CIPC Annual Report 2013/4

and 1st Quarter 2014/5 financial and non-

financial performance A Ludin

19 September 2014

IntroductionSustained and rapid transformation since 2011;Building an aeroplane while flying itmaintaining and improving service delivery while building a new institution;

Key achievements for 2013/4 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 registration and account opening (June 2013) Self-service centre and self-service terminals (January 2014)

ICT stabilisation New annual return system (August 2013)

Companies, CCs and Co-ops

Patents, Designs and Trade Marks Applications

E-filing uptake and turnaround

Business Rescue

Investigation and enforcement

• 156 compliance notices issued

• Failure to have accurate and complete accounting records;

• Annual financial statements not prepared within 6 months of financial year end

• AGMs not held within 15 months of previous AGM and no time extension

• Investigations:

• Auditor conduct

• Unauthorised director or member changes

• Governance in State-Owned Enterprises

Self-service centreSelf-service terminals offer huge opportunity for service delivery and will be expanded across the country

Customer registration;Password reset;Company registration;Annual returns;Address changes;Financial year end changes;Disclosure certificates;Director changes (coming soon)

SST services

SST company registrationCustomer Registration

Company registration

Registration certificate

No paper required!

Programme1: Business Regulation and Reputation

PROGRAMME 1: BUSINESS REGULATION AND REPUTATION

Output Measure/Indicator Actual achievement 2012/2013

Baseline 2012/2013 Planned Target 2013/2014

Actual Achievement 2013/2014

Deviation from planned targets to

actual achievement for 2013/2014

Reason for Variance

STRATEGIC GOAL 1: To improve the competitiveness of the South African economy by enhancing the reputation of South African businesses and the South African environment

STRATEGIC OBJECTIVE 1.1 To encourage the formalisation of small businesses and their identity

Companies registered manually within the published service standard

% of companies registered manually within the published service standard

Not reported 95% of companies registered manually within 25 working days

85% of companies registered manually within 25 working days

92% Actual achievement was 7% higher than the set target.

Target was set lower to mitigate the risks of challenges such as system slow response time and high volumes. These were well managed and resulted in improved performance.

Companies registered electronically within the published service standard

% of companies registered electronically within the published service standard

Not reported 95% of companies registered electronically within 3 working days

85% of companies registered electronically within 3 working days

98% Actual achievement was 13% higher than the set target.

Target was set lower to mitigate the risks of challenges such as system slow response time and high volumes. These were well managed and resulted in improved performance.

Co-operatives registered manually within the published service standard

% of co-operatives registered manually within the published service standard

Not reported 23% of co-operatives registered manually within 21 working days

85% of co-operatives registered manually within 21 working days

92% Actual achievement was 7% higher than the set target.

Target was set lower to mitigate the risks of challenges such as system slow response time and high volumes. These were well managed and resulted in improved performance.

New trade marks applications allocated an official application number within the published service standard

% of new trade marks applications allocated an official application number within the published service standard

Not reported 90% of new trade marks applications allocated an official application number within 5 working days

85% of new trade marks applications allocated an official application number within 5 working days

96% Actual achievement was11% higher than the set target.

Target was set to lower to mitigate the risks of challenges such as system slow response time and high volumes. These were well managed and resulted in improved performance. The introduction of e-filing also made a positive contribution.

STRATEGIC OBJECTIVE 1.2 To encourage the maintenance of high standards of corporate governance, transparency and brand protection

Companies that have complied with the filing of annual returns as prescribed

% of companies that have complied with the filing of annual returns as prescribed

Not reported 70% 75% 52% Actual achievement was 23% lower than the set target.

Availability and accuracy of e-mail and cell phone contact details for companies and close corporations and its respective directors or members makes sending reminders difficult.

The deregistration notification process is also very costly and not so effective.

Investigations completed within the published service standard

% of investigations completed within the published service standard

Not reported 33% of investigations completed within 135 working days

85% of investigations completed within 135 working days

60% Actual achievement was 25% lower than the set target.

Due to the fact that investigations of most of these cases are dependent on issues outside the control of the CIPC investigators, most cases take long to finalise.

