Companies and Intellectual Property Commission 2013/14 Annual Report & 1st Quarter Performance

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Trade, Industry and Competition

19 September 2014
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Companies and Intellectual Property Commission briefed the Committee on its 2013/14 annual report and its financial and non-financial performance for the first quarter of 2014/15. The Companies and Intellectual Property Commission said that it had been undergoing sustained and rapid transformation since 2011 to improve service delivery to economic citizens.

Key achievements for the 2013/14 period included an increase in posts from 606 to 640, a new remuneration framework, company registrations with FNB and a new annual return system.

Targets in the following areas were not met: company registrations due to delays in the implementation of the e-mail indexing solution; cooperatives registrations due to system down times; patent e-filings and the installation of self-service terminals (only 13 were installed)..

The Committee expressed concern about the low targets and the length of time it took to register a company. Clarity was sought on registered intellectual property in the international community versus registered intellectual property in the local community. Members also queried call centre performance and irregular expenditure concerns in the Companies and Intellectual Property Commission.

The Department of Trade and Industry provided a departmental perspective on the Auditor-General report.

Meeting report

Companies and Intellectual Property Commission Annual Report briefing
Ms Astrid Ludin, Commissioner: Companies and Intellectual Property Commission (CIPC), said that the Commission had been undergoing sustained and rapid transformation since 2011. The aim of the transformation was to improve service delivery to economic citizens.

The Key achievements for the 2013/14 period were:
A new structure and policies (July – August 2013)
Increased posts from 606 to 640
New remuneration framework
New service delivery model and channels
FNB integrated company registrations and the opening of accounts (June 2013)
Self-service centres and self-service terminals (January 2014)
Information and Communications Technology (ICT) stabilisation
New annual return system (August 2013)

The following targets were not met:
Company registrations. Delays were due to the implementation of the
 email indexing solution;
Co-operatives registrations. Delays were due to system down times;
Patent e-filings. The low number e-filings were due to big firms Spoor and Fisher and Adams & Adams not utilising the system;
Call/answer rate. Staff experienced challenges balancing the taking of calls and normal production; and
Self Service Terminals (SSTs). A total of 13 SSTs were installed but the Department of Home Affairs had problems with allowing biometric access to their database.

The CIPC established the foundations for a new model of public service delivery, set benchmarks for a world-class service and had made progressive change with tangible results             (see document).
Mr G Hill-Lewis (DA) said he and a colleague had visited the CIPC SST in Pretoria and found that it had improved service delivery times. It was clear from the annual report that targets were reduced from the baseline 2013 targets. The Committee would like to see service delivery standards getting better. The 25 working days to register a company was too long.

Mr Tayron Tshitaudzi, Divisional Manager: CIPC, replied that the Honourable Hill-Lewis had sent a complaint to the CIPC and this was being attended to.

Mr Hill-Lewis asked for more information about call centre staff being discouraged by a certain union from taking calls.

Ms Ludin replied that the big issue was related to change management. When job descriptions were done, query resolution was built into them. This made an impact on the job grade. In the past staff only had to capture the information, but now more query resolution was being done. The union had been engaged with in an attempt to reach a common understanding.

Mr Hill-Lewis asked the CIPC for its view on the World Bank’s Doing Business report which showed that South Africa had dropped eight places from 56 to 64 in the category: ease of starting a business.  

Ms Ludin replied that it was difficult to talk about the international side of the rankings. CIPC was just a small component of the overall ranking. The ranking included VAT registration and licences, so this was not necessarily indicative of company registration itself. However, as a country there was a need to improve. CIPC had been liaising with other departments and now had a live link with SARS that came into effect on Friday last week. This should have an impact on the rankings.

Mr Z Luyenge (ANC) said targets and achievements of the CIPC were a bit low. The 25 working days to register a company should be checked against the service standard as this did not show a significant impact.

Ms Ludin said that the reason why it was 25 working days was because manual transactions took very long.  Technology had now made the system more accessible hence the strategy to focus on electronic transactions.

Mr Luyenge asked for more information about registered intellectual property of the local community versus that of the international community.

Ms Ludin replied that the reason why the CIPC reported on it was because it believed that registering intellectual property should be one of the key indicators for the organisation. The use of intellectual property locally had to be relevant to local people, local business and local inventors. Quite a few changes had to be implemented to increase the relevance. There was a need for legislative change for patents and design.

Mr N Koornhof (ANC) asked if the CIPC envisaged services becoming cheaper.

Ms Ludin replied that the CIPC would like to maintain current fees, but had obtained approval from National Treasury to adjust fees by 5% annually. The CIPC implemented annual increases below inflation level. It was looking to make certain things freely available.

Mr Koornhof asked if it was possible to give penalties back as an incentive.

Ms Ludin replied that the organisation would look at the recommendations around penalties. Penalties where reflected in the budget in some way. 

Mr Koornhof asked how the fee structure in South Africa compared with those in Southern African Development Community (SADC) countries.

Ms Ludin replied that our fees were the lowest in the world. A Swedish report had found that offices that were self-sustaining charged lower fees. This country’s fees were low compared to SADC countries. The important issue was to look at how to give value back.

Mr T Mulaudzi (EFF) asked if more changes were possible with annual returns.

Ms Ludin replied that different ways had to be found to administer annual returns. One of the options mentioned was to have a pay-as-you-go company where a renewal fee was paid when needed. There was a need to look at different models so as to have an understanding of what the business community needed and what CIPC could offer. The constraint was what the legislation required the CIPC to do. 

Mr Mulaudzi asked what the turnaround time was for CK2 amendments.

Ms Ludin replied that CK2 amendments addressed address and  financial year-end changes. These changes made a big difference and could suddenly. .

