1 Briefing on the operation and management of Public Private Partnerships (PPP)

2 SCOPE 1.Introduction 2.Fundamental principles 3.Parties to the concession contract 4.Current status 5.Scope of operations 6.Risk profile 7.Management of operations 8.Budget 9.Challenges

3 1. INTRODUCTION  The two PPP Correctional Centres were opened in 2001 & 2002 respectively.  The main rationale behind the initiative was to improve on the cost effectiveness of the correctional system by making additional accommodation available, more quicker and flexibly than would otherwise be possible.

4 2. FUNDAMENTAL PRINCIPLES  Value for money: Accomplished by significant risk transfer and quality of services that are procured.  Risk transfer: Design Construction Maintenance Funding  Affordability

5 3.PARTIES TO THE CONTRACT MANGAUNG PPP CENTRE LENDERS Investec Bank Ltd ABSA Bank Ltd BLOEMFONTEIN PRISON FINANCE TRUST RSA GOVERNMENT BLOEMFONTEIN CORRECTIONAL CONTRACTS (Pty) LTD SHAREHOLDERS Old Mutual (20%) G4s (20%) 10 Alliance Mangaung (20%) Fikile Mangaung (20%) Ikhwesi Community Trust (20%) 25 year custodial services

6 3. PARTIES TO THE CONTRACT KUTAMA-SINTHUMULE CENTRE LENDERS First Rand Bank Ltd BOE Merchant Bank SOUTH AFRICAN CUSTODIAL SERVICES SECURITY TRUST RSA GOVERNMENT SOUTH AFRICAN CUSTODIAL SERVICES (Pty) LTD SHAREHOLDERS South African Custodial Management Kensani Corrections (50%) 25 year custodial services

7 4. CURRENT STATUS Mangaung Correctional Centre Contractor : G4S( previously GSL) Date opened: 01 July 2001 Certified normal accommodation : 2928 Population: 2928 Type of Correctional Centre: Maximum Contractual period: 25 years

8 4. CURRENT Status( Cont) Kutama-Sintumule Correctional Centre Contractor: SACM Date opened: 01 March 2002 Certified normal accommodation: 3024 Population: 3024 Type of Correctional Centre: Maximum Contractual period: 25 years

9 5.SCOPE OF OPERATIONS  Schedule A, B, C Construction Equipment( quality & quantity) Maintenance  Schedule D Operational Specification Goal 1: keep inmates in safe custody Goal 2: maintaining order, control, discipline and safe environment. Goal 3: providing decent conditions and meeting inmates’ needs.

10 5.SCOPE OF OPERATIONS (continue) Goal 4: providing structured day programme Goal 5: preparing inmates for their return back to the community Goal 6: delivering prison services Goal 7: community involvement

11 6. RISK PROFILE Design and construction Delays in construction- no payment until completed Failure to provide facility as specified Cost overruns on construction Maintenance Facility not properly maintained Costs related to maintenance more than anticipated Operations Contractor fails to meet performance standards

12 6. Risk Profile ( cont) Insurance –Insurance against third parties Availability of bed spaces –Less available places than contractually specified DCS pays only for available spaces Technology changes –Improvement in technology which reduces the operational costs DCS secures reduction in contract fee. Financial –Increase in the CPI increases contractor fees Residual Value –Facility reverts back to DCS but has a designed life of 50 years Staffing –Contractor solely responsible for Human Resources matters

13 DIRECTORATE CONTRACT MANAGEMENT DEPUTY DIRECTOR CONTRACT INFORMATION PROVISION (VACANT) DEPUTY DIRECTOR CONTRACT POLICY FORMULATION (MJ KOTO) DIRECTOR CONTRACT MANAGEMENT (MJ MAAKO) DEPUTY DIRECTOR CONTRACT COMPLIANCE (JDE BASSON) 7. MANAGEMENT OF OPERATIONS

QUALITY & QUANTITY CONTROL OF SERVICES  Governed by contract (concession & direct agreement) between the two parties.  Contracted operators to function independently.  DCS Contract Management Directorate to act as a regulatory body that must manage the contracts and ensure that inspections and audits are performed regularly at the two PPP Correctional Centres.  Regional Commissioners to have oversight function on the management of the two centres.

MONITORING  Correctional Services Controller Monitors operations Monitors empowerment related issues of contract  Supervisory Committee: To rule on the merits of the notices of breach and the extent of penalties To undertake the annual review  Inspectorate, Audit & Auditor–General’s Office To conduct inspections and audits on the two Correctional Centres  Judicial Inspectorate To facilitate the inspection of the Correctional Centres & report on the treatment of inmates in prisons and on conditions and any corrupt or dishonest practices.

Monitoring (cont) Directorate Contract Management To monitor contract compliance( operations & empowerment) To conduct site visits To attend to operational and empowerment meetings with contractors To attend quarterly meetings with Corrections & Contractors Penalties –Fixed penalties= 0 –Variable penalties= 0

17 8. BUDGET ACTIVITY: PPP CORRECTIONAL CENTRES: FINANCIAL YEAR 2009/2010  Goods & Services Indexed fee = R ,00  Payment on Capital Assets Fixed fee = R ,00

18 9. CHALLENGES  Gang fights  Hunger strikes  Re-classification of inmates  Requests for transfers  Provision of ARV’s  Medical releases

19 Business Unusual: all hands on deck to detain, rehabilitate and reintegrate offenders for a safer South Africa