Programme 2: Innovation and Creativity Promotion

PROGRAMME 2: INNOVATION AND CREATIVITY PROMOTION

Output Measure/IndicatorActual

achievement 2012/2013

Baseline 2012/2013 Planned Target 2013/2014 Actual 2013/2014Deviation from planned targets to

actual achievement for 2013/2014

Reason for Variance

STRATEGIC GOAL 2: To contribute to a knowledge-based economy and competitive local industries by promoting innovation, creativity and indigenous cultural expression and knowledgeSTRATEGIC OBJECTIVE 2.1: To promote the protection and commercial exploitation of innovations in key sectorsNew patent applications allocated an official application number within the published service standard

% of new patent applications allocated an official application number within the published service standard

Not reported 87% of new patent applications allocated an official application number within 5 working days

85% of new patent applications allocated an official application number within 5 working days

98%

Actual achievement was 12% higher than the set target.

The introduction of e-filing and risk mitigation of challenges such as system slow response time and high volumes resulted in improved performance.

New design applications allocated an official application number within the published service standard

% of new design applications allocated an official application number within the published service standard       

Not reported 98% of new design applications allocated an official application number within 5 working days

85% of new design applications allocated an official application number within 5 working days

97%

Actual achievement was 12% higher than the set target.

The introduction of e-filing and risk mitigation of challenges such as system slow response time and high volumes resulted in improved performance.        

STRATEGIC OBJECTIVE 2.2: To protect our cultural heritage and support a strong competitive South African creative industry that provides benefit to local artistNew copyright in film applications allocated an official application number within the published service standard

% of copyright in film applications allocated an official application number within the published service standard

Not reported 64% of copyright in film applications allocated an official application number within 2 working days

85% of copyright in film applications allocated an official application number within 2 working days

57%

Actual achievement was 28% lower than the set target.

The introduction of e-filing resulted in system challenges that resulted in delays in processing applications.

Programme 3: Service Delivery and Access

PROGRAMME 3: SERVICE DELIVERY AND ACCESS

Output Measure/IndicatorActual

achievement 2012/2013

Baseline 2012/2013Planned Target

2013/2014

Actual Achievement 2013/2014

Deviation from planned targets to actual achievement for

2013/2014

Reason for Variance

STRATEGIC GOAL 3: To promote broader economic participation

STRATEGIC OBJECTIVE 3.1: To promote broader formal economic participation by enhancing service delivery and extending the reach of CIPC

Website availability for on-line filings 24/7

% website availability for on-line filings 24/7

Not reported

Not measured 90% 92%

Actual achievement was 2% higher than the set target. Several ICT stabilisation initiatives

resulted in improved performance. Calls answered during the reporting period

% of calls answered during the reporting period

Not reported 28% 50% 31%

Actual achievement was 19% lower than the set target.

Although the implementation of the Swedish Model resulted in improved performance from a 30% in Quarter 1 to 42% in Quarter 3, a number of factors contributed to a decline in call taking from December to the end of the financial year. These included operational work pressure, the impact on processing targets and the ability of staff to deal with difficult customers. In addition, it seems that staff were discouraged to take calls by one of the representative trade unions  

STRATEGIC OBJECTIVE 3.2: To build an enabling and intelligent work environment anchored in a governed and sustainable organisation

Operating expenditure covered by operating revenue year to date (YTD)

% of operating expenditure covered by operating revenue year to date (YTD)

140% 124% 100% 100%The target was

achieved as set.N/A

Summary of financial performance

• 2013/2014 Actual income – R 455, 611, 000 (R293, 300, 000 – 52% was derived from Annual Returns.

• 2013/2014 Actual expenditure – R 309, 868, 000

• 2013/2014 Q1 – Surplus – R145, 743, 000

2014/5 Q1 Performance

• 23 performance targets set

• 2014/2015 Annual target for overall performance = 80%

• Quarter 1 target for overall performance = 70% (to allow the organization to strengthen its implementation efforts over time)

• Quarter 1 actual performance = 77% (18 targets met)

Programme1: Business Regulation and Reputation (Strategic Objective 1.1)Performance Measures 2014/15 Annual Target 2014/15 Quarter 1

Target2014/15 Quarter 1 Actual

Performance

GOAL 1: Improve the competitiveness of the South African business environment

Strategic Objective 1.1 Encourage the formalisation of South African businesses and their identity

