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Cipro clean-up flounders

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 13 Jul 2010

Three months after a forensic probe blew the lid off large-scale corruption and fraudulent practices at SA's company registration office, the agency's current state and outlook seem more unclear than ever.

Instead of cleaning house and getting the affairs of the Companies and Intellectual Properties Registration Office (Cipro) in order, government's intervention following the investigation seems to have stalled under the burden of red tape, purported political interference and legal action.

Conspicuously silent is minister of trade and industry Rob Davies, who initially vowed to get tough with crooked officials at Cipro. Davies was hailed by industry observers and political commentators as one of the few ministers in government who was serious about stamping out corruption, and seen as a politician who would make a real difference for a change.

However, his credibility has subsequently suffered, as his tough stance on Cipro seems to have achieved little bar the suspension of the agency's CEO and CIO. It has been weeks since Davies has made any mention of Cipro whatsoever and this has done little to reassure business.

The forensic investigation, conducted by Specialised Security Group, was completed in March. It revealed several discrepancies in the awarding of a R153 million contract to Valor IT for the implementation of a new enterprise content management (ECM) system at the agency.

Cipro CEO Keith Sendwe and CIO Michael Twum-Darko were suspended following the allegations of tender rigging, and Valor IT's contract was subsequently canned.

The two Cipro executives were meant to find out what charges they faced at the end of May. However, this morning ITWeb confirmed the Department of Trade and Industry's (DTI's) legal team has not even finalised the charges against Sendwe and Twum-Darko, or when these would be filed.

Hot air?

Despite Davies' earlier assurances, Cipro lies in tatters and the public is still none the wiser as to what steps he has taken, or will take, to clean up the agency, although some staff have recently been fired for lying on their CVs.

The minister has also not clarified what charges will be laid against the suspended executives, despite announcing to Parliament almost two months ago that the two could be criminally charged. It is also unclear whether Cipro will, in fact, be ready when the new Companies Act comes into force, in October.

The new ECM system at the centre of the brouhaha is vital for Cipro to implement the Act. The legislation places a greater burden on the office as it will have to regulate companies, and transform several registration functions into electronic processes.

Waiting game

This morning, Sidwell Medupe, director of media and public relations at the DTI, explained that charges had not yet been laid against Sendwe and Twum-Darko, because the department's legal division had yet to finalise the referral.

Medupe says the forensic report into the awarding of the tender was handed to the department's legal advisors so that they could formulate charges. The department previously indicated these could be internal or criminal.

He says the challenge around the delay in settling Sendwe and Twum-Darko's fates is because the legal department has been filing papers in response to Valor IT's court application to have the contract upheld.

However, Medupe says the department does not wish to discuss the pending legal case “through the media”.

Full steam ahead?

After the department pulled the plug on Valor IT's contract last month, work on the implementation of the ECM system came to a grinding halt.

However, Medupe says: “We are going to proceed with the development of the enterprise content management system, as this is needed for our operations and to deliver services to the public.”

He did not explain how the department intends proceeding with the implementation, or whether it would be ready in time for October.

Econometrix senior economist Tony Twine says Cipro is “clearly a malfunctioning cog in the regulatory wheel of the South African economy”.

“I imagine future cases of prosecution under the Act failing, because the cog in the information wheel wasn't there, or failed to work properly.”

Twine says failure to comply with the Act by following rules, such as updating a director's details, or compiling with regulatory issues, may not be prosecutable, because of a system failure at Cipro.

“It could be merry chaos if the law assumes a process exists and it does not exist in reality.” In addition, adds Twine, foreign investors could be deterred from coming into the country, because of the hurdles involved in getting a company off the ground.

Mark Walker, director of the IDC Middle East and Africa's vertical industry practice division, says Cipro is vital when it comes to planning around SA's economic health. He says a clean database of companies that are doing business is essential for tax planning and regulatory reasons.

“Government must get their act together; if this is just a case of sitting on their hands because no one wants to take any action, then it's a problem.”

Walker says Cipro's database of information is one measure that is used by analysts and economists for strategic planning. “If that database is wrong, then my strategic planning is wrong.”

In addition, when the new Act comes into play, Cipro's duties will be expanded. However, there are concerns over the integrity of the information in the office's database, which will make it difficult for Cipro to regulate companies. “These are big issues.”

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