Eight years ago, no one could have possibly imagined that the CIPC would be leading a digital revolution in South Africa. Back in 2011, the newly-formed CIPC was dealing with a myriad of issues. From an under-equipped website to documentation backlogs, it had inherited CIPRO’s (Companies Intellectual Property and Registration Office) shortcomings. To add to its woes, the irate South African business community described their experience with the CIPC as a ‘total nightmare’.
If we had to predict CIPC’s fate back then, we would not have envisioned a successful implementation of iXBRL in South Africa. And yet, on October 1st, 2019, the CIPC rolled out its latest updated taxonomy, thereby successfully launching the second phase of its iXBRL mandate and becoming the first regulator in the African continent to do a full-scale implementation of iXBRL.
How did the CIPC manage to pull off this massive feat? Let’s explore their journey:
The CIPC iXBRL Mandate: A need for standardization in business reporting
The business climate in South Africa was extremely turbulent in 2017. The poor economic performance and policy confusion had put South African businesses in major distress. Investor confidence was also at an all-time low with 2,499 businesses entering into business rescue proceedings over five years (2012-2017).
“We need a new perspective of doing business in Africa. Looking at the economic trajectory both locally and internationally for the next 6 – 12 months more businesses are likely to become distressed. Now’s the time to act.”
-Alastair Macduff, CEO, Turnaround Management Association (TMA)
As if things weren’t bad enough, South Africa was struck by its biggest corporate scandal: The Steinheist. In December 2017, Steinhoff, one of the top 10 listed companies on the Johannesburg Stock Exchange wiped more than R200 billion off the JSE. The Steinhoff CEO, Markus Jooste, announced his resignation “with immediate effect” and the Steinhoff board explicitly stated the cause as “accounting irregularities requiring further investigation”.
“Steinheist” was not the only compliance scandal that exposed the corruption in South Africa. The VBS Heist in which almost R2 Billion was stolen by the bank’s directors, senior executives and well-connected politicians with the aid of the auditor reflected the normalcy of entities’ fraudulent business conduct that had become a dangerous norm.
“In light of the recent fraud and corruption scandals involving some of the country’s biggest corporate players, introducing measures to align South Africa’s financial reporting with the rest of the world, should be embraced by all local businesses.”
-Adiebah Moruck, Senior Manager, Quality and Risk Management, Mazars
Not only did the CIPC have the power and authority but most importantly it possessed the will to implement necessary changes in the system to prevent such circumstances in the future. It did so by increasing the accountability of entities in their Annual Financial Statements (AFS) submissions and this is where the CIPC iXBRL Mandate came into play. Regulators across the world were implementing iXBRL to leverage this international standard to benefit their economies and country. The CIPC understood that moving away from unstructured PDFs to adopting iXBRL would not just make them a part of this global practice but also help in the creation of a powerful financial data bank that would benefit the South African economy. But with 100,000 qualifying entities which included public listed, state-owned, and private companies that fit a certain PI score criteria, this was a herculean task.
Fortunately, the CIPC did not have to reinvent the wheel. It already knew what had to be done, thanks to the experience of other regulators. The CIPC started by developing a taxonomy to suit the requirements of South African companies. Using the available IFRS taxonomy as a starting point, additional elements were added based on South Africa-specific reporting requirements. After a public review and deliberation, the CIPC XBRL taxonomy was released to the general public in August 2016. With the taxonomy in place, the CIPC decided to mandate iXBRL for qualifying entities and it did so in the most efficient way possible in phases.
While the CIPC taxonomy was being developed, the CIPC was also looking out for a reliable filing platform to receive the iXBRL filings that would eventually be lodged by entities. After a detailed evaluation, the CIPC picked IRIS iFile (an end-to-end data filing platform) as the platform through which all entities would lodge their iXBRL reports. Further, IRIS Bushchat, an efficient and reliable processor was deployed for validating the lodged iXBRL files. Together, the CIPC, along with XDS and IRIS, developed a portal that would enable a smooth lodgement process.
The Pilot Phase: iXBRL Solution Development
Considering the magnitude of this implementation, there could be no room for error. So, the CIPC began its process trial and testing on 15 February 2018. Between 15 March and 22 June 2018, the web portal went through rigorous testing and all technical issues were resolved. 60 companies were invited to create iXBRL documents and test-file them through the CIPC portal, to ensure the process was smooth for filers.
Simultaneously, global iXBRL solution and service providers also started preparing their products to support the CIPC iXBRL mandate, with offerings that ranged from self-filing solutions to assisted services. The solutions and services that were cut would be eventually included in the Software Service Provider panel by the CIPC, on their website. IRIS CARBON, an offering for companies, also from the IRIS stable, was used by over 50% of the filers in the test phase. The feedback on the ease of the process encouraged the CIPC to proceed with the rollout of the live mandate.
Phases 1 and 2: CIPC iXBRL implementation
1 July 2018 marked an important day in CIPC’s history as their web portal rolled out for live Inline XBRL Filings of entities AFS. The CIPC mandated about 100,000 qualifying entities for this and set up a Software Service Provider panel to provide client-side solutions assessed by the CIPC for compliance with minimum technical requirements. Now that entities were using the CIPC web portal for their iXBRL submissions, the CIPC initiated a major awareness campaign about iXBRL. It set up the ‘iXBRL Programme’ menu and introduced the ‘hard-stop’ functionality on 1 August 2018 which was eventually rolled back due to technical issues and re-implemented on 7 February 2019. The new functionality ensured that if the FAS and AFS were not uploaded together with the Annual Returns (AR), the portal would stop the entity’s submission. The CIPC also implemented other measures to tackle the non-compliance of entities. From official notices to penalties (10% of business turnover), they initiated a series of measures to ensure compliance. Even though the CIPC adopted a ‘soft landing’ approach in the initial months, these measures asserted that the introduction of iXBRL as a digital reporting standard was here to stay, and companies needed to start complying with this mandate.
On 1 October 2019, the CIPC released the updated taxonomy on its website, marking the launch of the second phase of its mandate. New elements were added, based on market feedback. Some elements that were added in the new taxonomy make it easier for the CIPC to monitor companies that were not yet complying with the mandate. It has been a truly long and arduous journey for the CIPC. It has faced countless hurdles in its efforts to bring business transparency to South Africa. But despite the resistance and criticism, the CIPC has managed to establish a new business perspective in South Africa. This perspective that champions advancement, efficiency, and transparency has resulted in 11,302 iXBRL filings on the CIPC’s web portal and a reported revenue of R 101 Trillion. Even though this may seem like a small number, it’s a tremendous achievement considering the challenges that the CIPC has faced. The next few years will undoubtedly re-establish the business culture and economy of South Africa as this country taps into the potential of XBRL and starts experiencing the benefits of its implementation.