PSIRA AR 1325/AN · a new office in Johannesburg where 41% of the security businesses are located....

2004/2005PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY • ANNUAL REPORT

PROFESSIONALISM ACCOUNTABILITY SAFETY

SECURITY

director’s foreword . . . . . . . . . . . . . . . . . . . 2

executive summary . . . . . . . . . . . . . . . . . . . 4

law enforcement . . . . . . . . . . . . . . . . . . . . . 8

legal services . . . . . . . . . . . . . . . . . . . . . . 20

finance and administration . . . . . . . . . . . . 28

annual financial statements . . . . . . . . . . . .32

1

contents

The past year, while filled with

numerous challenges, was

characterised by a strengthening in

relations and we are proud that we made

further progress in entrenching our role as

a regulatory authority.

As in previous years, there was

sustained growth in the private security

industry which presents a number of

formidable challenges. Key among these

include the need to increase the scope of

regulation; a tightening of the regulatory

framework and improved co-operation

between the Authority and other State law

enforcement agencies.

While the Authority has already been

able to rise to the above challenges in their

varied manifestations, it is recognised that

more rigour and vigour is required to

maintain effective and efficient regulation.

We are pleased to report that a number

of major strides have been made on the

operational front to deal with the

challenges alluded to above. These include:

1. Beefing up capacity – This has been

achieved through increasing the size of

the Law Enforcement Division by

appointing more inspectors and opening

a new office in Johannesburg where

41% of the security businesses are

located. Other operational units of the

Authority have also been further

capacitated to address the increase in

the number of registrations by security

businesses and security officers.

2. Review of the regulatory framework

– A number of areas in the current

regulatory framework which require

tightening up have been identified and

director’s foreword

2

Seth Mogapi

3

these will be addressed through

comprehensive legislative amendments

and regulations.

3. Closer co-operation – We have made

strides in achieving a closer working

relationship with other State law

enforcement agencies such as the

South African Police Service, Directorate

of Special Investigations and National

Intelligence Agency for improved

enforcement of the regulatory regime.

4. Empowerment – Greater participation

and empowerment of previously

disadvantaged persons in the industry

has been identified as a key strategic

issue which will receive attention

during the new financial year. Like other

sectors of our society, the private

security industry reflects the past

injustices in terms of lack of

opportunities to black people. The

challenge now is on how to achieve a

balance between vigorous regulation

while levelling the playing field to

facilitate equal access to economic

opportunities within the industry.

5. Engaging the industry – Opening the

lines of communication with the

industry is central to achieving effective

regulation. In the year ahead, regular

liaison with the industry has been

identified as a key strategic imperative.

The Authority is in the process of

identifying key stakeholders in the

industry.

My sincere thanks go to the previous

Council, Senior Management and staff of

the Authority and the South African public

who have made it possible for us to meet

our challenges. My special gratitude also

goes to the players in the industry who

have offered their utmost co-operation in

promoting a professional and legitimate

private security industry.

I would also like to thank Mr Josiah Jele,

our former Chairperson, for his insightful

leadership and support throughout his

tenure.

The next year will certainly provide

greater challenges and as the Authority we

look forward to another term with

enthusiasm and optimism.

Seth Mogapi

Director

The rapidly growing private security

industry has provided numerous

challenges, key of which has been

our endeavours to enhance our capacity to

match the attendant increase in regulatory

functions.

It is worth noting that the number of

employee security officers deployed within

the industry has increased from 115 331 to

283 359 representing an increase of 145%

between 1997 and 2005.

The following is a summary of the key

activities, achievements and performance of

the Authority which are elaborated upon in

the main report:

1.1 In the period under review, 6 027

inspections were conducted on

existing security services providers.

These inspections led to 1 685 being

charged for contravening provisions of

the statutory Code of Conduct for

Security Service Providers. The

charges mainly related to illegal

underpayment and deployment of

untrained and unregistered security

officers. Compared to the previous

year, the number of improper conduct

dockets opened against security

businesses has increased by 44%. Of

the 816 applications by prospective

security companies for registration,

four were turned down as they did not

meet the statutory requirements. The

816 applications represent an 18,6

increase from the previous year.

1.2 Accredited security training centres

were monitored through different

types of inspection. A total of 189

routine inspections were conducted

resulting in the following actions: 12

were notified of their non-compliance

with the Act and regulations.

Inspections were also conducted on

20 centres following changes of

address, which led to the approval of

all the centres. In addition, six

inspections were conducted on the

upgrading of classrooms, which were

all approved. In addition, 731

applications from training instructors

for accreditation were received leading

to approval of 666. Compared to the

corresponding period in the previous

year in which 359 747 courses were

processed, this year saw the

processing of 398 775 courses

representing a 103% increase. A total

of 140 training centres were also

accredited.

1.3 Collaboration with the South African

Police Service (SAPS) has also been

necessary to attain the objects of the

executive summary

4

5

Authority. During the period under

review 414 charges were laid with the

SAPS against security businesses

rendering services whilst unregistered

and for fraud, theft and other criminal

offences. This constitutes a 221%

increase in the number of cases

opened with the SAPS as compared to

the corresponding period in the

previous year. There are currently 374

criminal cases pending with the SAPS

and the Law Enforcement Division has

been following up with the Station

Commanders concerned and in some

cases with the Department of Justice

regarding progress on the cases.

Improved co-operation between the

Authority and the SAPS has been

enhanced by the meeting the Director

of the Authority had with Deputy

National Commissioner De Beer. At

this meeting, it was agreed that the

SAPS would provide the Authority

with a monthly update on criminal

cases opened by the Authority. The

SAPS also established the Monitoring

and Audit Unit, which only investigates

criminal cases related to the Authority.

The Unit has made a number of

arrests since its establishment in

2005.

1.4 A joint operation between the

Authority and the Directorate for

Special Operations (DSO) resulted in

the raiding of a security service

provider in KwaZulu-Natal. It emerged

from the raid that the Authority needs

to address certain shortcomings

regarding the execution of similar

raids.

1.5 Following the resignation of the

former investigators in 2003, four

inspectors in the Law Enforcement

Division took over the cases which

had been managed by the

investigators. As a result of missing

files some of the cases had to be re-

investigated and some progress has

been made in this regard.

1.6 In order to establish and strengthen a

good working relationship with other

State organs to ensure compliance

with our Act and Regulations, a total

of 2 034 enquiries pertaining to

security service providers were

received from State Tender Boards

and other stakeholders to ensure that

these security service providers

complied with the Act and

Regulations. This constitutes a 26%

increase in the number of enquiries

received compared to the

corresponding period in the previous

financial year.

1.7 The Authority received 510 enquiries

from the Firearms Registry in respect

of applications for firearms. The high

number of enquiries received can be

attributed to the requirements of

Regulation 13(5) and 13(6) which state

that the security services provider

requiring the use of a firearm, must

provide, a suitable firearm for that

purpose. The regulation has

addressed the problems arising from

employee security officers having to

provide their own firearms as one of

their conditions of employment.

1.8 Personal and telephone enquiries

were handled by the Authority’s

Complaints and Help Desk. The

enquiries involved a wide range of

issues including, inter alia, registration

procedures and fees, registration

status of companies and

representation and appeals

procedures.

1.9 A total of 1 593 charge sheets and

1 434 summonses were served on

security service providers in terms of

the Improper Conduct Enquiries

Regulation. Flowing from these

summonses 1 035 successful

prosecutions were concluded. The

1 593 charge sheets and the 1 434

summonses bear no reference to the

number of companies charged as the

summonses served by the Legal

Services Division could be from

previous years and not necessarily

from the year under review.

Furthermore, the variance between

1 434 summonses served and the

1 035 successful prosecutions could

be a result of various reasons such as

postponement and respondents being

untraceable.

1.10 The Authority also suspended the

registration of 79 security businesses

and withdrew the registration of 271

security services providers for failure

to pay statutory fees. The suspension

of 16 service providers was also

lifted.

1.11 During the period under review the

Legal Services Division has

successfully finalised four High Court

matters namely: Dorfling vs Private

Security Industry Regulatory

Authority; the Tertius Helgaardt Horn

matter; the Association of

Independent Contractors vs the

Private Security Industry Regulatory

Authority; and Ingqungqulu and

Another vs the Private Security

Industry Regulatory Authority. In the

6

executive summary (continued)

7

same period under review the Legal

Service Division defended High Court

matters namely: Spesguard CC;

Refugees; MMA Security Services t/a

Broubart Security and Anglo Platinum

Mines.

