Cipro scrambles

The Companies and Intellectual Property Registration Office (Cipro) is furiously trying to find a solution to get its cancelled IT overhaul project back on track.

The office has to have an enterprise content management (ECM) system in place by October when the new Companies Act comes into play. If it fails to meet this deadline, it will not be able to cater for the functions of the new Companies Act, which requires the agency to amend company registration forms that will simplify the process.

In addition, the new Act makes provision for changes to electronic processes in terms of name reservations, registration of companies and the compliance regarding accounting officers.

If Cipro fails to get new systems up and running in time, there could be disastrous consequences for the economy. New companies may not be able to register, and existing ones could find themselves unable to implement empowerment deals as they cannot change company details.

Moreover, investors could decide not to invest in SA, because they may see the company registration process as too cumbersome, unreliable and open to abuse.

The Department of Trade and Industry pulled the plug on Valor IT's contract last week to install the new system, and work on the R153 million contract came to a grinding halt. Valor IT is set to take the DTI to court next Wednesday in a bid to have the contract declared valid, which could delay implementation even further.

A forensic investigation earlier this year into the awarding of the contract to Valor IT resulted in the suspension of Cipro CEO Keith Sendwe and CIO Michael Twum-Darko. The department has not responded to a query as to whether the two have been criminally charged.

Elsab'e Conradie, Cipro's head of communication, marketing and stakeholder relations, says development of the new IT system has stopped. The ECM system is intended to replace the current manual process of registering a company, close corporation or cooperative.

Conradie says the office is looking at a few options and once it has decided on a way forward, the department will have to sanction its solution. “The sooner we find the best solution, the better.”

Cipro is moving into a completely electronic environment, which is a requirement of the new Act, and needs to be ready for when the law comes into being. “We are working very hard to get everything ready,” she says.

“Cipro's current systems are legacy systems and, although they have been upgraded, they do not have the capability or integration capacity to cater for the new functions [of the Companies Act],” she explains.

Among the changes the Act will usher in is simplified registration of new companies. In addition, electronic processes, such as name reservations, registration of companies and compliance regarding accounting officers, will all have to change in accordance with the new Act.

The Democratic Alliance says Cipro may have to go all the way back to tender stage, and the ECM system could take another year to be put into place.

Andricus van der Westhuizen, shadow minister of trade and industry, says he doubts Cipro will have the IT upgrade in place by October. He says the director-general has informed him the process will go all the way back to tender.

Van der Westhuizen says the new system is a necessity as the current legacy one is susceptible to fraud, and the manual processes result in delays for amendments and registrations.

In addition, he says, the new Act places more responsibilities on Cipro. Van der Westhuizen says the body is already not coping with its workload, and queries how it will cope with additional tasks.

The new Act will require Cipro, after its merger with the Office of Companies and Intellectual Property Enforcement to form the commission, to enforce the Act, conduct investigations and inspections, resolve disputes and do research.

Van der Westhuizen is concerned the Cipro brouhaha will turn investors away from the country, as they will not have any faith in the government's ability to eliminate fraud at the very body that is meant to make sure companies stick to the law. “It could turn millions of rands in investment away.”

Chris Gilmour, Absa Investments analyst, expects the delays in implementing the new system to result in companies not being able to register, or make amendments to information such as to appoint new directors.

He says the situation is a “major impediment” to economic growth, as the very companies government is relying on to create jobs will not be able to register - and will not be able to operate. “Any company beyond a certain size must be registered.”

In addition, says Gilmour, the current system Cipro has in place is open to abuse. He points to issues such as the duplication of companies on its database, and the challenges companies face when trying to use the Cipro Web site as examples of issues that plague the office.

“If your companies' database is as corrupt and as inefficiently administered as it appears to be the case, then all sorts of problems could occur.”

Gilmour says South African companies face the risk of corporate identity theft, as well as concerns that economic indicators could be skewed because there is no accurate information on how many firms are active in SA, how many new registrations are taking place and whether companies are folding.

He says Davies needs to assure the public that the office is being cleaned up and that measures are being put in place to make sure it runs efficiently.

In addition, says Gilmour, Cipro is meant to be the custodian of good corporate governance in SA, yet it is “in a mess itself”. “Cipro must be seen in a very good light. It's got to walk the talk, but if it has poor IT systems, it is starting with one hand tied behind its back,” he says.