Mr Mulaudzi  asked if the company registration period could be shortened for manual applications.

Ms Ludin replied that the turnaround time for company registrations could improve more. The issue here was around name reservations. More innovation and improvement was needed, especially on the technology side.

Mr Mulaudzi asked what the CIPC was going to do about corrupt middlemen in the CIPC head office in Pretoria. There seemed to be corrupt practices occurring there with some people suddenly becoming directors. Did the CIPC have a strategy to sort this out?

Mr Tshitaudzi replied that the CIPC was aware of the challenges presented by agents and runners and was looking to combat the problem with awareness and security. The Fraud Prevention Plan was approved in April this year. A whistle blowing strategy had been implemented. The investigation capacity of the organisation was taking shape.

Mr Mulaudzi asked if the CIPC had roadshows to inform people about the registration of co-operatives.

Ms Ludin replied that roadshows were being done around the country. There was a need to automate the registration of co-operatives. This was in the pipeline along with accompanying new legislation.
Mr C Mathale (ANC) said that all his questions were covered and he commended the CIPC for implementing innovative company registration processes.

Mr D McPherson (DA) commented that as Mr Hill-Lewis had alluded to the oversight at CIPC, which the committee had taken; it had been confronted with runners, which had been constantly undermining the CIPC. Mr Hill-Lewis had raised the issue of runners having unprecedented access into the CIPC and SARS. Had there been any progress in curbing that tendency since the committee had been there and what measures had the CIPC put in place to deal with those tendencies on a continuous base? Moreover he concurred with Mr Hill-Lewis that the CIPC needed to have higher targets so that CIPC would continue to improve so that it could better service entrepreneurs.

The Chairperson commended the Department of Trade and Industry for its decision to replace the Companies Intellectual Property Registration Office (CIPRO) with the CIPC as this had impacted positively on the financial ratings. The reason why CIPRO failed was because of governance. That was why the Auditor-General’s report detailing governance issues and non-compliance with laws and regulations within the CIPC was such a concern. As the CIPC had not taken steps to prevent irregular expenditure, what were the CIPC doing to overcome this? Why the target of 50% was so low for call centers?

Ms Ludin replied that systems were in place to deal with governance issues and non-compliance with laws and regulations. The CIPC had corrected most of the irregular expenditure. It was not the Auditor-General that had found it (irregular expenditure). The CIPC had found it and dealt with it. The issue now was about what kind of disciplinary steps should be put in place.

Mr Tshitaudzi acknowledged the audit issues raised by the Auditor-General, however CIPCO had started with a process to develop an Audit Matrix with action plans and timelines. A monitoring system was also built into the process. An internal risk committee had been created to oversee the process. 

The Chairperson asked why the target of 50% was so low.

Ms Ludin replied that the low targets had been discussed extensively within the organisation. The main concern was what had to be done to balance the targets. This year operations would be stabilised and query resolutions and call taking needed to improve. The two could not be done at the same time. This was why the targets were set at 50%, to give the CIPC some scope to improve query resolution. Once both were brought to an acceptable standard, the organisation would then continue to operate efficiently.

The Chairperson referred to the query logging system that had been introduced through the website. Why was the call centre not functioning properly now that it had access to a fully automated system?

Ms Ludin replied that many people had been spoken to. The Department of Trade and Industry had instituted a Call Centre for CIPRO because the staff were not answering their phones. This situation was still current. The reality is that people do not want to speak to a Call Centre, they want to speak to a person who could give them the right answer. That was a culture issue that had to be dealt with in the organisation. A new call centre was not going to solve the problem because it was about accountability. On the first day that the query logging system on the website was introduced, 200 queries were logged. This was good because there was data and people could be held accountable.

The Chairperson asked about the issue of ‘ghosts’ (people posing as directors, for example). How was the CIPC faring in eliminating this practice?

Ms Ludin said director changes were the area that had now been amended, and new systems had been implemented. This area had always presented problems.

The Chairperson asked for clarity on the disciplinary measures spoken about. The call centre issues had to be addressed more rigorously. Could the CIPC send a report of all services, costs and target times to the Committee by 23 September 2014?

Mr Hill-Lewis asked how many people had been dismissed for irregular expenditure.

Ms Ludin replied that no one had been dismissed for irregular expenditure. Irregular expenditure could occur because of one supplier, an expired license, or an approval not issued in time. There were no fruitless expenditure in the organisation.  

Mr Hill Lewis said that he had been in touch with SARS investigators who were conducting their own investigation on runners. This would assist CIPCO in pinpointing the corruption.

Ms Ludin replied that there were enormous benefits of being paperless in the back office.  Irregular transactions were normally paper based. So going paperless could easily isolate the potential for fraud.

Mr Kumaran Naidoo, Chief Financial Officer: Department Trade and Industry, said he felt the Committee should have a departmental perspective on the Auditor-General’s report. The Minister has written to all institutions and asked them to submit plans on how they were going to rectify all the findings. This had to go to the Audit Committee. Quarterly updates or status reports on the rectification plans were required. There was also a CFO Forum where meetings were held with each CFO on a bi-monthly bases to discuss and address challenges in organisations.

The Chairperson said that the CIPC was doing well in dealing with all the issues. Its progress was phenomenal. The rural areas did not really lend themselves to good communication, but there was hope that this would be addressed in the coming financial year.

The Training Programme
The decision for a training programme was taken three weeks ago. This meeting would take place at 9am on 26 September 2014.

The Training Programme was adopted.

3 September 2014
The minutes of 3 September 2014 were adopted.

9 September 2014
The minutes of 9 September 2014 were adopted.

10 September 2014
The minutes of 10 September 2014 were adopted.

The meeting was adjourned.

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