1.12 In the same period under review the

Legal Services Division has finalised

nine labour related matters involving

former employees. Three are

outstanding.

1.13 The Authority received one appeal,

which was dismissed by the Appeal

Committee following an Improper

Conduct enquiry where a ruling was

made against the service provider. The

Authority received 342 appeals from

individuals, of these appeals 250 were

dismissed and 92 upheld by the

Appeal Committee. Eighteen

applications for exemption from the

provisions of the Act were also

received, of which one was granted

and 17 are still pending.

1.14 The Authority is financially stable with

its current assets covering its current

liabilities 9.7 times. The Authority’s

financial status has improved

considerably with an excess of income

over expenditure from the year ended

31 March 2004 which was

R11 773 816 to R18 862 887, for the

period ended 31 March 2005 with a

surplus for the period of R7 449 977

and cash resources which amount to

R24 113 375 as at 31 March 2005.

1.15 Significant effort has been made to

enhance the administration and its

database to generate information and

reports on time. Information

technology systems for both risk

management and electronic payments

systems have been introduced and

implemented and will be core to

generating improved risk decision-

making and integrated transactional

user offerings.

1.16 The Finance and Administration

Division has also been primarily

involved in determining best practice

and developing the human resource

strategy across the different divisions

of the Authority. The Authority’s

demographics fairly represent its

ability and it has reached its set

targets as outlined in the human

resources section of the main report.

Strategic focus for the Human

Resources Department include

transformation and organisational

development, reward management,

manpower planning, leveraging human

resources technology and human

resources measurement.

Inspection of security businessesIn terms of the Law Enforcement Division’s

operational policy, each inspector must

conduct a minimum of 20 inspections per

month. This target is considered reasonable

taking into consideration all the other

functions associated with the position of an

inspector. In certain cases the targets of

individual inspections are reduced under

special circumstances i.e. special

investigations, annual leave, sick leave, etc.

During the period 1 April 2004 to

31 March 2005, a total of 6 027 regulatory

inspections of security businesses were

conducted by the Law Enforcement

Division as compared to 6 129 inspections

for the previous financial year. The reason

for the lesser number of inspections

conducted, is due to the fact that the Law

Enforcement Division had vacant inspector

positions in all the branch offices of the

Law Enforcement Division during the

period under review, especially the Eastern

Cape branch and the National Investigation

Team.

The regional breakdown was as follows:

law enforcement

8

REGION NUMBER OF INSPECTIONS

Head office (NIT) 3 677- Gauteng 2 287- Mpumalanga 315- Limpopo 410- North West Province 339- Free State/Northern Cape 326Western Cape 921Eastern Cape 290KwaZulu-Natal 1 139Total 6 027

9

Following on from the approval of the Law

Enforcement Division’s business plan,

additional statistical information pertaining

to inspections conducted was kept from

1 September 2004. This information

includes the following:

• Types of inspection, i.e.

routine/regulatory inspections, first time

inspections, triggered inspections and

infrastructure inspections.

• Statistical information pertaining to the

different categories or classes of

security service providers inspected.

(Refer to breakdown on pages 16 to 23)

• Inspections conducted at large, medium

and small businesses. For the purpose

of this statistical information, a small

business is considered to be employing

less than 20 security officers, medium

21 to 50 security officers and large 51

and more security officers. (Refer to

breakdown on page 18.)

With reference to the above, a regional

breakdown as far as the type of inspection

conducted from 1 September 2004 to

31 March 2005, is as follows:

Note must be taken that ”first time inspections” referred to above refers to businesses that have not been the subject of aninspection since its date of registration. These businesses are newly registered businesses. “Triggered inspections”refers to complaints sourced via the help desk, telephonic, written or personal complaints, Internet, newspaper articles,debtor clerks, etc. In terms of the Law Enforcement Division’s operational policy, priority must be given to complaints andinfrastructure inspections first. Routine inspections are conducted, depending on the particular area visited, on the basis ofwhen last an inspection was conducted at a particular security service provider.

NATIONAL Gauteng Mpumalanga Limpopo N/West Free State/ TotalINVESTIGATION TEAM N/Cape

Total number of routine/ 1 311 151 194 188 187 2 031regulatory/training/infrastructure/accreditation/inspections conducted

First time inspections 244 33 28 31 28 364

Triggered inspections 274 56 27 20 53 430

Infrastructure inspections 238 38 81 22 17 396

Western Cape Eastern Cape KwaZulu-Natal Total

Total number of routine/ 513 168 552 1 233regulatory/training/infrastructure/accreditation/inspections conducted

First time inspections 102 41 103 246

Triggered inspections 68 49 288 405

Infrastructure inspections 67 32 79 178

10

NATIONAL Gauteng Mpumalanga Limpopo N/West Free State/INVESTIGATION TEAM N/Cape

Total number of routine/ 1 311 151 194 188 187regulatory/training/infrastructure/accreditation/inspections conducted

Category or Class of Security Service Provider inspected

• Commercial/Industrial/residential/guarding or patrolling

• Assets in transit• Close protection services• Reaction or Response services and 1 090 141 182 182 134

monitoring signals from security equipment (control room)

• Ensuring safety and order on premises (special events)

• Car watch or related activities

Providing advice on the protection of persons/property (consultants/advisors) 13 12 1 6 1

Installing, servicing or repairing security equipment 60 7 9 16 5

Private investigators 25 11 8 14 10

Providing security training or instruction as well as accreditation 174 22 14 28 47

Providing services of a locksmith 50 5 1 4 3

Making persons or their activities available for rendering of security service (labour brokers) 3 4 0 0 0

In-house 30 2 1 9 11

Manufacturing, importing, distributing or advertising of monitoring devices 0 0 0 0 0

Statistical information pertaining to the different categories or classes of security

service providers inspected from 1 September 2004 to 31 March 2005 is as follows:

law enforcement (continued)

11

Western Cape Eastern Cape KwaZulu-Natal

Total number of routine/ 513 168 552regulatory/training/infrastructure/accreditation/inspections conducted

Category or Class of Security Service Provider inspected

• Commercial/industrial/residential/guarding or patrolling

• Assets in transit• Close protection services• Reaction or Response services and 376 130 493

monitoring signals from security equipment (control room)

• Ensuring safety and order on premises (special events)

• Car watch or related activities

Providing advice on the protection of persons/property (consultants/advisors) 1 0 4

Installing, servicing or repairing security equipment 58 10 15

Private investigators 17 3 8

Providing security training or instruction 39 24 57as well as accreditation

Providing services of a locksmith 19 1 29

Making persons or their activities available for rendering of security 0 0 5service (labour brokers)

In-house 10 4 12

Manufacturing, importing, distributing or advertising of monitoring devices 0 0 0

*On review of the statistical information presented above, note must be taken of the fact that certain security serviceproviders may render more than one particular security service. It will be noted that certain of the categories or classes ofsecurity service providers were not subjected to any inspections during the period under review. Taking into consideration thenumber of security service providers registered in a particular province, the number of inspectors of the Law EnforcementDivision and the policy as far as the number of inspections to be conducted in a particular month, security businesses are onaverage subjected to one inspection every six to eight months.

Besides the aforegoing as well as the number of complaints received, the number of infrastructure inspections and cost-effective planning which have an impact on this deliverable, it must be noted that the staff complement of the LawEnforcement Division has not been increased since the inclusion of the new categories or classes of security serviceproviders within the regulatory scope of the Act. The Director is addressing this constraint.

The security services with regard to

commercial/industrial/residential guarding,

cash-in-transit, VIP, control room, special

events and car watch as set out above are

consolidated as these services are not new

categories or classes of security service

providers and had to be registered in terms

of the repealed Security Officers Act (Act 92

of 1987). As requested by the Council, a

statistical breakdown of information on all

the different categories, which include the

categories of classes of security service

providers previously regulated in terms of

the repealed Security Officers Act, are

being kept from January 2005.

On review of the statistical information

presented above, note must be taken of the

fact that certain security service providers

may render more than one particular

security service. One inspection conducted

at a particular security business may

therefore result in two or more categories

or classes of security services being

inspected.

