The Companies and Intellectual Property Registration Office (Cipro) will implode if the Department of Trade and Industry does not take decisive action to clean it up, warn market commentators.
Cipro is funded by the South African business community, which is charged fees and levies for services, such as name reservations and registrations, annual returns and sales of data on its database.
In the last financial year, fees paid directly to Cipro amounted to R854 million, which was a decline on 2009's figure of R954.8 million. The drop was the result of a slowdown in economic activity in SA due to the global recession.
However, Cipro has been slammed after being hit by several incidences of fraud perpetrated on its database, including the recent well-publicised hijacking of Kalahari Resources.
The state of its database has also been questioned after a recent wide-ranging clean-up resulted in 750 000 companies being deregistered in one day.
There are also ongoing questions as to whether Cipro will be ready in time for when the new Companies Act comes into force next April. Its ability to implement new electronic requirements under the Act hinges on the implementation of an enterprise content management (ECM) system, which stalled after the department canned ValorIT's R153 million deal.
Implementation is unlikely to go ahead until ValorIT has had its day in court, where it wants the deal to be reinstated. As a result, the whole issue may go back to tender stage, delaying the IT overhaul for many more months.
Economic explosion
The Democratic Alliance (DA) says the Department of Trade and Industry (DTI), Cipro's custodian department, must intervene as a matter of urgency, or the office will die a “slow and painful death”.
Jacques Smalle, DA shadow deputy minister of trade and industry, says the slew of troubles at the office are “indicative of a deepening malaise at the heart of Cipro, and continue to do serious damage to the reputation of the department”.
PricewaterhouseCoopers revealed last month that Cipro's database had been used to create fake companies and divert tax returns to those companies, says Smalle. Other aspects indicating Cipro is in dire straits include the fact that trade and industry minister Rob Davies has not made public the results of a forensic investigation into the tender irregularities around the ECM system. The investigation was completed in March.
Smalle also points to the fact that Cipro officials failed to pitch in Parliament in April to answer questions on issues of corruption involving senior officials. “If left unchecked, this endless trickle of scandals, examples of maladministration and poor leadership will lead to the slow and painful death of Cipro, and the DTI itself will not escape unscathed,” says Smalle.
“If the DTI is set on fixing the problem once and for all, it needs to adopt a more drastic position,” says Smalle. He calls on the department to conduct a forensic audit, and then place Cipro under administration.
Chris Gilmour, Absa Investments analyst, says the situation at Cipro does not seem to be getting any better. He says a complete cleanup is required at the office, “otherwise the whole thing will implode”.
Gilmour questions why South African companies are not up in arms over the quandaries Cipro faces. He says they should stand up and provoke a response from the department and Cipro to get the situation sorted out. “He who pays the piper calls the tune.”
Business Unity SA has also reiterated its calls for the trade and industry minister to act decisively to address challenges with Cipro. CEO Jerry Vilakazi says: “A fully-functional Cipro is critical.”
Confused
However, the department is shocked at Smalle's statements, suggesting that the deputy shadow minister has not been properly briefed.
Sidwell Medupe, DTI director of media and public relations, is “puzzled and dismayed” that Smalle wants Cipro placed under administration.
Medupe says Smalle's utterances reflect “opportunistic obsession with events of the past which Cipro has been responding to for a while now”. He says the office is busy strengthening administrative controls and closing loopholes that are being identified.
In addition, adds Medupe, the office is gearing up for when the Company and Intellectual Property Commission is established in terms of the new Companies Act. He explains that the commission will take over Cipro's functions, and management will be “overhauled”.
Cipro head of communications Elsabie Conradie says the office cleans up its database on a continual basis. She concedes, however, that Cipro does sometimes have backlogs, and recently there was a backlog of name reservations. She was not immediately able to provide a list of all current backlogs.
Share