% of companies registered manually within 25 working days

85% 85% 83%

% companies registered electronically within 3 working days

85% 85% 98%

% changes in company director details processed manually within 30 working days

85% 85% 91%

% changes in company director details processed electronically within 5 working days

85% 85% 98%

% of co-operatives registered manually within 21 working days

90% 90% 84%

% trade marks applications allocated an official application number within 5 working days

90% 90% 99%

Programme 1: Business Regulation and Reputation (Strategic Objective 1.2)

Performance Measures 2014/15 Annual Target 2014/15 Quarter 1 Target

2014/15 Quarter 1 Actual Performance

GOAL 1: Improve the competitiveness of the South African business environment

Strategic Objective 1.2 Encourage the maintenance of high standards of corporate governance, transparency and brand protection

% companies with an active business status, that have filed annual returns by the end of the reporting period (year to date)

60% 30% 34%

% complaints received of which a determination to close or refer the matter to another regulatory authority or to be directed in terms of the Act to investigate the matter is made within 30 working days

80% 80% 80%

Programme 2: Innovation and Creativity Promotion (Strategic Objective 2.1)

Performance Measures 2014/15 Annual Target 2014/15 Quarter 1 Target

2014/15 Quarter 1 Actual Performance

GOAL 2: Promote innovation, creativity and indigenous cultural expression

Strategic Objective 2.1: Promote the protection and commercial exploitation of innovations in key sectors% of manually and electronic patent applications allocated an official application number within 5 working days

90% 90% 98%

% of manually and electronic design applications allocated an official application number within 5 working days

90% 90% 98%

Strategic Objective 2.2 To protect our cultural heritage and support a strong competitive South African creative industry that provides benefit of local artist% of manual and electronic copyright in film applications allocated an official application number within 5 working days

90% 90% 100%

Programme 3: Service Delivery and Access (Strategic Objective 3.1)

Performance Measures 2014/15 Annual Target 2014/15 Quarter 1 Target

2014/15 Quarter 1 Actual Performance

Goal 3: Promote broader formal economic participation

Strategic Objective 3.1: Provide easy access to credible, reliable and relevant information and advice and secure, value-added services % of on-line company registrations transactions

90% 60% 89%

% of on-line director changes transactions

90% 30% 82%

% of on-line trade marks applications 90% 60% 91%% of on-line patents applications 50% 30% 42%% of on-line designs applications 50% 30% 28%% of on-line copyright in film applications

90% 60% 100%

% website availability for on-line filings 24/7

95% 95% 98%

% of calls answered that come through the call centre number during the reporting period

60% 60%  21%

Number of self-service terminals (SSTs) installed and operational

45 13 12

Programme 3: Service Delivery and Access (Strategic Objective 3.2 & 3.3)

Performance Measures 2014/15 Annual Target 2014/15 Quarter 1 Target

2014/15 Quarter 1 Actual Performance

Goal 3: Promote broader formal economic participation

Strategic Objective 3.2: Build an enabling and intelligent work environment anchored in a governed and sustainable organisation% of operating expenditure covered by operating revenue year to date (YTD)

100% 100% 100%

% of positions of the approved structure filled

75% 70% 70%

Strategic Objective 3.3: Improve the reputation and organisational performance of CIPC

% of APP targets met 80% 70% 77%

Targets not metPerformance Measure Reason for underperformance Planned action/Comments

Company registrations Delays due to the implementation of the e-mail indexing solution.

After the implementation of the e-mail indexing solution, normal operations resumed, and staff indicated that they were able to process faster.

Co-operatives registrations

Delays were due to system down times. The ICT stabilization programme continues to ensure that system downtimes are minimized.

Patent e-filings Low number e-filings is due to the big firms, Spoor and Fisher and Adams & Adams not utilizing the system yet.

Efforts are in progress to get them to utilize the system.

Call answer rate Staff is experiencing challenges adjusting and balancing the taking of calls and normal production.

The Query Resolution Team (QRT) chaired by the Commissioner has identified several key areas and specific task teams to address such issues.

SSTs Thirteen (13) SSTs have been installed. One SST has been installed in Maponya Mall, as part of a partnership with the National Youth Development Agency (NYDA) but it is not operational yet because the Department of Home Affairs (DHA) has reservations about providing access to their database for biometric finger print scanning which is the gateway to all transactions on the SST.