Statistical information pertaining to

inspections conducted at large, medium and

small businesses from 1 September 2004

to 31 December 2004 is as follows:

12

REGION NUMBER OF INSPECTIONS

Small Medium Large InfrastructureBusinesses Businesses Businesses & Capacity

Head office (NIT) 939 348 345 396

Western Cape 294 68 84 67

Eastern Cape 109 16 11 32

KwaZulu-Natal 336 67 70 79

Total 1 678 499 510 574


13

With reference to the above statistics, the overall performance of the Law Enforcement

Division pertaining to inspections conducted for the period 01 April 2004 to 31 March 2005

is 104% compared to the target set. The regional breakdown is as follows:

Region Target Number of inspections conducted Performancee

NIT 3 569 3 677 103 %

Gauteng 2 288 2 287 100 %

Mpumalanga 276 315 114 %

Limpopo 340 410 121 %

North West Province 339 339 100 %

Free State & Northern Cape 326 326 100 %

Western Cape 912 921 101 %

Eastern Cape 268 290 108 %

KwaZulu-Natal 1 017 1 139 112 %

Improper conduct investigations During the period 1 April 2004 to

31 March 2005, a total of 1 685 improper

conduct dockets against security

businesses were compiled as compared to

1 167 dockets for the previous financial

year. This constitutes 518 or 44% more

dockets than the corresponding period last

year. Taking into consideration that there

was no increase in the staff complement,

this increase is significant. The regional

breakdown for the period under review is

as follows:

Region Number of dockets

Head Office (NIT) 1 003

Western Cape 288

Eastern Cape 112

KwaZulu-Natal 282

Total 1 685

Whilst the number of inspections conducted is less (as explained in point 1.1 of the report),

the Law Enforcement Division has been very successful in identifying illegal practices

within the private security industry. The growth in the number of dockets submitted, which

represents increased regulatory capacity, during the period under review, is not just limited

to the previous financial year, but over the last five years, as can be seen from the

following calendar year comparison:

14


2000 2001 2002 2003 2004

Head office (NIT) 512 640 715 812 858

Western Cape 243 141 160 137 267

Eastern Cape 147 223 184 148 103

KwaZulu-Natal 103 92 103 147 240

Total 1 005 1 096 1 162 1 244 1 468

As the Law Enforcement Division is still finalising certain investigations conducted during

2004, the number of dockets for 2004 will still increase significantly.

A further regional breakdown as far as Code of Conduct dockets against large, medium

and small businesses from 1 September 2004 to 31 March 2005 are concerned, is as

follows:


Small Medium LargeBusinesses Businesses Businesses

Head office (NIT) 330 92 134

Western Cape 97 34 42

Eastern Cape 36 10 10

KwaZulu-Natal 96 39 52


15

Improper conduct investigation docketspertaining to minimum wagesOne of the objects of the Authority is to

promote the protection and enforcement of

the rights of security officers and other

employees in the private security industry.

In particular, our role is to ensure that

security businesses pay the prescribed

minimum wages as determined by the

Department of Labour in order to ensure

that security officers are not exploited.

There are currently 565 Improper

Conduct dockets pending against security

service providers for allegations of failing to

pay the statutory minimum wage to

security officers compared to 567 at the

end of the previous financial year. The

regional breakdown is as follows:


Head Office (NIT) 466

Western Cape 17

Eastern Cape 7

KwaZulu-Natal 75

Total 565

Criminal investigations Inspections are also used to investigate

and detect unregistered security

businesses as well as other criminal

contraventions of the Act for the purposes

of lodging criminal complaints in respect

thereof with the South African Police

Service.

As at 31 March 2005 a total of 374

outstanding criminal cases were pending

with the South African Police Service

where inspectors of the Law Enforcement

Division have been the complainants.

During the period 1 April 2004 to

31 March 2005, a total of 414 criminal

cases were opened by inspectors of the

Law Enforcement Division compared to

129 cases opened the previous year.

The regional breakdown in respect of

criminal cases opened during the period

under review in the various offices of the

Law Enforcement Division was as follows:

Region Criminal cases opened


Western Cape 65

Eastern Cape 31

KwaZulu-Natal 48

Total 414

During the period under review, a total of 261 criminal cases were also finalised by the

South African Police Service and/or National Prosecuting Authority. Of these 261 cases,

46 cases were successfully prosecuted and 215 cases were unsuccessfully prosecuted.

The regional breakdown in respect thereof was as follows:

16

Region Successfully prosecuted Unsuccessfully prosecuted Total

Head office (NIT) 19 99 118

Western Cape 0 56 56

Eastern Cape 25 19 44

KwaZulu-Natal 2 41 43

Total 46 215 261

Region Criminal cases opened


Western Cape 46

Eastern Cape 11

KwaZulu-Natal 56

Total 374

As previously stated, there were, as at

31 March 2005, a total of 374 criminal

cases outstanding with the South African

Police Services countrywide. The regional

breakdown is as follows:


17

Firearm applicationsWhilst the Authority does not have

information as far as the number of

firearms registered within the private

security industry is concerned since this

information is kept and updated by the

Firearm Registrar, we do provide

information to the Firearm Registrar

pertaining to security service providers

applying for firearm licences. This

information includes, inter alia, the

following:

• The registration status of the security

business;

• Number of security officers employed

by the business and their registration

and training status;

• Annual amounts due to the Authority.

During the period under review, a total of

510 firearm application enquiries were

received from the Firearms Registry and

finalised. Of the 510 processed, the

Firearms Registry was informed that 183

security service providers owed annual

amounts to the Authority, 15 security

service provider registrations were

suspended and 38 were not registered. A

total of 37 security service providers

requested more firearms than their staff

component as per the Authority’s records.

A total of 237 of the applicants were

cleared by the Authority for consideration

by the Central Firearms Registry.

Charge sheets and summonses issued During the period 1 April 2004 to

31 March 2005, a total of 1 593 charge

sheets and 1 434 summonses in respect of

improper conduct cases were prepared by

the administrative staff of the Law

Enforcement Division on behalf of the

Legal Services Division compared to 590

charge sheets and 859 summonses for the

previous financial year. This constitutes an

increase of 170% in charge sheets and an

increase of 67% in summonses issued

compared to the previous financial year.

These summonses and the prosecutions

bear no reference to the businesses

charged as the charge sheets and

summonses issued by the Legal Services

Division could be from previous years

and not necessarily from the year under

review. Furthermore, the variance

between summonses served and the

total successful prosecutions could be

a result of different causes, such as

postponements and respondents not

being traceable.

Annual fees and fines collected During the period 1 April 2004 to

31 March 2005, a total of R2 262 765,20

annual fees and R305 775,77 in fines were

collected by inspectors of the Law

Enforcement Division compared to

R3 170 378,90 in annual fees and

R779 102,07 in fines collected the previous

financial year.

Untraceable security service providersFollowing on from the issuing of charge

sheets and/or summonses from

1 September 2004 to 31 March 2005,

32 security service providers could

not be traced by Inspectors of the Law

Enforcement Division. Steps taken to trace

these service providers include, inter alia,

the following :

• Visits to known addresses of the

businesses as well as that of the

owners/directors/members, etc.

• Enquiries at neighbouring businesses.

• Contacting all numbers available on the

Authority’s database.

Human resource componentThe regulatory functions and activities of

the Authority referred to are undertaken by

the Law Enforcement Division.

InspectorsThere are currently 35 inspectors – which

includes the Head: Law Enforcement and

Training, two managers and two acting

managers. The Law Enforcement officials

in turn are supported by a total of eight

administrative support staff that underpins

the Division’s administration in the four

regional branches of the Division.

18


19

Head office KwaZulu- Eastern Western(National Natal Cape Cape

Investigation Team)

Head: Law enforcementand training

Managers 1 - 1 -

Inspectors 20 6 1 5

Support staff 5 1 1 1

1 - - -

The Law Enforcement resource component in the different regions as at

31 March 2005 was as follows:

Vacant inspector and other positions within the Law Enforcement Division are being

addressed.

The Law Enforcement Division’s staff component is currently less than the previous

financial year. Taking into consideration the increase of the regulatory scope of the

Authority, it necessitates the appointment of additional inspectors within the Division. A

report has been forwarded to the Director of the Authority, motivating the appointment of

22 additional inspectors. This report will, on finalisation of the audit, be further

supplemented with financial information pertaining to the cost of regulation in relation to

the income received from direct regulation.

