Bringing Beneficial Owners out of Hiding

PWYP Zimbabwe is pressing for the country’s new register of beneficial ownership to be publicly accessible, so people can use it to fight corruption

There was joy in Zimbabwe in early 2020 when we followed many other countries worldwide in establishing our first beneficial ownership register. These registers enable people to see who really owns and profits from a company’s operations. They are a globally acclaimed tool for fighting corporate corruption, enabling people to hold governments to account over who wins contracts, and companies to account for their actions. But PWYP Zimbabwe has identified key barriers that might stop the register from increasing transparency.

Under Zimbabwe’s new Companies and Other Business Entities Act, companies are required to file details of all their beneficial owners with the Registrar of Companies. It’s a key step in the fight for transparency in the country’s extractive sector – but to be effective, it needs to be implemented well. To promote compliance with the new rules and their effective enforcement, the Zimbabwe Environmental Law Association – which coordinates the PWYP Zimbabwe coalition – organised a multi-stakeholder meeting in February 2020 on transparency and disclosure of beneficial ownership in the mining sector. The meeting brought together parliamentarians, tax and legal officials, and representatives from civil society, community-based organisations, mining communities and the media, to discuss implementation of the new register with the Deputy Chief Registrar of Companies. 

A key step against corruption

“The extractive industries are a hub of corruption, and it is important for community members to know who owns what, and how did they come to own that?” said Bridget Mafusire from the International Senior Lawyers Project, introducing the debate. “It is critical that we know this, for accountability purposes.” 

Willie Mushayi, the Deputy Chief Registrar of Companies, explained the role of the new beneficial ownership register in deterring money laundering, tax evasion, illicit financial flaws and corruption. Under the Act, a beneficial owner is defined as an individual who directly or indirectly holds more than 20 per cent of a company’s shares or voting rights. The Act specifies that not more than 20 per cent of the shares in a company may be held by a nominee on behalf of a beneficial owner. It also requires all existing companies to re-register with the Registrar of Companies within 12 months, establishing an updated register. 

Public access – a vital element

But there’s a drawback with the Zimbabwean law. For registers of beneficial ownership to deliver transparency, they need to be publicly accessible, so everyone can see who owns extractive companies.  Disappointingly, the Deputy Chief Registrar revealed that Zimbabwe’s beneficial ownership register will not be public. Law enforcement agencies such as the police and the financial intelligence unit can access it, but otherwise it will remain confidential unless disclosure is required by a court order. This prevents the public, civil society organisations, mining communities and the media from scrutinising information and holding to account people who hide corruptly behind companies to plunder national resources.

As Coordinator of PWYP Zimbabwe, I expressed our disappointment, stressing that, “access to the registry is critical for the public and communities to fully understand who owns the mines.” Only then can people hold mine owners and extractive companies to account for their behaviour, and the government to account for which companies it allows to operate the mines. My colleague Farai Mutondoro put it directly: “Why is the state so fearful about disclosing this information?”

The need for further reform

In response, the registrar said that the reform process had lasted four years, but public consultations were poorly attended. People had missed the chance to call for the register to be publicly available. Mr Mushayi encouraged members of civil society and mining communities to file complaints about corporate malpractices, so his office could investigate. 

PWYP Zimbabwe is now working to ensure greater public and civil society participation in consultations and monitoring, including ensuring that beneficial ownership requirements are well implemented so that companies comply with the new regulations. Parliament also has an important oversight role. MP Davison Svuure from the parliamentary committee on mining said its members “would want to know the owners or beneficiaries of mining companies, so we can hold them accountable for environmental degradation in their areas of operation.”  

Hope in Zimbabwe’s approach?

Other reforms are also needed to promote transparency and accountability in the mining sector, including ensuring contract and revenue transparency, and aligning Zimbabwe’s practice with international best practice, such as the Extractive Transparency Industries Initiative (EITI). In early 2020, PWYP Zimbabwe noted with regret that the government is not keen to join the EITI, which defines clear standards for disclosure of payments and contracts. 

However, PWYP Zimbabwe sees a spark of hope. From 2020, all EITI members must ensure that companies that apply for or hold a participating interest in an extractive licence or contract disclose their beneficial owners. Although it needs to be made public, Zimbabwe’s new beneficial ownership register could indicate that the country is pursuing transparency and accountability in its own way, rather than through EITI membership. PWYP Zimbabwe is watching closely to find out.