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South Africa has made some progress, but not nearly enough – that’s the message from panellists at last week’s two-day conference titled Collective action for beneficial ownership transparency (BOT) in South Africa: From commitment to implementation.

Organised by Corruption Watch, the Department of Public Service and Administration (DPSA), the Financial Intelligence Centre, the Open Government Partnership, and Open Ownership, the conference aimed to explore ways of achieving beneficial ownership transparency. Taking place on 16 and 17 May, the event brought together civil society organisations, government representatives, and the private sector to share progress to date, collectively discuss and determine how international best practice can be applied to South Africa, and define the collaborative role of each sector in putting South Africa’s various BOT commitments into action.

One highlight was a high-level panel discussion, moderated by Theo Chivuru of the OGP, which featured the following guest speakers:

  • Adv Xolisile Khanyile, director of the Financial Intelligence Centre,
  • Lieutenant-general Godfrey Lebeya, head of the Directorate for Priority Crime Investigations,
  • Karam Singh, executive director of Corruption Watch,
  • Asmeen Khan, operations manager in the World Bank’s South Africa office,
  • Pleasure Mathego, director of interest disclosure management at the DPSA,
  • Adv Kholeka Gcaleka, the deputy public protector.

Chivuru asked panellists to set the scene for attendees by providing their sense of where South Africa stands in terms of the implementation of BOT, and also in terms of some of the international obligations to which the country has committed itself.

The first speaker was the FIC’s Khanyile, who started off by mentioning the recent mutual evaluation report published by the Financial Action Task Force (FATF). This was an assessment of South Africa’s systems for anti-money laundering, counter financing of terrorism, and counter financing of proliferation of weapons of mass destruction. Released in October 2021, the report gives the country until October 2022 to address various points raised by the FATF.

“The report shows good progress, but more needs to be done when it comes to demonstrating effectiveness. I think South Africa needs to do more work when it comes to the implementation of the FATF standards.”

Of the countries that have undergone mutual evaluation, Khanyile added, only 52% have the right regulations in place that cover the issues of beneficial ownership in line with FATF recommendations 24 and 25.

“That’s not a good story, because we’re not only expected to have the right laws and regulations in place, but we are expected to implement those rules.”

That South Africa is not the only country experiencing similar problems, is no excuse, said Khanyile. “We can’t be counted amongst the countries that are having problems. We should be able to also tell a good story and we’re capable of doing that.”

For instance, publicly available information tends to be out of date, she said. “It is not current information, because it will tell you this data as it was 10 years ago, and law enforcement agencies won’t be able to act on that information. The information doesn’t assist us in identifying hidden assets – so we really need to do our role as a country in addressing these issues.”

Three-pronged approach to implement a BO register

Asked where South Africa stood in terms of implementing the G20 high-level principles on BOT as well as the UN Convention on Anti-corruption, Mathego of the DPSA said: “In short, what is required is for countries to adopt the definition of beneficial ownership. Secondly, assess risks associated with different types of legal persons and arrangements. Collect and maintain beneficial ownership information and make it accessible to competent authorities and law enforcement agencies. And lastly, ensure that there is supervision of these obligations and that law enforcement agencies and competent authorities co-operate domestically and internationally.”

These principles actually support FATF standards on beneficial ownership, she said.

“In 2015 Cabinet endorsed the high-level principles and made a commitment to implement such. They endorsed the establishment of the interdepartmental committee to oversee the implementation of the action plan. In 2017, the FIC Act was amended and for the first time, I think, included the definition of beneficial owner.”

Next came an assessment of the risks associated with different types of legal persons and arrangements in South Africa, said Mathego, including an assessment of South Africa’s legislative operational systems.

“Key recommendations in the risk assessment report are that we must establish a central register to collate relevant beneficial ownership information from different departments and institutions. We must harmonise the domestic legislation and institutions that impact on beneficial ownership and transparency, to avoid fragmentation and conflicting legislative framework. Thirdly, we must rationalise and improve current data.”

That is the current status, she said. “In terms of our approach to the [BOT] register, the development of one central register might be too much too soon. We have adopted a three-pronged approach towards the establishment of three registers. The first register will look at corporate and legal persons and this is the information that is held by the CIPC. The second will look at the trust register under the Masters office in the Department of Justice and Constitutional Development, and the third will look at other registers, structures, assets and information that impact on beneficial ownership – such as the NPO register, the deeds register, and other public benefit organisations.”