Finalised High Court mattersi) Dorfling vs Private Security Industry

Regulatory Authority

This matter was brought by way of an

urgent application against the Authority

before the Port Elizabeth High Court. The

application was served on 15 April 2004 and

it was heard on 16 April 2004. The

Authority approached Savage, Jooste &

Adams to oppose the said application. The

attorneys briefed Adv. Beyleveld to act on

behalf of the Authority.

The question before the Court was the

validity of the action of the Authority to

deregister the applicant on the grounds that

he committed a Schedule One offence,

namely, assault to do grievous bodily harm.

The High Court dismissed the application

with costs on the basis that there was no

urgency in this matter and that it should

have proceeded by way of normal motion

proceedings.

ii) Tertius Helgaardt Horn matter

A default judgment was granted against the

Authority for an amount of ±R100 000. The

judgment was granted as a result of

criminal charges that were brought against

a member of the close corporation instead

of the close corporation itself. After the

accused was acquitted, he sued the

Authority for malicious prosecution.

The Authority successfully applied for a

rescission of the said judgment. This case

serves as a lesson to our inspectors that

when they lay criminal charges they must

correctly identify the accused.

iii) The Association of Independent

Contractors vs the Private Security

Industry Regulatory Authority

The above matter was brought to our

attention in July 2003. It was heard in

August 2003 in the Durban High Court

before Justice Magid. The question before

the Court was whether the above

Association was a security service provider

as defined in Section 1 of the Private

Security Industry Regulation Act of 2001.

The Court delivered its judgment on

19 January 2004 and ruled that the said

Association was not rendering security

services as it did not receive reward as

required by the Act but a subscription.

The matter was heard by the Supreme

Court of Appeal on 28 February 2005 in

Bloemfontein. On 1 April 2005 judgment

was handed down. The Court upheld the

appeal with costs at ±R540 000,00.

Thereafter the apparent loophole exploited

by independent contractors has been

closed.

iv) Ingqungqulu and Another vs Private

Security Industry Regulatory Authority

The above matter was heard in the Pretoria

High Court by Justice de Waal. The

question before the Court was the validity

of a suspension order issued by the

Authority suspending a company named

legal services division

20

21

Ingqungqulu from rendering security

services. The Court turned down the

application on the basis that it involved a

dispute of fact and recommended that the

applicant should apply to the Authority in

terms of Section 26(3) of the Act – special

permission to operate pending the outcome

of the main application. The recommended

arrangement was made an order of Court

on 23 June 2004. The matter has been put

to rest. The suspension stands until the

improper conduct enquiries have been

finalised.

Pending High Court mattersi) Spesguard CC

The matter dates back to 2001. Initially, the

improper conduct enquiry was held to

enquire into the allegations against the

above business. It was found guilty and the

registration was withdrawn. After a series

of attempts to lodge an appeal against the

finding, the Appeal Committee finally heard

the matter, and dismissed it. A High Court

application has been brought against the

Authority challenging both the decision of

the Authority as well as that of the Appeal

Committee. The matter has been handed

over to the attorneys – Savage, Jooste &

Adams for consideration. The controversial

part of this case is the fact that the record

is not complete as there is a missing tape

and that the case dates back to 2001/2002.

Attempts have been made to locate the

said tape to no avail. In the interim the

Authority has approached the relevant

litigants so as to reconstruct the record.

The matter has not yet been set down for

hearing.

ii) Refugees

A number of foreigners applied for

registration as security service providers but

were not successful. They then took the

matter on review before the Pretoria High

Court on the grounds that the decision of

the Authority not to register them is

unconstitutional. The matter is still

unresolved. The Authority, in its defense,

submitted that if this group’s constitutional

challenge is successful, it will present a

formidable challenge to our regulatory

functions as the Authority will be bound to

register foreigner’s companies. The matter

has not yet been set down for hearing.

ii) MMA Security Services t/a Broubart

Security

The respondent in the above matter was

found guilty in its absence. Its appeal to the

Appeal Committee was dismissed and the

matter has been taken on review before the

Pretoria High Court. The matter has not yet

been set down for hearing.

iii) Anglo Platinum Mines

In the above matter, the question raised

was whether the Regulations relating to

exemptions and appeals that came into

operation on 6 September 2003 are valid or

not as they, it is argued, seek to take away

exemptions already granted prior to their

promulgation. If the applicants in this

matter are granted their request that would

be a blow to both the Ministry for Safety

and Security as well as the Authority as it

will be difficult to revisit the exemptions

that have been already granted.

Part-Heard High Court mattersi) Warren Craig Julie t/a TVU VIP

Protection

This matter started in July 2004. This

business was suspended on 28 July 2004

pending investigation into allegations

concerning Schedule 1 offences as well as

improper conduct which the business is

alleged to have committed.They made an

application in terms of Section 26(3) of the

Act – i.e. special permission to operate

whilst suspended. Such a request was

granted subject to certain conditions, inter

alia, that the security officers will not make

use of privately owned firearms but those

of the employer. On 15 September 2004

they brought an urgent application before

the High Court in Durban requesting

postponement of the improper conduct

enquiry scheduled to be heard in East

London on 22 September 2004.

The application was to be heard on

Friday, 18 September 2004. After perusing

the application, we approached Senior

Counsel, CJ Kruger for an opinion. He

advised us that it was not worth pursuing

the matter as the Authority stood a good

chance of not losing in staying the

22 September 2004 improper conduct

hearing. The Authority postponed the

hearing, relying on the opinion of Senior

Counsel subject to the same conditions

that were imposed on this business on

28 July 2004 – one of them being that

which relates to the use of firearms as

mentioned.

Finalised Labour Related mattersNine matters were finalised relating to

various demeanours.

i) A former employee was dismissed on

3 April 2004 for registering a non-South

African citizen contrary to provisions of the

Private Security Industry Regulation Act,

2001 (Act No. 56 of 2001).

ii) An employee’s contract was not

confirmed at the end of the extended

period of his probation – 31 March 2004.

He referred the matter to the CCMA. After

a series of postponements the matter was

finally put to rest as his application was

dismissed.

iii) An employee’s contract was not

confirmed at the end of the probation

period. He referred the matter to the

CCMA and the arbitration hearing was on

the 18th August 2004. The matter was

settled and he received one month’s

salary.

22

legal services division (continued)

23

iv) A former employee, who was a

manager of the KwaZulu-Natal branch, was

charged with fraud. After a series of

attempts to have her attend a disciplinary

hearing, she was finally dismissed. She

referred the matter for arbitration and the

two parties opted for a settlement of three

month’s salary. A criminal charge that was

laid against her is still in place.

v) A former employee’s services were

terminated in June 2004 and the matter

was referred to the CCMA on 20 August

2004. On arbitration the applicant was

granted ten month’s salary on the basis that

the termination of employment was unfair,

as the applicant was not informed of the

reason for the termination of his services.

vi) A former employee’s services were

terminated on the basis of age. She

referred the matter to the CCMA. On

arbitration the applicant was granted two

month’s salary on the grounds that the

termination of employment was unfair as

the Authority had employed her after she

had reached pensionable age of 65 years.

In brief, the tribunal ruled that old age could

not be a reason for termination as the

Authority, by its conduct, had condoned

employing someone of her age.

vii) Solidarity – Organisational Rights

The matter was referred to the CCMA on

12th August 2004. On arbitration it was

finally decided that Solidarity, a trade union,

deserved to be recognised by the Authority

as they had a majority of members. The

Authority has signed the recognition

agreement with Solidarity as ruled by an

arbitration tribunal.

viii) An employee’s contract was not

confirmed at the end of probation. She

referred the matter to the CCMA where it

was settled on two month’s salary.

ix) A former manager of the Western

Cape branch, was charged with fraud. A

disciplinary hearing was held in Cape Town

where he was found guilty and dismissed.

He lodged an appeal against the decision of

the Authority. The appeal was dismissed.

He then took the matter to the CCMA. The

application was dismissed by the arbitration

tribunal.

x) A former employee was charged with

a number of counts including corruption. A

disciplinary hearing was held in Pretoria

where he was found guilty and dismissed.

First, he referred the matter to the CCMA

for having been suspended without pay and

he has referred the dismissal dispute to the

CCMA once again. The date for the

arbitration of the suspension without pay

dispute has not been fixed.

xi) A former employee was charged,

amongst other things, with fraud involving

falsification of qualifications. A disciplinary

hearing was held on 10 August 2004. She

was dismissed early in September 2004.