The NYDA have to now on their own accord acquire authorisation from DHA after which the online services at this site can commence.

Electronic transactions growth

Service % of on-line transactions in

2013/14

% of on-line transactions in

2014/15 Q1

Company Registration 81% 89%

Director changes Not measured 82%

Trade marks applications 49% 91%

Patent applications 9% 42%

Designs applications 8% 28%

Copyright in film applications 14% 100%

Business RescueOperational BR Proceeding Applications 2011 -

20122012 - 2013 2013 -2014 2014 -2015 Total

Business Rescue Proceedings Started 313 424 390 84 1211

Invalid filings and Nullity 130 44 40 8 222

Business Rescue Proceedings Ended 143 188 116 0 447

Terminations of Business Rescue (COR 125.2)

52 76 42 0 170

Substantial implementation of Business Rescue (COR 125.3)

55 78 36 0 169

Liquidation 34 27 37 0 98

CO_Set Aside BR 2 7 1 0 10

Active 170 236 274 84 764

Financial Performance

Overall operating resultsAs of June 30, 2014

2014/2015    

Description

Total Budget Pro-rata Actual Variance Var %

Commitment

Available budget Purchase orders

  R'000 R'000 R'000 R'000 % R'000 R'000

Income            

Revenue 393 444 98 361 101 123 2 762 (3%) 0 292 321

Other 0 0 51 51 0% 0 (51)

Interest 43 000 10 750 19 950 9 200 (86%) 0 23 050

Total Income 436 444 109 111 121 124 12 013 (11%) 0 315 320

             

Operating Expenditure            

Operating Expenditure 401 321 104 069 73 997 (37 373) (36%) 67 446 259 879

Special Projects - OPEX Allocation 22 043 5 511 183 (630) (11%) 5 958 15 902

Total Expenditure 424 650 109 580 74 179 35 401 32% 73 404 277 067

             

Capital Expenditure            

Operational: Capital Expenditure 26 100 6 425 2 901 (2 962) (46%) 6 486 16 713

             

Total: Operating and Capital expenditure 450 750 116 005 77 080 38 925 34% 79 890 293 780

             

             

Closing Surplus / (Deficit) - OPEX Budget (14 306) (6 894) 44 044 50 938 739% (79 890) 21 540

             

Retained Earning (To fund special projects) ** 22 043 5 511 183 5 328 97% 5 958 15 902

               

Revenue Report

As of June 30, 2014Revenue Report

R'000 R'000 R'000 R'000 R'000 % R'000

Annual Returns: Com 141,001 35,250 35,296 0 46 0% 26,598

Annual Returns: CC 75,923 18,981 32,822 0 13,841 73% 18,079

Companies 65,100 16,275 13,730 0 (2,545) (16%) 18,223

Cooperatives 5,820 1,455 1,693 0 238 16% 1,144

Corporate Info 12,600 3,150 5,494 0 2,344 74% 4,949

Trademarks 65,100 16,275 6,374 0 (9,901) (61%) 14,764

Patents and Design 18,600 4,650 5,183 0 533 11% 9,854

Copy Right 9,300 2,325 531 0 (1,794) (77%) 524

Total 393,444 98,362 101,123 0 2,762 2.81% 94,136

2014/2015June 30, 2014

Revenue Total Budget Pro-rata Actual Commitment Variance Variance2013/2014

YTD Actual

ANNUAL RETURN FEES AND PENALTIES

Expenditure ReportBudget Variance Report - Summary

Companies and Intellectual Property Commission As of June 30, 2014

R'000 R'000 R'000 R'000 % R'000 R'000

Compensation of employees 250 181 60 325 46 528 13 797 23% 0 203 653

Goods and services: 174 469 49 895 27 652 22 243 45% 73 404 73 413

Audit Fees 7 800 2 300 521 1 779 77% 3 775 3 504

Bank Charges 1 450 362 368 -5 285 1% 0 1 082

Advertisements 6 600 1 555 46 1 509 -80% 885 5 668

Communications 19 170 4 544 294 4 251 3% 2 646 16 231

Temporary Admin and Support Staff 0 655 119 536 56% 70 (189)

