The government must reveal the names of secret owners of all companies that win State tenders as part of a programme it has with the International Monetary Fund (IMF).
This will begin in April 2022 as part of the 38-month programme that is aimed at helping Kenya improve its finances by reducing wastage and corruption, according to the IMF.
By the end of March 2022, the Washington-based institution said, Kenya is expected to “adopt revised standard bidding documents to obtain consent from beneficial owners to publish beneficial ownership information for awarded tenders in the public procurement information portal (PPIP), and start requiring consent for all new tenders.”
Publishing these names, the IMF noted, will “reduce corruption risks by strengthening transparency and enhancing oversight.”
The revelation of all beneficial owners of companies that do business with the government was to start at the end of June 2021 but was delayed following legal hitches that included the right to privacy.
Revealing of the names is expected to solve the mystery behind the controversial Sh7.8 billion scandal at the Kenya Medical Supplies Authority (Kemsa) in which shadowy wheeler-dealers lined their pockets at the expense of a citizenry that had been hit hard by the crippling effects of the Covid-19 pandemic.
Kenya Power clean-up
As part of trying to deal with the rot at Kenya Power, the power distributor launched a lifestyle audit of its 10,000 employees in what was aimed at flashing out those who might have been siphoning money from the listed company.
The delay in publishing the rules was due to fear of breach of people’s privacy – an issue that has been solved by requiring beneficial owners to give their consent before signing up for the contract.
In August 2020, Kemsa, which had been legally tasked with procuring Covid-19 protective equipment, caught the attention of the president after being put on the spot over the looting of Sh7.8 billion.
A report by Auditor General Nancy Gathungu on the procurement scandal at Kemsa revealed that Sh2.3 billion was lost in procuring Covid-19 medical supplies. Ms Gathungu, who tabled the report before the Senate in September last year, revealed how billions of shillings were unaccounted for and how there was no evidence of budgetary approval by relevant authorities.
The Auditor-General concluded that Kemsa irregularly utilised the Universal Health Coverage budget to procure Covid-19-related items worth Sh7.6 billion.
“The procurement process was not initiated based on need assessment and planning resulting in over-procurement of Covid-19 related stock worth Sh6.3 billion that is still being held at Kemsa warehouses. 97 per cent of the stock has been in the Kemsa warehouses for more than three months implying inadequate market forecasting and planning practices,” said the audit report.
The audit found numerous violations of the Procurement and Public Finance Management Acts and inefficiencies in the procurement process.
In July 2019, the Attorney General published regulations that required firms to keep a register of beneficial owners, a move that would reveal details of shadowy shareholders in local firms, including foreigners.
This was yet another attempt by the State to combat money laundering, with Kenya joining other jurisdictions such as the European Union in tasking firms to reveal personal details of individual owners with a stake or voting right of at least 10 per cent.
The Companies (Beneficial Ownership Information) Regulations, 2019, require companies to disclose a myriad of details of an individual who owns a company, either directly or indirectly.
The regulation is aimed at unmasking shadowy shareholders who might be engaged in illicit financing or even corrupt practices.
Some shareholders have been taking advantage of a loophole in financial laws that allow one to mask their wealth in public listed companies. Currently, if one searches for a company, there is a likelihood he or she cannot see the identity of individual owners of a proxy with a significant stake in a company.
However, six months after the publication of the regulations, every firm shall be required to provide the Registrar of Companies with personal information for individuals with at least a 10 per cent stake or voting rights in a company.
This includes beneficial owners’ full name, telephone number, date of birth, postal and residential address, occupation, email address, passport number or national identification number and nationality of the beneficial owner.