She referred the matter to the CCMA. The

date for the arbitration has not yet been

fixed.

xii) A former employee, an inspector, was

dismissed mid-November 2004 for poor

performance. No referral has been made to

the CCMA at this stage. The matter is

regarded as having been put to rest.

xiii) Another matter is pending before the

Labour Court and no date has been fixed

for the hearing.

24

STATISTICS FOR THE PERIOD 1 APRIL 2004 – 31 MARCH 2005

Month NIT W/Cape E/Cape KwaZulu-Natal Total

April 04 18 30 0 2 50

May 04 59 13 17 14 103

June 04 6 21 9 11 47

July 04 13 16 14 21 64

August 04 42 15 0 13 70

September 04 96 10 8 9 103

October 04 140 0 1 7 113

November 04 60 31 1 9 86

December 04 10 0 20 1 21

January 05 62 0 0 0 62(not confirmed)

February 05 86 11 12 4 113(not confirmed)

March 05 86 8 22 7 123(not confirmed)

Total 678 155 104 98 1 035


Code of Conduct enquiries finalised

25

Comments on each monthAPRIL 2004

The reason there were few finalised

matters in this month was due to the fact

that it was the first month after the end of

the 2003/2004 financial year when matters

for the existing financial year were first

placed on the roll. Also, it should be borne

in mind that summonses in April 2004

were improperly served as was indicated in

the prosecutors’ report handed over to the

Director.

MAY 2004

The explanation for the high number in

May 2004 for NIT? is that the summonses

were not properly served in April 2004, as a

result matters were carried over into May

2004.

JUNE 2004

The reason for the low number for NIT in

June 2004 is because all the matters that

were placed in April 2004 came to an end

at the end of May 2004. So the six finalised

matters indicated above were summonses

that were served late in April/May 2004 as

they could not meet the 10 day rule which

all summonses ought to comply with.

OCTOBER 2004

Matters that were heard and finalised

during this month were only part-heard

matters. New matters were placed on the

roll to be heard in November 2004.

DECEMBER 2004

The standard practice in the past has

been to place matters late in November

to be heard in December and to start late

or not at all in January the following year.

In this financial year matters were placed

in December 2004, and arrangements

were made for prosecutors to take leave

in mid-December 2004 so as to start

on 3 January 2005. This arrangement

proved helpful as most respondents were

on leave after 10 December. This also

helped the Authority to minimise costs as

presiding officers did not remain in

attendance whilst the respondents were

not available.

The Legal Division is working on

matters finalised by the NIT in the

September - November 2004 period that

were due to be confirmed by the end of

February 2005. The matters to be

confirmed or set aside by the Director,

which are still being prepared by the

Legal Services Division are likely to

increase the total number quite

substantially.

JANUARY 2005

No cases for Western Cape, Eastern Cape

and KwaZulu-Natal were dealt with as

matters were only served in January 2005

and we had to comply with the timeframe

for charge sheets, which has already

been explained.

FEBRUARY 2005

Only four matters in KwaZulu-Natal were

addressed as most of the dockets compiled

in December 2004, before the bonus period,

proved to be non-prosecutable and we

didn’t have any choice but to deal only with

those charges available to us.

MARCH 2005

The reason for eight finalised matters in the

Western Cape and seven matters in

KwaZulu-Natal was also due to the fact that

very few dockets had been compiled.

Refusal of registration as Security ServiceProvider During the period 1 April 2004 to

31 March 2005, a total of 3 023 individual

security service provider applications for

registration were refused by the Authority,

due to the fact that the applicants were

found guilty of a disqualifiable criminal

offence, as set out in the Schedule to the

Private Security Industry Regulation Act.

Withdrawal of registration as SecurityService Provider a) During the period 1 April 2004 to

31 March 2005, 18 individual security

service provider registrations were

withdrawn by the Authority, following

the discovery that they had furnished

false information in their applications for

registration.

b) In the same period 154 security service

provider registrations were withdrawn,

following their conviction, whilst

registered as security service providers,

of a disqualifiable criminal offence as

specified in the schedule to the Act.

Appeals against the Authority’s refusal toregister a Security Service Provider andwithdrawal by the Authority of registrationdue to a conviction of a scheduled offenceDuring the period under review a total of

342 appeals in this category were

considered by the Appeal Committee. Of

these considered, 237 (69,3%) were

dismissed and 105 (30,7%) were upheld by

the Appeal Committee.

Appeals against the Authority’s refusal toregister a Security Service Provider due tonon South African residence During the period under review 13 appeals

in this category were considered by the

Appeal Committee, all of which were

dismissed.

Appeals against conviction and/orsentence following the finalisation ofimproper conduct enquiries convened interms of the Act During the year 2004/2005, one appeal

against the conviction and/or sentence

following on from the finalisation of an

improper conduct enquiry was finalised by

the appeal committee which was

dismissed.

26


27

Applications for exemptionsDuring the period under review, 18 applications for exemptions where replications were

requested was received from the Minister for Safety and Security. Of these applications

one was granted and 17 are still pending.

STATISTICS FOR THE PERIOD 1 APRIL 2004 – 31 MARCH 2005

Withdrawals Appeals

Month Refusals Section Section Criminal Foreigner Code of Exemptions26(4)(a) 26(4)(d) Record Conduct

April 2004 100 0 0 0 0 0 1

May 2004 202 0 0 0 0 0 2

June 2004 108 4 14 42 1 0 1

July 2004 434 0 0 60 1 0 2

August 2004 235 2 106 40 2 1 0

September 2004 329 8 11 0 0 0 1

October 2004 105 0 0 136 7 0 1

November 2004 432 0 0 39 2 0 10

December 2004 136 0 0 25 0 0 0

January 2005 196 0 0 0 0 0 0

February 2005 401 0 0 0 0 0 0

March 2005 345 4 23 0 0 0 0

Total 3 023 18 154 342 13 1 18

TENDERS – STATISTICS FOR THE PERIOD 1 APRIL 2004 – 31 MARCH 2005

Not approvedNo of Further info Annual fees

Month enquiries Approved Denied requested collected

April 2004 114 91 13 10 7 846,10

May 2004 219 158 20 41 38 381,29

June 2004 211 150 40 21 37 834,74

July 2004 147 111 21 15 62 614,23

August 2004 575 358 96 121 59 319,40

September 2004 216 139 76 1 21 337,75

October 2004 224 141 37 46 12 689,64

November 2004 242 189 39 14 50 812,23

December 2004 86 67 19 0 10 101,65

January 2005 196 144 29 23 104 368,16

February 2005 227 164 63 1 58 218,79

March 2005 285 202 56 27 63 177,14

Total 2 742 1 914 509 320 525 701,12

The Authority is financially stable with

its current assets covering its

current liabilities 9.7 times. Our

financial status has improved considerably

with an excess of income over expenditure

from the year 2002 which was R20 625 as

compared to the year 2003 which was

R8 785 426 and to R11 773 816 in 2004 and

to R7 449 977 for the period under review.

The decrease in surplus from the 2004

financial period to the 2005 financial period

is R4 174 302 resulting in a 35% decrease.

However, this decrease has not

compromised the budgetary figures or the

operations of the Authority for the period

under review in any manner. The annual

financial report reflects an increase in total

reserves by R7 449 977 from the period

1 April 2004 to 31 March 2005.

• Non-current liabilities have decreased by

33,78% since the last financial year

reflecting improved cash flow and

liquidity.

• Current liabilities have increased by

27,24% with an increase in the

accounts payable from R1 252 861 in

2004 to R1 918 125 in 2005.

• Current assets have increased by 22%,

from R23 143 668 in 2004 to

R29 680 288 in 2005.

FinanceThe Authority’s year to date income as per

the income statement for 31 March 2005 is

R48 887 862 as compared to the previous

period of R44 409 768 and the total

expenditure for the period under review is

R41 437 885 as compared to the previous

period of R32 635 952.This has resulted in a

net surplus of R7 449 977 for the period

ending 31 March 2005 as compared to

R11 773 816 for the previous financial

period, 2003/04.

