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97pc of State firms hide beneficiaries of tenders

97pc of State firms hide beneficiaries of tenders

Only 926 government entities have revealed the beneficial owners of firms awarded State tenders out of more than 33,000 institutions mirroring the sluggish progress of transparency in public procurement.

Procuring government entities have been required to disclose beneficial ownership information for awarded contracts on the Public Procurement Information Portal (PPIP) to boost transparency.

But government entities and State -owned institutions have kept the beneficial owners of 97.2 percent of firms that secured public tenders, shielding from view of the public details like names of directors, identity of the owners and their stakes.

They are also required to disclose postal address, telephone number and physical address of all the winning bidders and the tenders.

Besides tracking tax cheats, the disclosure is also meant to curb conflict of interest and prospect of officials and companies colluding together to create phoney contracts.

The lack of powers by the Public Procurement Regulatory Authority (PPRA) to hand down sanctions and penalties to the government linked entities is partly attributable to the slack in disclosures.

“We continue to take measures to increase the availability of beneficial ownership information in public procurement. As of October 2024, 962 out of over 33,000 procuring entities had registered with the PPIP, which held 10,458 awarded contracts with beneficial ownership information disclosed, worth a total of Sh213.73 billion,” the Kenyan authorities are quoted saying in the disclosures to the IMF.

Disclosure of beneficial ownership information is part of IMF-backed structural policies on governance which seek to combat corruption through creating more transparent procurement practices, forensic audits and implementing laws establishing access to information and asset declarations of public officials.

Procuring government entities are required to publish the information for awarded contracts on the Public Procurement Information Portal (PPIP) to boost transparency.

They are also required to disclose the names of directors, postal address, telephone number and physical address of all the winning bidders and the tenders.

Besides tracking tax cheats, the disclosure is also meant to curb conflict of interest and the prospect of officials and companies colluding to create phoney contracts.

Government entities began publishing beneficial ownership information of entities awarded public contracts through the PPIP in November 2022.

The low rate of compliance has been partly attributed to the lack of powers by the Public Procurement Regulatory Authority (PPRA) to hand down sanctions and penalties to the offending entities.

The PPRA has been limited to issuing letters of non-compliance to procuring entities in the absence of sanctioning powers to enforce the requirement.

It has additionally conducted training aimed at improving the institutions’ understanding of beneficial ownership disclosure obligations.

The government has told the IMF that it plans to amend various public procurement laws to bring administrative action against accounting officers and heads of procurement functions and the State-linked enterprises.

“As the PPRA does not currently hold sanctioning powers for non-compliance, we are undertaking a legal review to identify and propose options for enforcement, including administrative sanctions against accounting officers and heads of procurement functions of procuring entities,” Kenyan authorities told the IMF.

“The compendium of proposed amendments has been shared with the National Assembly in September 2024 for consideration. We are also working on integrating the PPIP with other government platforms, including the electronic government procurement system, which will facilitate the automatic generation of contract award reports, and the BRS [Business Registration Services] e-registry for automatic validation of beneficial ownership information submitted by bidders.”

The BRS has, for its part, moved to tighten adherence to the requirement for beneficial ownership information on private firms which include names, phone numbers and residential addresses of secret shareholders who control more than 10 percent stakes in the entities.

The firms are expected to fully comply with the disclosure requirement or risk being struck off the registry of private companies from December 1 this year.

The disclosures are expected to open the window for the Kenya Revenue Authority (KRA), security agencies and the Financial Reporting Centre (FRC) to tap the information to track money launderers, corrupt individuals and tax cheats.

Low awareness levels among private firms and the high prevalence of dormant firms have also led to low disclosures as more than half of private firms risk de-registration for non-compliance.

As of October 24, 50.28 percent or 399,595 registered companies were yet to disclose the identity of their secret shareholders, risking being struck off the business registry after the November 30 deadline.

The requirement for filing beneficial ownership information seeks to cover risks of the entities being misused to facilitate criminal activities such as corruption, money laundering, financing of terrorism and the proliferation of tax evasion.

The BRS has sought to incentivise disclosures on beneficial ownership by, among others, improving the compliance process, hosting the disclosure portal on the e-Citizen platform and zero-rating the cost of filing.

The registry has also offered a guide to compliance even as it now eyes sanctions to crack down on errant private firms.

“In line with our commitment to fostering compliance, we are intensifying stakeholder engagement and public awareness campaigns. These efforts aim to ensure that all required entities fulfil their obligations and comply before the upcoming deadline,” the registrar of companies, Joyce Koech, told this publication previously.

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