Business

Crunch time for CIPC tech crisis

Technology failures at the Companies and Intellectual Property Commission (CIPC) will severely affect the local economy and job growth, prompting the Democratic Alliance (DA) to call for a state of emergency at the commission.

“The commission managed to process only 196 new registrations in June 2011 - equivalent to 7% of the 2 738 new registrations processed in the same month last year,” says DA shadow minister of trade and industry Tim Harris.

Head of communication, marketing and stakeholder relations at the commission Elsabe Conradie says the problems experienced by the CIPC are due mainly to technological shortcomings and these are being addressed.

“With the appointment of the new chief information officer, systems are being reviewed and new systems will be developed to cater for new functions. In the meantime, current functionality problems receive urgent attention for interim solutions.”

Sharp point

”Companies are the building blocks of our economy. If we are failing to register new companies, or process company returns at the required rates, then we are stifling economic growth before it begins, and impeding the creation of new jobs,” says Harris.

Econometrix senior economist Tony Twine says the economic impacts mentioned by Harris will occur if the bottleneck remains for any length of time.

The average time to register a company in SA is 40 days and to do the same in Australia evidently takes about 48 hours.

Twine adds that the establishment of new companies in any economy is necessary to expand productive capacity and create competitive markets, both of which are positive for any growth.

“New jobs can only be created if there is an increase in the value added within an economy. Value-added growth is economic growth, so, if economic growth is retarded by bureaucratic inefficiencies, so will employment growth be ended.”

He also says the impacts of the CIPC's poor performance are probably already visible, or will be as soon as the second quarter 2011 growth statistics become available.

“For a government which prides itself on the ability to micro-manage aspects of the economy in the name of the 'developmental state', this is an uncomfortable needle very close to the bubble of that hubris.”

Gross insufficiency

Harris says, in total, the commission managed only 2 476 new registrations in the first two-and-a-half months of its existence.

“In the same period last year, its predecessor, the notoriously dysfunctional Cipro [Companies and Intellectual Property Registration Office], completed 6 120 new registrations.”

He adds that the commission acknowledged it has a backlog of 50 000 transactions.

Many of the problems seem to arise from the fact that the commission's call centre is grossly insufficient for its needs. During May, the centre received 66 000 calls, but 47 500 (seven out of 10 calls) were not answered, says the shadow minister.

“The DTI [Department of Trade and Industry] claims they are short of 30 call centre agents, but that they wouldn't have space for new agents on their campus. This is absurd given the rate of youth unemployment in SA and the ease with which the DTI could engage space to facilitate call centre capacity anywhere in the country.”

However, Conradie says businesses are still being registered on a daily basis, backlogs are being cleared and the Web site is functional. “Although certain areas do present challenges.”

She adds that with some issues there are quick wins, like appointing more call centre agents and streamlining certain processes.

“However, to develop and implement new systems will take longer and should only be fully implemented in about 18 months' time.”

Sticky start

The CIPC became operational on 1 May as the result of the Companies Act, which came into effect in May.

The commission was created through the merger of Cipro and the Office of Companies and Intellectual Property Enforcement.

It says the first two months have been difficult, with system problems, and new and inherited backlogs in a number of areas.

“CIPC is working its way out of a very difficult beginning, but is still under pressure. Although there is increasing public pressure, things are improving internally.”

It names some of its challenges as Web site functionality, the next stage of development, the increase in volumes, customers struggling to get access to the organisation for tracking and advice because of understaffed call centre and also some new, unanticipated problems.

Crisis stations

Harris says the private sector has to be central in finding a solution for the CIPC's woes since its major functions, like document and call centre management, technology design and the integration of Web-interfaces with backend databases, are similar to those performed every day “with minimal fuss” by private companies.

”Some officials at the commission seem open to this approach, but claim that overly burdensome procurement systems stand in their way. This cannot be tolerated. If there is a delay in contracting out services, then stop-gap measures must be put in place to prevent the backlog worsening.”

The shadow minister also says that, while the DTI has acknowledged the commission needs a new IT system, it is unacceptable that their Web site is often not able to handle the simplest tasks like checking an existing company name.

He adds that trade and industry minister Rob Davies needs to declare a state of emergency at the commission.

“The DTI currently has a two-year road map to effect a turnaround, but SA cannot wait that long for the crisis in company registrations to be resolved.”

Fraudulent system

Earlier this month, the CIPC said it would overhaul its IT systems, a process that will largely be completed by next October.

This came in the midst of mounting criticism from consumers battling to register new company names and lodge annual returns.

Cipro was heavily criticised after its database was abused last year, which led to the South African Revenue Service paying out fraudulent tax refunds worth at least R51 million, after companies' details were illicitly changed on Cipro's database.

In addition, at least 11 firms were reportedly hijacked in 2010, as fraudsters removed legitimate directors and replaced them with others on the agency's database.

Cipro also failed to install a new enterprise content management system, after a R153 million contract, awarded to Valor IT, was canned when irregularities were picked up in the tender process.

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