Comparative actual spending for the

2003/04 financial period with that of the

2004/05 period shows a significant increase

in expenditure by 20,95%, from

R32 635 952 in 2004 to R41 437 885 in

2005 due to increased operational spending

as a result of the expansion of the

Authority by opening a new office in

Johannesburg as well as an increased

number of staff, an increase in consulting

fees, an increase in legal expenses and

significant increases in contributions to the

Authority’s medical aid scheme due to an

increase in staff.

Although there is an increase in

expenditure by 20,95% the Authority has

exceeded its budgetary targets of a surplus

of R7 500 000 by R99 514 with an excess

of income over expenditure for the year

ended 31 March 2005 of R7 599 514. This

excess of income over budgetary target

was done without compromising

operations.

The Authority continues to maintain the

highest levels of professionalism through

financial performance

28

29

constantly updating and improving on work-

flow processes as well as being updated

with the latest technological advancements

so as to ensure efficiency and

effectiveness in the industry in which it

operates.

The Authority prides itself in the

following areas:

• Improved Service Level Agreements.

• Updated procedures and policies.

• Strict internal control policies.

• Improved technology implementation.

INCOME AND EXPENDITURE OF THE

AUTHORITY

The Authority receives income from the

following sources:

INCOME

• Total Annual fees have increased from

R30 065 200 in 2004 to R31 808 223 for

the year ended 31 March 2005,

resulting in a difference of R1 743 023

with an increase of 5,8% as compared

to the comparison of the 2002/03 and

2003/04 periods with an increase of

7,8%.

• Total Registration fees have increased

from R6 230 151 in 2004 to R6 533 286

for the year ended 31 March 2005,

resulting in a difference of R303 135 and

an increase of 4,87% as compared to the

comparison of the 2002/03 and 2003/04

periods with an increase of 11,05%.

• Interest received for the year has

increased from R2 220 770 in 2004 to

R2 421 299 for the year ended 31 March

2005, resulting in a difference of

R200 529 and an increase of 9,03%

compared to the comparison of the

2002/03 and 2003/04 periods with an

increase of 36,6%.

• Fines received for the year have

increased significantly from R1 643 864

in 2004 to R3 231 799 for the year

ended 31 March 2005, resulting in a

difference of R1 587 935 and an

increase of 96,60%.

• Sundry income derived from the issue

of ID cards, manuals, certificates, which

also includes the infrastructure

assessment fee, have increased from

R721 851 in 2004 to R1 973 509 for the

year ended 31 March 2005, resulting in

a difference of R1 251 658 and an

increase of 173,40%.

• The unallocated receipts, a holding

account for income deposited

incorrectly into the Authority’s bank

account has increased from R303 305

in 2004 to R592 292 for the year ended

31 March 2005, resulting in a difference

of R288 987 and an increase of 95,28%.

• Income from ID cardholders has

increased from R2 099 662 in 2004

to R2 327 454 for the year ended



EXPENDITURE

The total expenditure of the Authority has


R41 437 885 as at 31 March 2005, an

increase by 20,95% and a comparative

increase in total income from the 2003/04

financial year of (R44 409 768) to the

2004/05 financial year of (R48 887 862),

resulting in an increase of 9,15% as

compared to the increase from the 2002/03

period of 8,65%.

SUMMARY NOTES ON INCOME AND

EXPENDITURE

NOTES ON INCOME

1. Interest and penalties received from

service providers are imposed for code

of conduct violations. Interest is 15,5%

per annum and penalties are 10% per

month. These amounts are to be paid

before the 7th of each month.

2. Sundry income of the Authority

comprises income from printing of ID

cards, manuals, certificates and income

from infrastructure assessments.

3. Interest is received from funds

deposited into a call account with

Nedbank. A total amount of R8,5-million

has been invested with Nedbank.

4. Annual fees and Registration fees are

deposited on a daily basis and

reconciled to the appropriate

account on receipt.

5. The sundry income account of the

Authority is now shown as a separate

account on the Income Statement so as

to clearly indicate the operations of the

Authority.

NOTES ON EXPENDITURE

1. Staff costs for the 12 months year to

date are R20 021 490 as compared to

R19 488 849 in 2004, resulting in a

difference of 2,73%. The increase in

staff costs is due to the increase in the

number of new appointments.

2. The Authority’s major operating

expenses other than staff costs are

fingerprint costs at R3 051 011, which

have increased by 3,98%. These costs

have been increased from R28-00 per

fingerprint set to R28-50 per set by the

criminal record centre.

3. Legal Expenses of the Authority are

R2 178 113 for the year ended 31

March 2005 as compared to

R1 362 084, resulting in a difference of

R816 029 and an increase of 59,91%.

Legal expenses consist of travelling

claims, subsistence, car-hire, venue

booking, presiding officers fees as well

as payment to attorneys representing

the Authority.

4. Telephone, faxes and diginet line

expenses are R1 885 095 as at

31 March 2005 as compared to the

previous financial year which was

R1 497 562. The increase in this

expenditure is purely operational

although new technology has been

implemented.

30

financial performance (continued)

31

5. Printing and stationery expenses have


R1 798 679 for the year ended



6. Consulting fees have increased from

R2 255 991 in 2004 to R3 215 652 for

the year ended 31 March 2005,

resulting in a difference of R959 661

and an increase of 42,54%. Consulting

fees consist of IT costs and legal

consultants’ fees.

HIGHLIGHTS OF THE FINANCE AND

ADMINISTRATION DIVISION

Highlights of the Income Statement for the

year ended 31 March 2005.

INCOME OF THE AUTHORITY

The total income received for the financial

period 31 March 2005 is R48 887 862

which is significantly higher than 2004

(R44 409 768) and the previous financial

periods 2002/03 with an income of

R40 565 643 and also as compared to the

financial period 2001/02 which was

R34 178 174.

This has resulted in an increase in

income for the current financial period of

R7 599 514.

EXPENDITURE OF THE AUTHORITY

The total expenditure of the Authority for

the financial period 31 March 2005 is

R41 437 885 as compared to 2004

(R32 635 952 and compared to the previous

financial year 2002/03 with R31 780 214

and also compared to the expenditure in

the financial period 2001/02 which was

R34 157 548.

The overall increase of R8 652 396 in

expenditure from the last financial period is

due to an increase in operational costs

without compromising the budget of the

Authority or its operations.

HIGHLIGHTS OF THE BALANCE SHEET

AS AT 31 MARCH 2004.

1. The cash resources of the Authority as

at 31 March 2005 is R22 784 128

compared to the previous financial

period which was R20 778 374. A

significant increase of R2 005 754 is

evident from the operations of the

Authority.

2. There is a significant increase in non-

current assets from R6 262 786 as at

31 March 2004 to R7 792 532 as at

31 March 2005, resulting in an increase

of R1 529 746.

3. The current liabilities of the Authority

has also significantly increased from

R1 252 861 as at 31 March 2004 to

R3 046 895 as at 31 March 2005, due

to an increase in the accounts payable

of R665 264.

4. The total accumulated funds have

increased from R26 114 555 in 2003/04

to R33 564 532 as at 31 March 2005,

resulting in an increase of R7 449 977.

for the period ended 31 March 2005

Council members responsibility for financial statements . . . . . . . . . . . . . . . . . . . . . . . .33

Report of the independent auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Council members report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Income and expenditure statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Notes to the annual financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 - 44

Detailed income and expenditure statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 - 46

annual financial statements

32

33

Council members responsibility for Financial Statements

Council member Council member

The council is responsible for monitoring

the preparation of and the integrity of the

financial statements and related

information included in this annual report.

In order for the council to discharge its

responsibilities, management has

developed and continues to maintain a

system of internal control. The council has

ultimate responsibility for the system of

internal control.

The internal controls include a risk-

based system of internal accounting and

administrative controls designed to

provide reasonable but not absolute

assurance that assets are safeguarded

and that transactions are executed and

recorded in accordance with South African

Statements of Generally Accepted

Accounting Practice and the Authority’s

policies and procedures. These controls

are implemented by trained, skilled

personnel with an appropriate segregation

of duties and are monitored by

management.

The financial statements are prepared in

accordance with South African Statements

of Generally Accepted Accounting Practice

and incorporate responsible disclosure in

line with the accounting philosophy of the

Authority. The financial statements are

based on appropriate accounting policies

consistently applied and supported by

reasonable and prudent judgments and

estimates.

The council members believe that the

company will be a going concern in the

year ahead. For this reason they continue

to adopt the going concern basis in

preparing the annual financial statements.

