From Moneyweb: A little nugget of good news got drowned out by the depressing economic news of the last few weeks: SA is getting serious about making itself more attractive to do business.
In terms of the ease of doing business, SA has been in freefall for the last decade. It currently ranks 84 out of 190 countries in the World Bank’s Ease of Doing Business survey, having fallen from 34th a decade ago. Other African countries such as Kenya (56th place) and Rwanda (38th) have sailed past us. New Zealand, Singapore and Hong Kong are the most congenial countries for ease of doing business, occupying the top three slots in the rankings.
SA is determined to muscle its way back into the Top 50 rankings.
The Companies and Intellectual Property Commission (CIPC) recently launched its BizPortal online platform which allows anyone to open a company in minutes for R175.
At the same time they can:
- Register with the South African Revenue Service (Sars)
- Open a business bank account
- Get registered with the Unemployment Insurance Fund (UIF)
- Get registered with the Compensation Fund, and
- Get a B-BBEE certificate.
All of this takes just one day, without having to join a single queue.
Finance Minister Tito Mboweni trumpeted the launch of the new service in last week’s budget speech as part of a broader programme to address SA’s lagging international productivity. CIPC Commissioner Advocate Rory Voller says the launch of BizPortal will go a long way to improving the ease of doing business in SA.
BizPortal is able to achieve in hours what previously took weeks or even months.
It does this by linking up with databases hosted by the departments of home affairs and labour as well as Sars and other data providers.
For example, the Department of Home Affairs database is able to verify the identity of new company directors, or changes to existing directors. Previously, this had to be done by joining a queue and lodging documents at the CIPC offices around the country.
The CIPC was set up under the Companies Act to monitor and enforce compliance with the act and establish regulations aimed at reducing the risks of doing business in SA. It took over the functions of the old Companies and Intellectual Property Registration Office (Cipro), which earned a deserved reputation as a ‘black hole’ for losing company registration documents.
The CIPC has a mammoth task to perform. There are two million companies in SA that are required to submit their annual financial returns to the commission each year. The majority of these are smaller companies for which audited financial statements are not required. A so-called ‘independent review’ by an accounting officer is sufficient for most of them. An independent review offers a lower level of assurance on financial statements than an audit, and can be compiled by an accounting officer rather than an auditor.
One of the main functions of the CIPC is to monitor company solvency and liquidity. In terms of the Companies Act, businesses may not trade in a commercially insolvent position (where a company has insufficient cash to pay its bills). Companies may be technically insolvent (where liabilities exceed assets) but are still able to pay their bills when they fall due.
The CIPC is in the process of analysing the roughly 20 000 company financial statements received each year to achieve a detailed understanding of the country’s economic drivers, then making this available for a fee to the public.
In 2017 the CIPC announced that all companies would have to fill out a 24-question checklist to monitor compliance with the Companies Act, but last week decided to ditch the compliance checklist for smaller companies after lobbying from the accounting sector.
“There was an outcry from certain groups that this would add to the regulatory burden for smaller companies, and we decided this was not in the best interests of promoting the ease of doing business in SA,” says Voller.
“We understand that there is a cost to companies of complying with regulations, and this can be quite substantial for smaller businesses. We don’t want to be adding unnecessarily to these costs.”
Voller expects the launch of BizPortal and the relaxation of compliance obligations on smaller businesses to improve SA’s international ranking for the ease of doing businesses.
The World Bank’s Ease of Doing Business rankings are based on a range of factors, many of them outside the control of the CIPC, such as:
- The ease of obtaining electricity connections and registering a property
- The level of taxes payable and the costs of preparing tax returns
- The ease of trading across borders
- The efficiency of contract enforcement, and
- The speed and cost-efficiency of resolving bankruptcies.
Voller says the CIPC has not completely shut the door on introducing a compliance obligation for smaller businesses in future, but if any such obligation is introduced, it will be far simpler and less costly than the 24-question list.
Voller was one of the drafters of the amended 2008 Companies Act, which has been hailed as among the best in the world.
Another proposed amendment in the works will require companies to disclose their beneficial ownership. This is something the Guptas exploited to the maximum, often hiding their beneficial ownership in offshore trusts and complex corporate structures.