One of the biggest sticking points in Kenya’s agreement with the International Monetary Fund (IMF) is the slow progress being made in identifying the beneficial owners of companies doing business with the government.
The IMF has expressed worry that attempts to reduce corruption and conflict of interest are being undermined by State agencies’ failure to declare the owners of the businesses that supply them.
The effectiveness of the 48-month deal the nation has with the Washington-based lender has been called into doubt after the IMF criticized the minimum disclosure on the details of owners of enterprises that conduct business with State agencies in its most recent report.
The government will receive a total of $3.52 billion (Ksh499.84 billion) by April 2025 under the agreement, which pledges Kenya to reducing its vulnerability to debt by combating corruption, wasting money, and generating revenue.
According to the IMF’s most recent study, “Continued low level reporting of beneficial ownership information by companies is impeding effective implementation of the beneficial ownership framework.”
A structural benchmark in the ongoing Extended Fund Facility and Extended Credit Facility agreements included releasing information about public procurement.
By the end of June 2021, Kenya was initially intended to begin disclosing information about beneficial ownership, or information about the identities of people holding a stake of more than 25%.
The administration explained that it did not yet have the proper legal framework to release such data, which caused the delay.
The IMF’s comments cast doubt on the efficacy of reform metrics, which are frequently difficult to measure but are still employed to evaluate program performance.
Kenya claimed to have begun publishing the data, but the IMF appears constrained in its ability to ensure that change is actually carried out.
This occurs at a time when the Kenya Kwanza administration has been shaken by a number of procurement scandals in which it is believed that unidentified individuals secretly profited from tenders in which the cost of projects was overstated.
Kenya said that as part of a financing agreement with the IMF, it began disclosing the beneficial ownership details of businesses that were awarded contracts on the government procurement webpage in November 2022.
However, a cursory glance indicates that the data on the gateway is either missing entirely or is just partially full.
The IMF continued, “The authorities are taking additional steps to ensure that public procuring entities continue to comply with the publication requirements, including by carrying out capacity building activities.”
Similar to this, Section 93A of the Companies Act 2015 mandates that businesses reveal to the State the names, contact information, and residential addresses of any secret shareholders.
This rule, according to the IMF, will also aid the government’s attempts to expose illegitimate money.
The centralized electronic register for beneficial ownership information was developed by Kenya Business Registration Services in October 2020 to “further strengthen the country’s framework for beneficial ownership, which provides for timely access to the information by competent authorities,” according to the IMF.
Records change
In a significant reorganization of shareholder records, the law mandates that current enterprises comply within the prescribed periods and that new firms complete the Beneficial Ownership Information E-Register at the companies register prior to registration.
Names of the substantial shareholders, KRA pins, copies of national identification cards or passports, postal and residential addresses, occupations, phone numbers, and the date on which an investment became a beneficial owner are among the information that must be provided.
Every company contracted by a State agency was required by the agreement to disclose its beneficial owners on the procurement portal or risk being disqualified from the tender.