The annual financial statements for the

year ended 31 March 2005 set out on

pages 39 to 44 were approved on 29 June

2005 at a council meeting and are signed

on its behalf by:

Independent Auditors Report

TO THE MEMBERS OF THE PRIVATE SECURITY INDUSTRY REGULATORY AUTHORITY

We have audited the annual financial statements of the Private Security Industry

Regulatory Authority set out on pages 39 to 44 for the year ended 31 March 2005. These

financial statements are the responsibility of the company’s directors. Our responsibility is

to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those

standards require that we plan and perform the audit to obtain reasonable assurance that

the financial statements are free of material misstatement. An audit includes examining,

on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and

significant estimates made by management as well as evaluating the overall financial

statement presentation. We believe that our audit provides a reasonable basis for our

opinion.

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Authority at 31 March 2005 and the results of their operations and

cash flows for the year then ended in accordance with South African Statements of

Generally Accepted Accounting Practice.

The Authority has not complied with the requirements of the Public Finance

Management Act as a Schedule 3A entity. Reasons for the non compliance are given in

the council member’s report.

In our opinion, except for the effect of such disclosures that might have been necessary

to comply with the Public Finance Management Act, the financial statements present

fairly the financial position of the Authority at 31 March 2005 and the results of its

operations and cash flows for the year then ended in accordance with the Public Finance

Management Act.

KPMG Inc.

Registered Accountants and Auditors

Chartered Accountants (SA)

FB Leith

Director

29 June 2005

34

annual financial statements (continued)

35

Council Members Report

BUSINESS ACTIVITIES AND GENERAL REVIEW OF OPERATIONS

The primary objectives of the Private Security Industry Regulatory Authority (PSIRA) are to

regulate the private security industry and exercise effective control over the practice of

the occupation of security service provider in the public and national interest and the

interest of the private security industry itself.

The activities of the Authority for the period under review resulted in a net profit of

R7 449 977 (2004: R11 773 816) and are clearly set out in the attached financial

statements.

NON-COMPLIANCE WITH THE PUBLIC FINANCE MANAGEMENT ACT

The Private Security Industry Regulatory Authority is listed in terms of the Public Finance

Management Act as a Schedule 3A entity since the beginning of the current year. The

Authority has not complied fully with the requirements of the Public Finance Management

Act as this non-compliance resulted from decisions taken at past council member

meetings to the effect that compliance was not necessary, as the entity was not listed in

terms of the PFMA in prior years.

EVENTS SUBSEQUENT TO YEAR-END

No material fact or circumstances have occurred between the end of the financial year

and the date of this report.

COUNCIL MEMBERS

M De Haas Appointed: 1 June 2005

S Majombozi

Dr Randera Appointed: 1 June 2005

Dr Ndlovu Appointed: 1 June 2005

J Jele Resigned: 28 February 2005

J Irish Resigned: 28 February 2005

S De Lange Resigned: 28 February 2005

Business address Postal address

481 Belvedere Street Pvt Bag X817

Arcadia Pretoria

Pretoria 0001

balance sheetas at 31 March 2005

36

Notes 2005 2004

R R

Assets

Non-current assets

Property, plant and equipment 2 7 642 995 6 262 786

Current assets 29 680 288 23 143 668

Accounts receivable and pre-payments 3 5 566 913 1 035 726

Term deposits 1 329 247 1 329 568

Cash and cash equivalents 4 22 784 128 20 778 374

Total assets 37 323 283 29 406 454

Equity and liabilities

Capital and reserves

Accumulated funds 33 564 532 26 114 555

Non-current liabilities

Long term liabilities 5 711 856 1 075 039

Current liabilities 3 046 895 2 216 860

Accounts payable 6 1 918 125 1 252 861

Provisions 7 772 084 622 033

Current portion of long term liabilities 5 356 686 341 966

Total equity and liabilities 37 323 283 29 406 454


37

Notes 2005 2004

R R

Income

Annual fees 31 808 223 30 065 200

Registration fees 6 533 286 6 230 151

Interest received 2 421 299 2 220 770

Fines received 3 231 799 1 643 864

Sundry income 1 973 509 721 851

Unallocated receipts 592 292 303 305

ID card holder 2 327 454 2 099 662

Infrastructure Assessment - 1 124 965

48 887 862 44 409 768

Expenditure

Personnel 20 021 490 19 488 849

Other operating expenses 8 21 416 395 13 147 103

41 437 885 32 635 952

Excess of income over expenditure for the year 7 449 977 11 773 816

Accumulated funds at beginning of year 26 114 555 14 340 739

Accumulated funds at end of year 33 564 532 26 114 555

income and expenditure statementfor the year ended 31 March 2005

cash flow statementfor the year ended 31 March 2005

Notes 2005 2004

R R

Cash generated by operations

Cash receipts from customers 44 356 675 40 292 824

Cash paid to suppliers and employees (41 840 208) (33 025 918)

Cash generated by operations 10.1 2 516 467 7 266 906

Interest received 2 421 299 2 220 770

Interest paid - -

Net cash inflow from operating activities 4 937 766 9 487 676

Cash flow from investing activities

Proceeds from disposal of property, plant and

equipment - -

Acquisition of property, plant and equipment (2 569 150) (1 571 384)

- Replacements - (1 354 926)

- Additions (2 569 150) (216 458)

Net cash outflow from investing activities (2 569 150) (1 571 384)

Cash flows from financing activities

Movement on long term liabilities (363 182) (345 368)

Net cash outflow from financing activities (363 182) (345 368)

Net increase in cash and cash equivalents 2 005 434 7 570 924

Cash and cash equivalents at beginning of year 22 107 941 14 537 017

Cash and cash equivalents at end of the year 10.2 24 113 375 22 107 941

38


39

notes to the financial statementsfor the year ended 31 March 2005

1. ACCOUNTING POLICIESThe financial statements are prepared on

the historical cost basis and incorporate the

principle accounting policies as set out

below, which are consistent with those

adopted in the previous financial year.

1.1 PROPERTY, PLANT AND EQUIPMENT

Land is stated at historical cost.

Other items of property, plant and

equipment are stated at historical cost less

accumulated depreciation and impairment

losses.

Depreciation is provided on the straight-

line basis, over the estimated useful lives

of assets. Depreciation is not provided on

land.

Surpluses on the disposal of property,

plant and equipment are credited to

income. The surplus is the difference

between the net disposal proceeds and the

carrying amount of the asset.

1.2 LEASES

Finance leases

Leases that transfer substantially all the

risks and rewards of ownership of the

underlying asset to the authority are

classified as finance leases. Assets

acquired in terms of finance leases are

capitalised at the cash cost equivalents and

depreciated over the estimated useful life

of the asset. The capital element of future

obligations under the leases is included as

a liability in the balance sheet. Lease

payments are allocated using the effective

interest rate method to determine the

lease finance cost, which is charged

against income over the lease period, and

the capital repayment, which reduces the

liability to the lessor.

Operating leases

Leases where the lessor retains the risk

and rewards of ownership of the underlying

asset are classified as operating leases.

Payments made under operating leases are

charged against income as they are

incurred.

1.3 REVENUE

Fees received consist of annual fees, initial

registration fees and accreditation fees

received during the year under review.

2. PROPERTY, PLANT AND EQUIPMENT

Depreciation Cost Accumulated Carrying

rate depreciation amount

% R R R

31 March 2005

Land - 1 399 656 - 1 399 656

Buildings 5 3 096 841 149 537 2 947 304

Furniture and fittings 10 1 031 003 624 415 406 588

Office equipment 20 2 544 923 1 219 825 1 325 097

Computer equipment 33,33 7 321 832 5 757 482 1 564 340

15 394 255 7 751 260 7 642 995

31 March 2004

Land - 1 399 656 - 1 399 656

Buildings - 2 990 733 - 2 990 733

Furniture and fittings 10 828 902 561 253 267 649

Office equipment 20 1 345 023 1 036 359 308 664

Computer equipment 33,33 6 260 789 4 964 705 1 296 084

12 825 103 6 562 317 6 262 786

1.4 PROVISIONS

Provisions are recognised when the

authority has a present legal or constructive

obligation as a result of past events, for

which it is probable that an outflow of

economic benefits will occur, and where a

reliable estimate can be made of the

amount of the obligation.

