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Agency moves in on parastatals

It’s not coincidence. It’s strategy.

Last week, the Companies and Intellectual Property Commission (CIPC) gave the board of SAA a tight deadline to explain why Dudu Myeni — a chairperson with a legendary amount of political clout — was to keep her job at the airline until November, in violation of term limits.

The week before that, the CIPC was in court asking for Phumzile Tshelane, the chief executive of the Nuclear Energy Corporation of South Africa (Necsa), to be put on probation for five years for taking advantage of a Necsa car and driver for his personal use. Tshelane is to drive the politically important and expensive new nuclear build project.

The week before that, the CIPC confirmed it was asking hard questions of Denel chairperson Lungisani Mantsha about his apparent sharing of confidential government information with the Gupta family — allegations that have seen no declared action by any other part of the government, amid murmurs that the family and its associates seem untouchable.

The very fact that Cabinet ministers and police alike appear wary of individuals such as Myeni makes them all the more attractive targets for the CIPC to pursue.

“You have to look at the highly charged, highly political ones,” CIPC commissioner Rory Voller told the Mail & Guardian this week. “You have to have these high-profile matters in order for the compliance nature and enforcement nature of the organisation to be elevated.”

Nor is it an accident that a lot of the CIPC’s current high-profile enforcement work deals with state-owned companies. Recently, his organisation noticed a trend of noncompliance with corporate governance rules in state-owned enterprises, said Voller. The CIPC’s response: “We made a shift to say: ‘We are going to deal with this.’ ”

And so the CIPC, declared moribund more than once in the past, became the organisation that made Finance Minister Malusi Gigaba explain why he was keeping Myeni on at SAA — and may yet be the driving force behind more serious action.

The CIPC has never had a matter that required it to go to court and argue that a flagrant breach of a court order required criminal sanction, said Voller.

But it’s early days yet.

Until 2011 what is now the CIPC pushed paper, mostly company registrations, through an administrative process — and did even that mundane task poorly. Scammers found that loopholes allowed them to register companies with names similar to those of corporate giants and fleece money from unsuspecting clients. In a few eye-popping instances, fraudsters even managed to remove legitimate directors of major companies and “hijack” them.

At the same time, it could take months for real company registrations to be processed, with stories of bureaucratic bungling rivalling anything in the civil service.

Various serious problems continued well into 2015, when opposition political parties warned that the CIPC was in danger of institutional collapse, but the changes began in 2011.

In that year, changes in the Companies Act came into force, which turned the CIPC from an administrative body into a regulatory one, with powers to match.

Why did it take six years for those changes to flower into the pursuit of high-profile breakers of governance rules? Voller, who was involved in drafting the new rules and was either deputy commissioner or acting commissioner during that period, is coy. “The first thing we had to do was understand the mandate and capacitate the investigative teams,” he said.

Events suggest that is only one part of the answer.

In April 2015 Voller’s predecessor, Astrid Ludin, resigned in dramatic fashion, saying she could not do her job without the political support of Trade and Industry Minister Rob Davies (under whom the CIPC falls) while the National Education, Health and Allied Workers’ Union danced on her metaphorical grave.

Voller was appointed acting commissioner, but was only confirmed in the job in September 2016, nearly a year and a half later. At the time, allegations of state capture were escalating while the Cabinet contradicted itself on the Gupta family.

Voller shied away from questions about his personal politics and simply laughed when asked whether he had made any trips to Dubai, but he was very clear about one thing: the CIPC can be inexorable because it has the backing necessary to call out anyone who requires it.

“We have total political support from our minister,” he said of Davies, who, in a frequently reshuffled Cabinet, has been in his post since 2009. “We keep the ministry informed of all our regulatory actions, especially the high-profile ones.”

Voller has similar high praise for Parliament’s portfolio committee on trade and industry, to which he reports and which he considers the “best-functioning” committee in Parliament under chairperson Joan Fubbs, who has also held that position since 2009.

It doesn’t hurt that, unlike almost any other government agency, the CIPC is not dependent on either Parliament or its government department for funding; it is self-funding through the fees it levies from companies in its administrative work.

With the money, the support, broad powers and a smoothly functioning organisation behind him, Voller has taken an implacable stance.

What will happen with Myeni and the corporate rules that say she cannot continue at SAA? “The minister [Gigaba] has given an undertaking to correct it,” he said.

And if that undertaking is not honoured? “We will continue to its necessary conclusion.” 

Big pharma and agriculture in the patents crosshairs

Changes to the Companies Act and the way it is administered turned the Companies and Intellectual Property Commission (CIPC) into a powerful body in 2011. It became responsible for policing adherence to corporate memorandums of incorporation and the behaviour of directors, giving rise to a “compliance notice” system that is civil in every sense of the word — unless there is a continuing failure to comply.

The rule changes also made provision for proactive monitoring, which has been at the root of many of its high-profile actions recently.

“We read newspaper articles …and say: ‘Hey, hang on, there is noncompliance here,’ then we go and investigate,” said CIPC commissioner Rory Voller.

This has led the CIPC to consider a number of matters linked to state capture, even as other government agencies said they required complaints, or solid evidence, before they could act.

Similar changes to the obligations and powers of the CIPC with regard to intellectual property are expected in the near future. Although South Africa’s new policy on intellectual property is still a draft, the CIPC is training 18 patent examiners and will soon be employing 20 more to prepare for the shift to an examining patent system.

Where previously patents in South Africa simply had to be filed and stood until challenged, the new system will make the CIPC responsible for determining whether patents are valid.

The mere suggestion of a move towards such a system in recent years made pharmaceutical companies consider setting up supposedly local grass-roots organisations — in reality run from Washington — to lobby against it, in an incident civil society organisations dubbed Pharmagate. Later, the Mail & Guardian found that several supposedly independent local agricultural organisations had repeated, verbatim, the objections to the new patent system raised by global seed company DuPont Pioneer.

Those two sectors may have been right to be worried. “The important areas will be pharmaceuticals and agriculture,” said Voller on the body’s initial areas of focus for patent examinations.

The CIPC is also the natural home for a national register of the owners of companies. By law, companies must provide their shareholder registers on demand, but in reality shareholders often enjoy effective anonymity. Between antiterrorism and anti-money laundering regulations there is an inevitable need to keep track of ownership, and the CIPC is already in discussions with South Africa’s Financial Intelligence Centre about mechanisms.

“We’re 100% going there,” said Voller. “It’s going to take us a bit of time to do it, but we have people working on it right now.”

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Phillip De Wet
Guest Author

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