97% of government firms haven’t shared the names of the people behind their tenders, according to an IMF report.
Only 926 institutions have met the expectation that more than 33,000 would disclose ownership details.
Only 926 government bodies, out of over 33,000 institutions, have disclosed the beneficial owners of companies that have received state contracts. The data illustrates the gradual advancement in transparency in public procurement.
Government agencies in charge of procurement are required to post information about the beneficial ownership of contracts they have awarded on the Public Procurement Information Portal (PPIP) in an effort to promote transparency.
However, the state-controlled government bodies and institutions have hidden the beneficial owners of 97.2% of the companies that have received public tenders. The public cannot see directors’ names, owners’ identities, or some of their stakes.
Additionally, they must supply the physical address, phone number, and postal address of each successful bidder and tender.
The purpose of the disclosure is not just to identify individuals who have cheated on their taxes but also to prevent conflicts of interest and the possibility of authorities and businesses working together to construct misleading contracts.
Firms connected to the government are not subject to fines and penalties by the Public Procurement Regulatory Authority (PPRA). This is partially due to the lack of disclosures.
“We are continuing to take steps to expand the availability of information on beneficial ownership in the context of public procurement.”
As of October 2024, 962 out of nearly 33,000 procurement organizations were registered with PPIP. The International Monetary Fund’s (IMF) Kenya agents stated that the PPIP revealed beneficial ownership information for 10,458 awarded contracts, totaling Sh213.73 billion.
The International Monetary Fund (IMF) supports structural policies on governance that include the disclosure of information regarding beneficial ownership.
These policies aim to combat corruption by establishing more transparent procurement practices, conducting forensic audits, and enacting laws that establish access to information and asset declarations for public sector officials.
It is mandatory for government agencies that are responsible for procurement to disclose the information about granted contracts on the Public Procurement Information Portal (PPIP) in order to increase openness.
Additionally, it is essential for them to publish the names of directors, along with the postal address, telephone number, and physical address of all winning bidders and offers.
It is the intention of the disclosure, in addition to identifying tax evaders, to prevent conflicts of interest and the possibility of authorities and businesses working together to produce fake contracts.
In November 2022, government organizations began publishing information about the beneficial ownership of companies that received public contracts under PPIP.
One reason for the low compliance rate is that the Public Procurement Regulatory Authority (PPRA) can’t fine or penalize businesses that violate the regulations.
For its part, the BRS has taken steps to strengthen its adherence to the requirement that private companies provide information on their beneficial ownership. This information must include the names, phone numbers, and residence addresses of hidden shareholders who control more than ten percent of the businesses.
“We anticipate that the businesses will fully comply with the disclosure obligation; failure to do so could result in their removal from the private company registration starting from December 1st of this year.”
It is anticipated that the disclosures would make it possible for the Kenya Revenue Authority (KRA), security agencies, and the Financial Reporting Centre (FRC) to access the information in order to hunt down people who engage in tax evasion, money laundering, and other forms of fraudulent activity.
Poor levels of knowledge among private enterprises and the high incidence of inactive firms have also contributed to poor disclosures. More than half of private firms face the risk of de-registration due to non-compliance.
At the time of the 24th of October, 52.8%, or 399,595 registered firms, had not yet disclosed the identities of their hidden shareholders. After the November 30 deadline, these companies risked removal from the business registration.
The government hopes to mitigate the risks of illegal actions such as bribery, money laundering, funding terrorist organizations, and the propagation of tax evasion by requiring the disclosure of information about beneficial ownership.
Additionally, the BRS has attempted to encourage declarations on beneficial ownership by, among other things, enhancing the compliance procedure, placing the disclosure portal on the e-Citizen platform, and eliminating the cost of filing.
