The court battle between Valor IT and the Department of Trade and Industry (DTI) seems set to drag on indefinitely, as it has yet again been postponed.
As a result, the Companies and Intellectual Property Registration Office (Cipro) will not be able to implement a much needed enterprise content management (ECM) system, leaving South African businesses susceptible to abuse on its legacy systems.
The battle between Valor IT and the department has been dragging for almost a year, after DTI canned Valor IT's R153 million contact to overhaul Cipro's IT systems. Valor IT took the department to court to uphold the contract and claims to have reached a R28 million settlement last November.
Trade and industry minister Rob Davies has denied that any such settlement was reached, as nothing was ever signed off. The parties met in court again yesterday, when Valor IT tried to enforce its settlement.
However, resolution of the legal spate has again been delayed, this time to an uncertain future date, due to the volume of papers the DTI has filed, says Valor IT chairman Josias Molele. He accuses the DTI of using “delaying tactics” as the enforcement of the settlement was not argued, but rather the subject of the agreement.
Davies has also hinted at possible legal action by the DTI to recover money that has already been paid to Valor IT, which would delay the legal battle even further. He said last month the matter would go back to court to sort out “compensation, one way or the other”.
Cipro has already paid Valor IT around R95 million that for the aborted implementation.
Waiting game
As a result of the legal wrangling, the implementation of the new ECM system hangs in the balance. The legal issue is preventing Cipro from moving ahead with installing a more secure framework that could cut down on fraud perpetrated on its database.
The ECM system was meant to move Cipro onto a fully electronic platform and improve its current controls. It should have been up and running in time for the new Companies Act, which comes into effect on April Fools' Day.
Cipro is now forking out another R11 million to Waymark, the company that installed its current legacy system, for maintenance and to plug any security gaps. The stop-gap measure also aims to make sure Cipro is ready for the new law.
Elsab'e Conradie, Cipro's head of communication, marketing and stakeholder relations, has previously said the office hopes to move ahead with the ECM system once the legal matter has been wrapped up.
She explained, although the office was plugging holes in its current system, the ECM was still necessary as it would result in stronger controls at the registrar.
No proof
Chris Gilmour, Absa Investments analyst, says the continuous delays in getting the ECM system implemented leaves local businesses at the mercy of a dysfunctional system. He says Cipro has “demonstrably failed in the past”.
Cipro's database was plagued by abuse last year, as fraudulent tax refunds worth at least R51 million were paid out by the South African Receiver of Revenue (SARS), because companies' details were illicitly changed on the Cipro database.
In addition, at least 11 companies were reportedly hijacked last year, as fraudsters removed legitimate directors and replaced them with others on the agency's database. This year alone, three firms have been hijacked, despite improved security measures that were put in place last October.
In September, the office said about 10 000 companies filed director change forms each month, and around 10 of these - or 0.001% - are called into question.
Gilmour says if Cipro's systems were good, SA business would not be at risk of having companies hijacked. “It's all well to say we are patching things up, but it must be effective. The proof is in the pudding,” he says.
Cipro needs a proper, secure system in place to prevent abuse of its database, says Gilmour. He is concerned that there doesn't seem to be a sense of urgency from government to get Cipro's systems right.
DTI was not immediately able to comment as it has to consult its legal team, but will provide respond at a later stage.
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