Businesses which secured over 57 percent of tenders in ministries and parastatals kept their identity, addresses and office location secret in breach of the law, raising fresh concerns over transparency in State contracts.

Disclosures in the annual report of the Public Procurement Regulatory Authority (PPRA) show firms that secured 14,819 of 25,994 contracts failed to disclose their beneficial owners.

This points to struggles in unmasking shareholders of companies who secretly benefit from State deals through nominee accounts in efforts to boost transparency in public sector procurement.

The breaches look set to upset the International Monetary Fund (IMF), which pushed for enactment of the law that will force disclosure of secret owners in companies awarded procurement contracts as a tool for fighting graft.

Kenya in October 2020 started collecting personal data on beneficial owners, including their names, KRA PIN, national ID or passport copies, postal address, residential address, occupation and telephone numbers.

Part of this information, including postal address, email, office location, directors and beneficial owners, is supposed to be made public through a portal manned by PPRA— the State procurement regulator —for firms that have secured tenders in government and parastatals.

PPRA said 316 of the 411 procuring entities during the review period complied with the beneficial ownership disclosures, leaving 95 in breach.

PPRA Director-General Patrick Wanjuki told the Business Daily that some of the enforcement gaps stemmed from limitations in the public procurement information portal (PPIP) system, which only supported beneficial ownership disclosure for open tenders.

Read: State to reveal names, homes of tender tycoons in graft fight

This has seen contracts awarded through other methods, such as direct procurement and requests for quotations, able to proceed without such disclosure.

“PPIP was designed mainly to publish procurement information and promote transparency. It was not developed as an end-to-end transaction processing system capable of enforcing compliance before a procurement process is concluded,” said Mr Wanjuki.

“Therefore, the portal could not automatically prevent the progression or completion of procurement processes where beneficial ownership information had not been disclosed. Compliance largely depended on manual adherence by procuring entities.”

He added that since procurement activities could be undertaken outside the portal, PPIP did not have full visibility over every stage of the procurement lifecycle, making comprehensive beneficial ownership monitoring difficult.

The revelation came in the period PPRA said top 10 suppliers were collectively awarded 20 contracts worth Sh93.09 billion, which accounted for 42 percent of the total value of contracts reported.

The entity said 73 percent of the total value of contracts was procured by open tender, while 27 percent was through other methods, including direct tendering.

The Companies Act 2015 defines a beneficial owner as a person who, individually or jointly, directly or indirectly holds at least 10 percent of a company’s shares or voting rights, has the power to appoint or remove a director, or otherwise exercises significant influence or control over the company.

The distinction between legal and beneficial ownership has become central to global anti-corruption efforts, particularly in government contracting, where shell companies and proxies are often used to mask influence.

The requirement for beneficial ownership disclosure was entrenched in law through amendments to the Companies Act in 2019 and subsequent Companies (Beneficial Ownership Information) regulations issued in 2020 and 2022, which expanded the obligation to firms bidding for public tenders and public-private partnerships.

“Beneficial ownership information maintained by the PPRA in the government portal, in relation to entities that have been awarded a tender by the procuring entity as part of contract award, shall be published and made publicly available,” say the 2022 regulations.

Under the rules, companies must submit details of their beneficial owners at the bidding stage, with successful contractors required to provide full disclosure before signing contracts. The information is then expected to be published on the PPIP to enhance transparency.

However, the PPRA report shows that compliance remains patchy, with many firms either failing to submit the information or providing incomplete disclosures, effectively shielding the real beneficiaries of public contracts.

The authority says the lack of disclosure is part of broader weaknesses in procurement reporting and documentation, noting that key records, including beneficial ownership details, are often missing or incomplete in contract award data published on the PPIP.

The anonymous ownership of firms comes despite increasing scrutiny globally, where opacity in company ownership has been linked to corruption, tax evasion, money laundering and even terrorism financing.

The Financial Action Task Force (FATF), the global watchdog on illicit financial flows, has long recommended that countries establish mechanisms to ensure that beneficial ownership information is available and accessible to competent authorities.

Kenya’s reforms were partly driven by the need to align with FATF standards as well as pressure from the IMF to unmask and publish the owners of companies winning State contracts as part of the conditions to access loans.

The Business Registration Service (BRS) has also been pushing companies to file beneficial ownership registers, but uptake has been slow, mirroring the challenges now evident in the procurement space.

The failure to disclose ownership details weakens accountability and opens the door to conflict of interest, including situations where politically exposed persons or public officials secretly benefit from State contracts.

The PPRA report showed that besides failing to disclose beneficial owners, the breaches by procuring entities extended to failure to publish complete contract information, delays in reporting and inaccurate data entries on the procurement portal.

These gaps have prompted the regulator to call for stronger enforcement powers, including the ability to impose administrative sanctions on non-compliant entities.

The regulator is also pushing for greater use of digital systems, including full migration to electronic government procurement, as a way of improving audit trails and reducing opportunities for manipulation.

PPRA chairman Mwangi Wa Iria said while compliance monitoring remains key for the watchdog, the next frontier is ensuring there is “accountability with consequences.”

“Entities that fail to publish procurement data, disclose beneficial ownership, or maintain proper records undermine both transparency and value for money. The board therefore supports a review of the Public Procurement and Asset Disposal Act, 2015, to provide PPRA with administrative sanctioning powers, ensuring noncompliance is not cost-free,” said Mr Iria in the annual report.

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