1.5 EMPLOYEE BENEFITS

Current contributions to pension funds

operated for the benefit of employees are

charged against income as incurred.

Contributions to the fund are made by

employees and the Authority at rates of

7,5% and 9,65% respectively.

Experience adjustments and prior service

costs resulting from plan amendments are

amortised over the expected average

remaining service of the relevant current

employees.

1.6 CASH AND CASH EQUIVALENTS

For the purpose of the cash flow

statement, cash and cash equivalents

comprise cash on hand, deposits held on

call with banks.

40



41

Land Buildings Furniture Office Computer Total

and fittings equipment equipment

31 March 2005

Carrying amount at

beginning of year 1 399 656 2 990 733 267 649 308 664 1 296 084 6 262 786

Additions - 106 108 202 101 1 199 899 1 061 042 2 569 150

Disposals - - - - - -

Depreciation - (149 537) (63 162) (183 466) (792 776) (1 188 941)

1 399 656 2 947 304 406 588 1 325 097 1 564 340 7 642 995

31 March 2004

Carrying amount

at beginning of year 1 399 656 2 990 733 225 605 264 702 440 796 5 321 492

Additions - - 111 602 170 218 1 289 564 1 571 384

Disposals - - - - - -

Depreciation - - (69 558) (126 256) (434 276) (630 090)

1 399 656 2 990 733 267 649 308 664 1 296 084 6 262 786

Land and buildings comprise 1015/43 Arcadia, Pretoria and are encumbered in terms of a first mortgage bond

(refer note 5).

Land is carried at cost while buildings are carried at cost less accumulated depreciation and impairment

losses.

A change in accounting policy took place in the current period with regard to the depreciation of buildings.

The change in accounting policy has been applied prospectively based on the insignificance of amounts

involved, as well as the fact that the amount of the adjustment to the balance of opening retained earnings

cannot reasonably be determined as the allocation between land and buildings was not available for prior

periods.

2005 2004

R R

3. ACCOUNTS RECEIVABLETrade debtors 1 779 636 870 491

Staff debtors 83 366 60 933

Pre-payments 3 622 306 43 410

Deposits 81 605 60 892

5 566 913 1 035 726

4. CASH AND CASH EQUIVALENTSCurrent account 22 734 009 20 734 039

Petty cash 50 119 44 335

22 784 128 20 778 374

The bank account is subject to a special condition. A guarantee amounting to R28 350 is held

on behalf of the Authority in terms of a rental agreement.

5. LONG TERM LIABILITIESSouth African

Secured - 1 068 542 1 417 005

Loan bearing interest at prime (2004 – 15%) per annum, linked to the Nedcredit call

deposit account, secured by first mortgage over land and buildings with a book value of

R4 496 497 (2004 – R4 390 389). The loan is repayable in 72 variable monthly instalments

depending on the balance of the Nedcredit call deposit account.

Less: Current portion included in current liabilities 356 686 341 966

Long term liabilities 711 856 1 075 039

6. ACCOUNTS PAYABLETrade creditors 61 351 243 356

Accruals 972 549 198 559

Value Added Tax 884 225 810 946

1 918 125 1 252 861

42



43

2005 2004

R R

7. PROVISIONSProvision for leave pay 362 963 397 257

Provision for bonuses 22 124 224 776

Provision for legal costs 386 997 -

772 084 622 033

8. OTHER OPERATING EXPENSESOther operating expenses include:

Auditors remuneration

- current year 184 000 147 000

Councilors emoluments

- fees for services as board members 547 130 642 503

Depreciation of property, plant and equipment 1 039 404 630 090

Interim management fees - -

Surplus on disposal of property, plant and equipment - -

Operating lease charges -

office equipment - -

9. EMPLOYEE BENEFITSThe group provides retirement benefits for all its permanent employees through a funded

defined benefit pension scheme that is subject to the Pension Funds Act, 1956 as

amended.

The total value of contributions to the above scheme 2 173 606 1 745 915

Total amount expensed during the year was 1 237 380 1 065 308

2005 2004

R R

10. NOTES TO THE CASH FLOW STATEMENT10.1 CASH GENERATED BY OPERATIONS

Operating income 7 449 977 11 773 816

Adjustments for -

Depreciation 1 188 941 630 090

Interest received (2 421 299) (2 220 770)

Operating income before working capital changes 6 217 619 10 183 136

(Increase)/decrease in accounts receivable (4 531 187) (439 951)

Increase/(decrease) in accounts payable 665 264 (2 251 913)

Increase in provisions 150 051 116 343

Increase)/(decrease) in current portion

of long term liabilities 14 720 (340 709)

2 516 467 7 266 906

10.2 CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and balance with banks. Cash and cash

equivalents included in the cash flow statements comprise the following balance sheet

amounts: Bank balances, term deposits and cash on hand

24 113 375 22 107 941

44



45

2005 2004 Increase/ %

(decrease) Difference

R R R

Income

Annual fees 31 808 223 30 065 200 1 743 023 5,80%

Registration fees 6 533 286 6 230 151 303 135 4,87%

Interest received 2 421 299 2 220 770 200 529 9,03%

Fines received 3 231 799 1 643 864 1 587 935 96,60%

Sundry income 1 973 509 721 851 1 251 658 173,40%

Unallocated receipts 592 292 303 305 288 987 95,28%

ID card holder 2 327 454 2 099 662 227 792 10,85%

Infrastructure assessment - 1 124 965 (1 124 965) (100%)

48 887 862 44 409 768 - -

Expenditure

Personnel expenditure 20 021 490 19 488 849 532 641 2,73%

- Salaries 13 101 703 12 995 683 - -

- Motor vehicles scheme cost 2 305 630 2 332 567 - -

Company contributions:

- Pension fund contributions 1 244 777 1 065 308 - -

- Medical aid scheme 2 049 925 1 719 435 - -

- Unemployment insurance 113 448 103 967 - -

- Regional services council levy 105 509 89 052 - -

- Workmen’s compensation 43 308 149 869 - -

- Skills development 128 159 128 183 - -

- Other 929 031 904 785 - -

Advertising and promotions 40 732 95 949 (55 217) (57,55%)

Auditors’ remuneration 184 000 147 000 37 000 25,17%

Bank charges 121 905 109 062 12 843 11,78%

Councillors’ expenses 547 130 642 503 (95 373) (14,84%)

detailed income and expenditure statementfor the year ended 31 March 2005

46

2005 2004 Increase/ %

(decrease) Difference

R R R

Casual staff 130 000 124 206 5 794 4,66%

Cleaning 265 503 223 194 42 309 18,96%

Communication 286 993 254 625 32 368 12,71%

Consulting fees 3 215 652 2 255 991 959 661 42,54%

Depreciation 1 188 941 630 090 558 851 88,69%

Doubtful debts provision 1 270 125 263 460 1 006 665 382,09%

Fingerprinting costs 3 051 011 2 934 278 116 733 3,98%

Insurance 267 850 226 016 41 834 18,51%

Interest - - - -

Operating lease charges - - - -

Leave and bonus provisions 385 087 69 725 315 362 452,29%

Legal expenses 2 178 113 1 362 084 816 029 59,91%

Surplus on disposal of

property, plant and equipment - - - -

Interim management fees - - - -

Office removal and rental costs 925 013 808 008 117 005 14,48%

VAT penalty (refunded)/paid 97 350 (1 581 355) 1 678 705 -

Postage 263 563 284 296 (20 733) (7,29%)

Printing and stationery 1 798 679 1 410 870 387 809 27,49%

Publications 176 421 134 864 41 557 5,54%

Repairs and maintenance 764 186 750 415 13 771 1,84%

Security 483 852 455 126 28 726 6,31%

Seminars and conferences 25 874 21 180 4 694 22,16%

Telephone and fax 1 885 095 1 497 562 387 533 25,88%

Training 265 550 27 956 237 594 849,89%

Debt Collection Agent 137 227 - 137 227 100%

License Software 358 700 - 358 700 100%

Provision for fines 1 101 843 - 1 101 843 100%

Total expenses 41 437 885 32 635 952 - -

Excess of income over

expenditure for the year 7 449 977 11 773 816 - -


detailed income and expenditure statement(continued)for the year ended 31 March 2005

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Private Security Industry Regulatory Authority481 Belvedere Street Arcadia PretoriaTelephone (012) 337 5601

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