African leadership in disclosing ‘hidden’ beneficial ownership

African countries have led the way in tackling hidden ownership. Through their membership of the EITI, 25 African countries have committed to disclose the natural owners of the companies who bid for, operate or invest in the extractives sector. They have committed to disclose the names of any political exposed persons with ownership in the sector. They have developed detailed plans for how they will do all this by January 2020. The plans outline why the countries are taking action and how they will get there.

Eleven of those countries – Cameroon, Chad, Cote d’Ivoire, DR Congo, Ghana, Guinea, Mali, Mauritania, Nigeria, Sao Tome and Principe, and Togo – have committed through the beneficial roadmaps to make the data available through a public register. Of these, Ghana and Nigeria want to move beyond the extractives to cover all registered companies to prevent conflicts of interest in public procurement and contract allocation. Others, including Tanzania and Zambia, are considering similar approaches.

“The National EITI has been empowering citizens with the critical information they can use to hold the government and other players in the extractives industries account and make recommendations that drive reforms in these strategic sectors of our national life”

HE Muhammadu Buhari, President of Nigeria

Why beneficial ownership transparency matters

“We would like to know with whom we are entrusting the exploitation of our resources”

Didier Vincent Kokou Agbemadon, Togo EITI National Coordinator

In an era of low commodity prices, the need for good governance in the extractive sector is stronger than ever. Disclosure of beneficial ownership information can help improve the investment climate, reduce reputational and financial risks, prevent illicit financial flows and reduce the risks of money laundering and corruption. According to the Africa Progress Panel, the Democratic Republic of the Congo (DRC) in the period 2010-2012 lost at least USD 1.36 billion from five mining deals hidden behind a structure of complex and secret company ownership. This figure is equal to almost twice the DRC’s combined annual budget for health and education in 2012.

“We advise the government to use the EITI as an available tool to address the problem of illicit financial flows by adopting and fully implementing the new EITI principle on beneficial ownership”

Joint statement by 12 civil society organisations working on extractives transparency issues in Zambia.

Ghana and Cameroon are examples of countries pushing ahead with beneficial ownership disclosure with the aim of minimising the risks of money laundering and corruption. Zambia intends to prevent tax evasion by improving information sharing on beneficial ownership between government agencies. Ghana and Nigeria both want to use beneficial ownership data to identify key actors and transactions involved in commodity trading in their oil and gas sectors. The Republic of the Congo is seeking to increase accountability of public officials and politically connected persons by requiring that they publish their ownership of concessions and exploration licenses.

Shining a light – progress so far

Several EITI countries in Africa have made good progress. In Ghana, the Companies Act was amended in August 2016 to mandate the Registrar General to collect information as well as maintain the public register. Cameroon is revising its mining code and the DRC has adopted a transparency and fiscal responsibility law. The Republic of the Congo has adopted a new law proposing that the government published information on the beneficial owners and associates of any public service concession holders, as well as any exploration or production permits related to oil, gas, mining and forestry.

Aside from legal reforms, Guinea, Madagascar, Mali and Nigeria have decided which regulatory bodies and government agencies will be responsible for the collection and publication of beneficial ownership information. In Sierra Leone, an informal inter-agency working group consisting of relevant agencies such as the Corporate Affairs Commission, Financial Intelligence Unit and sector-specific regulators, has been established. Nigeria and Zambia will code or tag beneficial ownership data to compare it with other publicly available data.

Seizing the momentum

A year after the leak of the Panama papers, there is a momentum spreading across Africa to conduct business more openly and to tackle tax avoidance to ensure that the wealth created in the continent remain with its citizens. The international community and regional bodies needs to support this. African EITI countries need to be assisted in developing their plans and their registers, to share best practice and ideas on how to strengthen their tax and revenue collection systems.

“It is great for business and responsible companies that EITI now requires beneficial ownership disclosure – it is important for us to know who we are doing business with”
 
Carine Smith Ihenacho, Chief Compliance Officer at Statoil and EITI Board member
 
Visit beneficial ownership, Progress report 2017 and country pages on eiti.org website for more information.