Mangaung Correctional Centre.
Image Credits :
G4S Correction Services
There are few topics that make people as uncomfortable as prisons. And even fewer when you introduce a second layer of discomfort: prisons for profit.
We like to believe incarceration sits outside the logic of markets. That punishment, justice and rehabilitation exist in a moral economy, not a financial one. And yet, somewhere in the world, prisons are performing extremely well as real estate assets.
GEO Group owns and operates detention facilities on behalf of governments. Their facilities are predominantly in the US and elsewhere around the globe, with nearly 100 facilities and roughly 80 000 beds. A straightforward business model in which the state pays a fixed fee per inmate per day.
Beyond the physical prisons themselves, they also provide halfway houses, parole and probation supervision, electronic ankle monitoring and rehabilitation programmes. It’s pretty much a full turnkey service when it comes to the prison itself, as well as the community re-entry and monitoring process once the inmate is released from prison.
I recently spoke to Joe Bassett, the portfolio manager of the Renegade Fund at AG Capital, who explained why their hedge fund took a positive view of the stock in the run-up to Donald Trump’s previous election. The stock jumped by close to 50% very quickly after they invested — a well-timed call backed by an original perspective.
What interested Joe was not ideology, but rather the narrative.
The past five years, he explained, had been driven by story-led markets. Whether it was nuclear energy, artificial intelligence or quantum computing — capital flows toward the dominant narrative of the moment and when the story fades, so does investor appetite.
With Trump back to his familiar X rants, immigration enforcement returning to political focus and the US Immigration and Customs Enforcement (ICE) once again centre stage in the US, a company like GEO Group re-enters the conversation.
Capital does not ask whether something feels right; rather, it asks where demand exists, whether contracts are durable and whether the story has momentum. The human side of investing reveals itself not in morality, but in pattern recognition.
Now let’s turn the uncomfortable mirror towards South Africa.
Our prison system is overcrowded and underfunded, with ageing infrastructure, staff shortages and chronic maintenance problems. A system straining under pressure with little fiscal room to breathe.
Is it unthinkable to ask whether prisons could ever generate returns for investors in South Africa or is that question simply too politically uncomfortable to entertain?
South Africa is no stranger to privately run prisons.
Mangaung Correctional Centre in Bloemfontein was operated under a public-private partnership by G4S, under contract with the Department of Correctional Services. The model mirrored many global counterparts with a fixed fee per inmate, private operations and state oversight.
The name of the prison might ring a bell for those who followed one of the most Netflix-esque prison escapes in South Africa’s history — the escape of convicted rapist Thabo Bester in 2022. The prison was also accused of multiple human rights violations, violent unrest and allegations of abuse.
The private-public partnership collapsed spectacularly. The state took back control and Mangaung became shorthand for everything that could go wrong when incarceration meets private enterprise.
But here is the question we avoid asking: Did it fail because it was private or because oversight failed?
Our Constitution allows for privately run prisons. The legal framework exists. What does not exist, or at least not convincingly, is trust. Trust in enforcement, transparency and accountability. Three words that we sadly do not use closely when it comes to the persona of our government.
Do we trust the state to regulate, monitor and intervene before failure becomes a national spectacle?
We have no problem reimagining hospitals, energy generation or even memorial parks as investable infrastructure. Developer Calgro M3 has shown that even emotionally sensitive assets can be responsibly commercialised by transforming your typical cemetery into a well-maintained, landscaped space to lay your loved ones to rest.
They offer an alternative to traditional cemeteries and the group is valued in the billions.
Yet prisons remain untouchable, not because they cannot be improved, but because the political and moral risk is too high.
We also have a strong history of anti-privatisation sentiment; however, when it comes to unlocking certain real estate assets, bringing in the cash and expertise of private parties can be essential to unlocking their potential. This is not about profiting off incarceration; it’s about identifying an opportunity and solving a problem.
Prisons are real estate assets with huge demand and they consume a large portion of public capital. They fail the people inside them and the communities around them.
Ignoring alternative models does not preserve morality; rather, it preserves dysfunction.
Perhaps the real question is not whether prisons should ever be privately run, but whether the state is willing and able to build oversight systems strong enough to ensure that profit never outruns dignity.
Somewhere in the world, prisons as real estate assets are working well as investments and more importantly, for inmates and the communities that they live in.
Prisons abroad are being run efficiently and humanely with much clearer accountability than what we achieve.
In our country, we are comfortable with dysfunction. The uncomfortable truth is that South Africa does not yet have a prison problem worth debating as an investment question. It has a governance problem worth confronting as a national one.
