Cipro meltdown continues

South African companies are at the mercy of an increasingly dysfunctional registration office, but none of the key functionaries are willing to accept responsibility for the growing crisis, nor can government shed any light on the way forward.

While the Companies Intellectual Property Registration Office (Cipro) seems to be fast heading for a large-scale organisational meltdown, it refuses to accept liability for irregularities concerning businesses on its database.

It is also refusing to field questions regarding the bigger problems around the implementation of a new IT system, which has been delayed and is desperately needed to prevent fraudulent attacks on its database and aid businesses in participating in the formal economy.

Yesterday, the office held a press conference at which it outlined plans to prevent more companies from being hijacked. The announcement came on the back of news that Kalahari Resources had allegedly been hijacked, because its directors were changed without the proper authority.

Cipro has, on the instruction of the court, changed the information back to reflect the original directors. According to media reports, the original directors won their application in the High Court to be restored as directors yesterday.

However, Cipro's new measures to counter future fraudulent abuses of its database have been slammed as too little, too late by the official opposition party. Cipro acting CEO Lungile Dukwana says about 10 000 companies file director change forms each month, and about 10 of these - or 0.001% - are called into question.

security measures from next month, which include a company-owned password, proof of the changes to directors and an official mandate to be presented.

Dukwana announced yesterday that the changes to its legacy systems would also alert a company's CEO or chairman and the company secretary via e-mail when directors' names are changed.

In the meantime, Cipro has suspended electronic director changes, and now requires all this information to be submitted manually, which will add to the cost of doing business in SA and is a potential barrier to entry for new businesses.

It transpired, during the press conference, that the person who allegedly changed Kalahari Resources' directors was a professional, such as an accountant, who has since had his Cipro customer number revoked and can no longer make changes on behalf of companies.

Yet, the person who made the changes would have been able to change directors' names on any company of his choice, including large, strategic entities such as Telkom, for example.

However, the office has denied any liability for changes made to its database, insisting that the correct procedures had been followed when amendments were made. Further, says Dukwana, the office is not required to verify the information with which it is provided, although it will now do so in future.

Cipro had been cited as a respondent in the Kalahari Resources case, but this is only to explain its systems, acting chief customer officer Joey Mathekga says.

“Cipro has nothing to defend in court, because the way the changes were done followed a prescribed process,” adds Dukwana.

However, Cipro's suspended CIO, Michael Twum-Darko, says Cipro's job is to protect information regarding businesses in SA.

While Dukwana admits that the office has a responsibility to improve controls, he argues that the changes were not the result of a systems failure, as Cipro's procedures were followed. He concedes, however, that Cipro's IT systems are not robust enough to close the door on fraudsters. “The current system is not helping us... this is an old legacy system.”

However, the implementation of a new electronic content management system, which could aid the office in clamping down on abuse of its database, has stalled. The DTI canned the R153 million contract with Valor IT, after a forensic investigation picked up irregularities in the tender process.

Valor IT is heading to court to have the contract declared valid but, in the meantime, there has been no progress on the IT overhaul, despite looming changes to the Companies Act. Cipro's current systems will not be able to cope with new responsibilities created by the Act, which should be implemented in a mere few weeks.

The DTI has not responded to repeated requests for a progress update on the implementation, and has previously said it would not comment until the court matter is wrapped up. Yesterday, head of communications Elsabie Conradie emphatically stated at the start of the conference: “We will not be talking about the ECM system.”

DA shadow minister of trade and industry, Andricus van der Westhuizen, says the new system is vital to prevent fraud. He has heard of several instances in which directors' names were changed without the proper authority from the company concerned.

“People know that Cipro will tighten up security and, with the delay around the ECM system, criminals are trying to get through the door before the system is implemented,” says Van der Westhuizen. He argues that the DTI is “doing far too little to put Cipro on the right track. Cipro is in a dire situation.”

Meanwhile, it would appear that Trade and Industry minister Rob Davies has not been provided with accurate information around suspended Cipro CEO Keith Sendwe and Twum-Darko.

The pair were officially suspended in May, after a forensic investigation, completed in March, unearthed irregularities in the awarding of the tender to Valor IT. Davies asserted in May that Cipro would be cleaned up, and the pair would be charged.

Van der Westhuizen tells ITWeb that Davies told him in Parliament yesterday afternoon that Twum-Darko had been charged, and had signed for the charges against him. Twum-Darko, however, denies signing for any charges.

Twum-Darko says he received e-mailed charges, but claims that these do not count as official charges, as his service conditions require charges to be delivered to him physically. He says, as a result, he has not been officially charged, despite the 90-day deadline from when he was suspended having lapsed.

In addition, says the suspended executive, no evidence of allegations that led to his suspension have ever been presented to him, and he is keen to be called in front of a disciplinary hearing so that he can clear his name. “I will sit at home until they are ready for me, and then I will prove them wrong.”

Sendwe is said to be in hospital and could not be contacted for comment. Staff within Cipro have also been told that the pair have been charged during a meeting, although this has not been formally communicated and no other details were provided.

Johan Strydom, the DTI's senior legal advisor, this morning refused to comment on the confusion surrounding the charges.