These separate registries have to “talk to each other”, said Mathego, which means they must use the same data model.

Corporate veil hides many secrets

Deputy Public Protector Kholeka Gcaleka spoke of how beneficial ownership information relates to her office’s investigative work

“We don’t only investigate after receiving a report, but we also do own-initiative investigations based on observations around democratic issues. We haven’t interacted with the information around beneficial ownership – but we’ve had several cases around procurement irregularities, infringement of the supply chain management, and so forth. Because of that corporate veil it does become difficult to realise who is behind this particular company who is fronting, because we have a lot of fronting in the country.”

Why the country seems to be going slower than it should be, commented Gcaleka, is that “government tends to want to be the player and the referee at the same time, whereas we’ve got constitutional institutions which can play the referee role and assist with a speedier approach.”

Stronger political leadership needed

Karam Singh, Corruption Watch’s executive director, said in his view, South Africa seems to be at a “perpetual crossroads in the fight against corruption”, although there have been significant developments in recent times – such as the Zondo commission of inquiry into state capture, and its associated set of reports.

“How do we move from findings and recommendations to actual consequence management?” Singh asked, referring to stumbling blocks such as the PPE procurement debacle of the Covid-19 pandemic. “This happened not in the era of state capture, but in the supposed New Dawn. It involved hundreds of millions, if not billions of rands of irregular spending, fronting abuse, and the types of issues that we’re talking about today.”

Another important issue, he added, is the implementation of the national anti-corruption strategy (NACS) – but neither the Zondo reports nor the NACS address beneficial ownership transparency to any substantial degree.

“I wanted to look both at the reports coming out of the Zonda commission, and at the NACS, to understand the extent to which the issue of beneficial ownership transparency is clearly identified in these documents as an issue. And I was disappointed. It’s here in the NACS, but it doesn’t seem to receive the type of attention that it requires – certainly attention that is equivalent to other issues that we’re dealing with, around enhancing whistle-blower protection and reforming the public procurement system.”

The reports skirt around the BOT issue, he said, with no clear articulation of the G20 principles or the FATF recommendations.

“It’s going to be a mammoth task, to take all of those recommendations coming out of the Zonda commission, to align them with the NACS, and to drive that into policies and implementation – so this is an incredibly important gathering and a huge credit to everybody involved in pulling this together. This is a very timely discussion.”

South Africa is not at the right point, he added, in terms of understanding the culture of corruption and its extent. Another obstacle is the governing ANC’s national elective conference, scheduled for the end of this year. “It feels that there is a hesitancy and resistance to driving strongly the kind of reform that we need from our political principals in this moment, because they’re not sure if they’re going to retain their positions at the end of the year.”

Asked what it will take to implement BOT, he said: “We need stronger political will. We need stronger leadership. I think we need a stronger realisation that this is a burning issue. And then we need the kind of coordination to drive a collective response.”

Civil society has a role to play in pushing for that implementation, he said. “There’s still some reticence from some in government to working closely with civil society. There’s a sense that we’re troublemakers – but certainly there is a lot of goodwill from some key officials and you wouldn’t have gotten the type of support from government a few years ago. There wasn’t that type of commitment to working with civil society. I think we’re doing what we can, but I don’t think we can claim any easy victories or say that we’re doing enough. We must do more.”

No single model will work for all countries

The last speaker on the panel was the World Bank’s Asmeen Khan. She acknowledged the vibrancy of the civil society community in South Africa, saying that it constantly pushes government to keep it accountable.

Institutions like the World Bank can assist with technical matters and capacity building in implementing the standards and reporting requirements of beneficial ownership transparency, including commitments made by G20 countries – of which South Africa is one.

“We’re providing capacity building to law enforcement and regulators to support the implementation of standards. We’re assisting in strengthening the systems reflecting and assessing information of beneficial ownership and also strengthening the financial disclosure systems and assessment of money laundering and terror financing risks. Through our procurement work, we’re also developing a global procurement risk analytic tool, which is an open-source platform for procurement decision makers, oversight authorities and CSOs to identify, analyse and proactively mitigate risks.”

In the end, she said, no single model works for all countries. Adaptations are necessary. However, it’s important that transparency is addressed in public procurement first.