By Anna-Sophie Hobi

For the first time, the Zimbabwean law requires to keep a beneficial ownership (BO) register. This came as a pleasant surprise; finally, an important part of the jig saw puzzle for solving the persistent transparency deficits. The significance of the BO requirement in the new Companies and Other Business Entities Act gets added value considering that the Extractive Industries Transparency Initiative (EITI) recently embraced BO disclosure.

No doubt that Zimbabwe is showing little appetite for joining EITI. However, the convergence of domestic legal reforms with EITI gives a signal that Zimbabwe is perhaps not far off the transparency radar.  To help civil society to gain a fair understanding of the new requirement on BO, the Zimbabwe Environmental Law Association (ZELA) organized a half day workshop.

The workshop was held at Cresta Oasis Hotel, Harare on Wednesday, 26 February 2020. The meeting brought together the Registrar of Companies, Zimbabwe Revenue Authority (ZIMRA), Civil Society Organisations (CSOs), the Office of the Auditor General (OAG), and the Chamber of Mines. Unfortunately, the BO register will remain confidential as explained by the Registrar of Companies. It is, however, a step in the right direction.

Why the BO registry is important? Complex and secretive corporate structures and anonymous business entities scattered across various jurisdictions make it difficult to identify who ultimately controls and benefits from a company. The natural person behind it is the so-called beneficial owner.

Too easily, secrecy and anonymity help to facilitate corruption, money laundering, tax evasion and profit shifting to tax havens. It is extremely difficult to “follow the money” and find out where the profits go. To prevent illicit flows of money, it is necessary to gain insights on who owns and controls what, particularly in the opaque, risky and highly profitable extractive sector.

Civil society worldwide has been in the forefront of bringing the issue of BO transparency to the table. Increasingly, international standards require a BO register and various countries have even made the registers public and accessible online, an example is the United Kingdom’s Companies House.

The membership in Eastern and Southern African Anti Money Laundering Group (ESAAMLG) has given Zimbabwe the obligation to be compliant with international standards to prevent money laundering and combat the financing of terrorism. These comprise the recommendations by the Financial Action Task Force (FATF), that urge countries to keep a beneficial ownership register for both companies and trusts.

This is why also the Zimbabwean government had to amend the Companies Act and include a beneficial ownership register. Zimbabwe’s new Companies and Other Business Entities Act [Chapter 24:31] comes to force in the first quarter of 2020. It includes an “obligation to maintain and file beneficial ownership information” (section 72) and the “prohibition of concealment of beneficial ownership” (section 73). In practice, companies will keep an up-to-date list of their beneficial owners and have to frequently update the Registrar of Companies that will also keep a register of beneficial owners.

While the new Companies and Other Business Entities Act does not give full clarity on the accessibility and availability of the register to members of the public, the Registrar of Companies gave clear explanations at the BO workshop.

“The beneficial ownership is not a public register. It remains confidential unless required to be disclosed”.

The only way to access it as a citizen, the Registrar elaborated, would be through a court order. This makes it very difficult and cumbersome for civil society, journalists, researchers and the general public to gain more information on companies. Especially community members that live close to mining areas have an interest and right to know, who is their neighbour. Communities are rarely aware of who is operating on their land, who is mining their resources and where those profits go.

In addition to that, the Zimbabwean government has greatly announced to fight corruption. Only together with the public “watchdogs”, this big task can be tackled. While it is very commendable, that Zimbabwe has made the provision for a BO register, its confidentiality makes it a toothless measure against corrupt practices and money laundering. At least it is a small positive that government institutions like the Financial Intelligence Unit and Zimbabwe Republic Police (ZRP) have access to BO register to support their investigations.