CBK faces litmus test in fresh multi-billion-coin minting tender

Central Bank Governor Kamau Thugge when he appeared before the National Assembly Finance and National Planning Committee on the printing of new currency notes at Parliament on August 21, 2024. [Boniface Okendo, Standard]

The Central Bank of Kenya (CBK) has moved to prequalify candidates for a multibillion-shilling coin minting tender, in a move that comes under scrutiny following past controversies surrounding its procurement practices.  

The pre-qualification process aims to identify qualified coin minters for the hotly contested tender. 

This public tender contrasts with the previously much-criticised $109.42 million (Sh15 billion) tender for new currency notes awarded to a German firm, Giesecke+Devrient Currency Technologies GmbH (G+D), citing a lack of transparency in the tendering process. 

“The Central Bank of Kenya intends to prequalify candidates for coin minting services,” CBK said. 

“A minimum requirement for qualification is to have successfully carried out Coin Design, Minting and Supply services in the past to a Central bank or currency-issuing authority.” 

This public tender marks a shift towards a more transparent approach by the CBK. 

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CBK Governor Kamau Thugge earlier defended the secrecy, citing the sensitive nature of currency printing and the need to protect national security, which critics say could lead to corruption and unfair practices.

“The classified procurement process for currency became necessary on account of… an imminent stockout of the banknotes particularly the Sh1,000 which would have resulted in serious economic and security implications for the country,” Dr Thugge said. 

“There was thus an urgent need for the currency procurement. The previous supply contract had lapsed and Dela Rue had already shut down the Nairobi factory and dismissed all the staff.” 

Auditor General Nancy Gathungu in a recent report raised concerns about the lack of competitive bidding in the previous tender.

This public prequalification process for coin minting appears to address those concerns by allowing any eligible coin minter to participate. 

De La Rue Plc suspended its printing operations in Kenya in 2023, citing reduced orders and a poor economic climate, paving the way for German banknote printer Giesecke & Devrient.

De La Rue revealed recently it took a hit of Sh2.1 billion in winding down its Kenya operations following the loss of business.

“In financial year (FY) 23, the Group announced that owing to current market demand, and no expectation of new banknote orders from the Central Bank of Kenya for at least the next 12 months, De La Rue Kenya (a subsidiary with a material non-controlling interest held by the Government of Kenya) has suspended banknote printing operations in the country,” it said on December 12.

“As a result of the mothballing of operations in Kenya, an exceptional charge of £1.3million was made in H1 24, including redundancy charges of £0.2million property, plant and equipment asset impairments of £1.1million and other costs of £0.1million, offset by £0.1million of proceeds from the sale of previously impaired inventories.” 

“No costs were incurred in relation to H1 25. Since this program commenced, £ 13.8 million of costs have been incurred in relation to this. No further costs are expected in relation to this project in FY25.” 

The German firm, which is now printing the new-look currency notes, had previously been involved in a bitter fight with De La Rue, which had a stranglehold on Kenya’s lucrative money printing business except for the period between 1966 and 1985 when another UK firm, Bradbury Wilkinson, did the job.

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Other firms which fought for lucrative currency printing contracts include Crane Currency (United States) and Oberthur Fiduciaire of France.

The latest CBK coin minting prequalification document outlines the minimum requirements, including a successful track record of supplying coins to central banks or currency issuing authorities.

“Only candidates prequalified under this prequalification process will be considered for invitation to tender for Coin design, minting and supply,” said CBK. 

“Canvassing or lobbying for the prequalification of the above tender directly or through a proxy shall lead to automatic disqualification of the bidder.” 

Governance experts say the CBK faces the challenge of balancing transparency with the need to maintain some level of confidentiality in the coin minting process. 

The tender documents likely contain sensitive information about the specifications and security features of the coins.