Consultants and special services 69 200 22 043 13 653 8 390 38% 29 139 26 409

Depreciation and Amortisation 0 0 1 578 (1 578) 0% 0 (1 578) Finance Costs 0 0 0 0 0% 0 0

Internet and Network Cost - ICT related services 8 800 2 200 356 1 844 84% 5 500 2 944

Inventory 7 270 1 960 1 266 694 -237% 2 029 3 975

Maintenance, repair and running cost 5 020 1 255 1 606 (351) -1138% 1 371 2 043

Operating leases 29 880 7 470 6 363 1 107 15% 24 935 (1 418)

Impairment Loss 0 0 0 0 0% 0 (0)

Travel and subsistance 3 950 1 347 243 1 105 60% 274 3 433 Doubtful debts and Impairment 0 0 0 0 0% 0 0

Other 15 329 4 203 1 239 2 963 71% 2 780 11 310 Movement in Provision 0 0 0 0 0% 0 0

Total Operational Expenditure 424 650 110 220 74 179 36 041 -56% 73 404 277 067

Capital Expenditure 26 100 6 425 2 901 3 524 -46% 6 486 16 713

Total approved budget 450 750 116 645 77 080 39 565 -51% 79 890 293 780

2014/2015

Commitments Purchase

Orders

Available BudgetDescriptions Total BudgetPro-rata Budget

Actual Expenditure

Variance Var%

Analysis of financial performance: Expenditure

Statement of financial position

Companies and Intellectual Property Commission Statement of Financial Position

As at June 30, 2014

Note Jun-2014 Jun-2013R 000 R 000

AssetsNon-current assets 1 42,438 20,359

Property, plant and equipment 31,776 12,349 Intangible assets 10,662 8,010

Current assets 1,411,654 1,269,499

Inventories 2 - 649 Receivables from exchange transactions 3 674 237

Other Receivables 3 652 1,119 Cash and cash equivalents 4 1,410,328 1,267,922

Non-current assets held for sale - 45

Total assets 1,454,092 1,289,858

Equity and liabilities Equity 1,345,155 1,194,636

Accumulated Surplus 1,345,155 1,194,636

Current Liabilities 108,937 95,222

Provisions 5 24,647 20,742 Payables from exchange transactions 6 6,299 10,514 Trade and other payables from non-exchange

transactions 6 77,991 63,966

Total Equity and Liabilities 1,454,092 1,289,858

Statement of Cash Flows

Companies and Intellectual Property Commission Statement of Cash Flowsfor the year ended June 30, 2014

Jun-2014 Jun-2013R 000 R 000

Cash flows from operating activities 127,700 110,557 Revenue from exchange transactions 33,056 50,071 Revenue from non-exchange transactions 74,694 44,677 Interest income 19,950 15,809

Payments (101,277) (82,955) Employee cost 46,528 45,606 Suppliers (54,749) (37,349)

Net cash flows from operating activities 26,424 27,602

Cash flows from investing activities (2,901) (154) Acquisition of property, plant and equipment (2,840) (25) Proceeds of diposal of property,plant - 90 Acquisition of Intangible assets (61) (219)

Cash flows from financing activities - -

Net increase/(decrease) in cash and cash equivalents 23,523 27,448 Cash and cash equivalents at beginning of period 1,386,805 1,240,474 Cash and cash equivalents at end of period 1,410,328 1,267,922

Going forward• The focus for the rest of the year will be on:

• Roll out of SSTs

• Redesign of website (query resolution system which should reduce the number of calls);

• Accessibility and ease of transacting through modern, effective channels to improve the relevance and value to Customers and Stakeholders;

• Enforcement and compliance efforts demonstrating improved compliance.

• Meeting our targets

A paperless back officePicture 

Query Resolution Strategy• proper training of call takers;

• conducting a time and motion study regarding staff workload;

• addressing the ICT and telephony challenges;

• new telephony system (including a work force management system to manage staff performance) and CIPC ownership of such telephony system.

New website

New e-services

JSE service New dedicated e-mail service for listed companies and their subsidiaries: Share capital changes Name changes Other MOI amendments

Dedicated office at the JSE in near future

In conclusionFoundations for new model of public service delivery establishedBenchmarks set for world class serviceProgressive change with tangible results