts has decreased.The Committee wanted to know the number of small security companies who are currently operating and also the average amount owed by small businesses in operation to the larger ones. The Authority explained that the percentage owed by the small business is estimated at 59%. of the provision for bad debts of 40 million that was emphasized by the Auditor General. However, it should be noted that the big companies market share is 23% and contributed only 5% while small companies contributes more than 49% to PSIRA operations. The Authority is trying to assist the small business to be able to pay their annual fees through payment arrangements. In terms of the proposal,there will be a clause stating that a person who is not able to have businesses or contracts within a year,can voluntary come to the Authority to report that so that they do not incur losses.
Security Industry: The Authority was questioned whether it has a plan in place to expand the industry to address the issue of unemployment to contribute to growth of the economy of the country. The Authority explained that the biggest companies are the few in numbers but they hold 85 percent of the economic share in the industry. The medium companies are between 10 to 12 percent and under 1 percent is there small companies. The small companies are in biggest numbers but they ownless than 1 percent share of the market structure. The Authority indicated that there is still a lot that needs to be done in transforming the industry in future.
Accreditation Training Process: The Committee wanted to know about the accreditation of training that is being offered and what steps have been taken to ensurethatthe accreditation will be done in future. The Authority indicated that the legislation is currently allowing them to accreditindividual’s private businesses that are entrusted to provide training to security officers and they monitor them. As far as the way forward is concerned, part of their strategy for the next five years is looking into developing examination centres and managing them. The Authority is looking at online platforms for examination which will give them more comfort in respect of the quality of training. The Authority is building significant capacity within the training environment across the country where training providers deliver training curriculums on behalf of PSIRA.
The Authority should indicate what security courses are of interest to security officers. The Authority explained that there are currently a number of curriculums that provides for legislation regarding the sector in grades E, D, C, B and they also have specialization course in accident transit, response security and door handling. The most interest is still in the door handling sector courses grade E which entry levelcourses that give the security officers access to registration within the Authority.
Criminal Investigations cases:The Committee was concerned thatthe criminalinvestigation caseswere takinga long time tobe finalised. The Authority reported that it hasopened 3838 cases out of that number 453 that were finalised and 1150 are still pending.The Authority stated that after it has identified the contravention, the matter will be investigated and forwarded to the South African Police Service (SAPS) to open a criminal case. The number of cases that they have is used to put pressure on the SAPS to demand feedback on how their matters are finalised. The Authority is currently trying to improve the relationship with the SAPS, there is a Memorandum of Agreement (MOU) that is due for a review.
The Authority highlighted one of the issues that they want to resolve with the SAPS regarding the investigation of delayedcases to be investigated in time and finalised by thembefore providing feedback. It was reported that the SAPS has managed to finalise some of the investigated cases. If the SAPS believes that there is a case, they will forward it to the National Prosecuting Authority (NPA). The Authority stated that the cases are also time consuming when they get to the NPA, because they believe that the cases are not urgent. The Authority is embarking on having meetings with the NPA from various provinces to explain to them what the regulations and legislation is all about.
Registered and active security officers: The Authority should explain the difference between the registered and active security officers. The Committee asked if the security officers are required to pay fees on an annual basis. The Authority explained that the security officers and businesses may apply for registration process to meet the requirements on their database. The person will remain on their database as a registered security officer. The person will only be classified as registered active once the person starts employment in the industry whether they are self-employed in the industry or employed by a specific security company. In terms of the process of legislative requirement, a company that employs a security officers should report to the Authority within 10 days so that the particular security officer is linked on their database as employed by a particular security business. Then thesecurity officer is classified as registered and active in the industry.
The Authority stated that currently it has about 2,5 million security officers on their database of which 548 000 is active either as employees or operating independently. The security officers only pay their annual fees once they are employed and active in the industry, if they are not working there is no obligation for them to pay their annual fees to the Authority as stated in the legislation. The security business has the obligation to pay their annual fees.
Non-compliance: The Committee raised issues regarding the security companies that are not paying salaries to their security officers.The Committee wanted to know whether the Authority has a knowledge of the security company called BES inMpumalanga that has opened a case against its 76 security officers. The matter is in Nelspruit and its case no is 407/11/2020. The employer did not pay the employees their salaries, leave and bonus payments. The employees went to the employer to enquire about their salaries. The employer did not give any explanation instead he called the police to arrest 76 security officers. The security officers are currently in custody and they have been charged. Members wanted to know what action will be taken by the Authority to the company that has failed to pay salaries of its employees.
The Authority reported that it did not receive any complaint regarding the above-mentioned matter. The Authority members in Mpumalanga will conduct an investigation and report back to the Committee once the matter has been finalised. It was indicated that there is a Bargaining Council that has been established to deal with all matters relating to labour exploitation.
8. COMMITTEE RECOMMENDATIONS
8.1 Recommendations
The Portfolio Committee on Police recommends the following:
- The Committee recommends that the Minister should immediately process the appointment of new Council Members before the contract lapses to prevent the situation where they will operate without the Board. The Council has not been appointed since January 2020.
- The Committee recommends that the Authority should strengthen its enforcement and compliance of its regulations and code of conduct in order to deter service providers who are not adhering to the Basic Conditions of Employment Act.
- The Committee recommends that the Authority should strengthen the capacity of the compliance forum in order to prevent unfair labour practices and the exploitation of security officers’ rights by unscrupulous service security providers.
- The Committee recommends that the Authority should find better mechanism to improve the delays in the criminal investigation cases.
- The Committee recommends that the Authority should empower small security businesses to develop.
- The Committee recommends that the Authority should improve the working relationship with the National Prosecuting Authority (NPA) and South African Police Service (SAPS) for the smooth running of processes.
The Democratic Alliance and the Economic Freedom Front reserves its rights with respect to adoption of the Report.
Report to be considered.
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