According to Wikipedia "Don't throw the baby out with the bathwater" is an idiomatic expression for an avoidable error in which something good or of value is eliminated when trying to get rid of something unwanted. The concept is as old as time itself. The earliest record of this phrase is in 1512, in Narrenbeschwörung (Appeal to Fools) by Thomas Murner.
1. Why are entire concepts considered flawed because they do not work sometimes? It often happens that failures or mistakes of a single aspect or a small portion of the whole, lead to wholesale rejection of an idea or solution, or of something substantially larger. People do not bother to see the whole as composed of parts and to see which part has failed. Instead of a holistic assessment, puerile, uninformed discussions are held at meetings or are built in on e-platforms that constitute enforceable rules in the real and virtual space without considering all the facts. We do not discard the printer if it only requires a new ink cartridge.
2. In a previous article we mentioned that “ former Minister of Trade and Economic Development Ebrahim Patel proudly announced: “The CIPC was awarded the Most Innovative Public Service Entity of the Year for 2020 as well as the effective use of digitized services award, throughout all tiers of government, for their Bizportal online registration system.” He also called for scrapping the necessity for smaller companies to be required to complete the annual financial statements. His department never implemented his request and instead deregistered hundreds of thousands of smaller companies.” In just one year Following Notice 19 of 2023 to customers, the CIPC deregistered six hundred and forty-seven thousand, eight hundred and fifty-three (647 853) of all companies and close corporations.
There is a provision to apply for re-registration, an online process with no opportunity to discuss the matter with a real person. Thereafter, should such application be unsuccessful the applicant is free to approach the High Court for a ruling to reinstate the company. Obtaining a court order from the High Court is a very expensive and timely process and once again, the submission of documents is done via an e-platform. In one case the process to obtain a court date in the Pretoria High Court was received by the court system but no court date was allocated. A second filing to obtain the same was also unsuccessful. A request for an explanation was sent via email to no less than three court officials, none of whom replied to the email sent for clarification. The last resort was to approach the Johannesburg High Court for a court date which was eventually granted.
The present approach to deregistering a company and expecting to place the burden on the owner that he/she should convince a court of law to proceed over such a matter is out of place, and it is little wonder our courts are overburdened.
3. In a media release on July 23, 2024, the Financial Intelligence Centre (FIC) stated. “Certain designated non-financial businesses and professions (DNFBPs) are continuing to ignore Financial Intelligence Centre (FIC) directives aimed at helping South Africa exit the grey list of the Financial Action Task Force (FATF).” It stated that the FATF remained concerned about the low rates of risk and compliance return (RCR) submissions to the FIC by designated non-financial businesses and professions (DNFBPs), and emphasised that these accountable institutions needed to increase their response rates. The FIC stated the compliance for these industries were as follows:
“The average RCR submission rate to date of this release across affected Directive 6 sectors is 63 percent, and individual sector submission rates are:
- Legal practitioners – 60 percent
- Estate agents – 66 percent •
- Trust service providers – 74 percent
- Company service providers – 76 percent
- Casinos – 100 percent”
The current low response levels mean that the country is unable to show sufficient progress in fully addressing the FATF-identified deficiency. The Greylisting has an impact on the country’s risk profile and adds to the overall cost of capital from outside our borders. Remaining on the grey list can impact the lives of ordinary citizens, let alone a broad range of businesses and the economic future of the country. We already have a persistent high interest rate cycle with the Reserve Bank seemingly only intent in curbing inflation with very little regard to the adverse impact on consumers and businesses. The latest credit reports indicated very high stress levels not only for consumers but businesses and government debt (were) also a major problem.
4. The Eskom debt problem is not going away, neither that of Transnet Prasa, SABC and SAA to name a few. The present situation seems to be repeated every year at all levels. The handling of the SANRAL debt is a good example. Eventually, it became clear that the problem had become so large that there was no chance of recouping the arrears from motorists. The same will apply to the Municipality debt to ESKOM. The Treasury may think it prudent to attach conditions to the Debt relief to please the naysayers in the boardrooms, but the reality is the municipalities cannot recoup money from their customers.
To bury one’s head in the sand means “to deliberately refuse to accept the truth about something unpleasant. (Collins Dictionary)
FIC provided the following statistics.
5. From the above numbers it is clear that the FIC does not have the capacity to fulfil its mandate. Imagine investigating 558 348 suspicious and unusual transaction reports! How much time can be spent on investigating each one of them and looking (as) if it is only the tip of the iceberg. Just like the High Court in Pretoria that is unable to provide a court date for an unopposed matter and the inability of the CIPC to handle their workload, we will not see progress here until more competent and trained staff are appointed to handle these complicated matters.
There are clever attorneys that have 30 years and more experience in drafting Trusts and hide assets under disguised non-market related prices in the Trust for the beneficiaries. They have refined the art of disguise over many years and the blueprint is repeated over and over for ever more clients. What is needed is for the Authorities to unmask one such player and investigate his entire client base. In one sitting they will uncover billions of rand in understated values and taxes that were never paid. These guys should be penalised heavily and imprisoned in order to get the message out there.
* Kruger is an independent analyst.
** The views expressed herein are not necessarily those of IOL or Independent Media.
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