CBK defends Sh15bn secret currency printing tender to German firm

 

The new series of bank Notes. [Courtesy]

The Central Bank (CBK) has defended secretly awarding a Sh15 billion ($109.42 million) tender to a German company to print new currency notes, saying the process was above board.

The tender was awarded to ="https://www.standardmedia.co.ke/business/business/article/2001501407/central-bank-put-to-task-over-currency-printing-deal">Giesecke+Devrient Currency< Technologies GmbH (G+D), a German security printing firm, to print the new Kenyan currency notes, the central bank boss said.

While appearing before Parliament, Dr Kamau Thugge said the hurried and secret - until now - multi-billion-shilling deal, was meant to address a looming stock-out of currency. Thugge stated that the German firm was selected based on its technical and financial capabilities, arguing that the printing of new currency is a sensitive and high-security process that requires specialized firms with proven track records hence the reason was kept secret.

The secrecy and lack of public disclosure around this major currency printing contract has raised questions, with critics calling for more transparency in such high-value government procurements.

However, the central bank maintained that confidentiality was necessary to protect the integrity of the currency printing process and ensure the security of Kenya's financial system.

Thugge said the National Security Council which is headed by the President and the Cabinet approved the secret or classified procurement last as requested by the banking regulator.

“CBK was informed of the approval through a letter from the CS, National Treasury, noting that the Bank was guided to work with the relevant security agencies to achieve the classification objectives owing to the national security importance of currency printing, and further noting that currency is a high-level national security instrument,” he said.

“CBK gathered relevant data from the various companies' publicly disclosed information, as well as from other sources confidentially. Through this process, Giesecke+Devrient Currency Technologies GmbH (G+D), a reputable German Banknote printing company was identified.”

The Council consists of President William Ruto, Deputy President Rigathi Gachagua, the Defence Cabinet Secretary, Foreign Affairs CS, the Interior CS, the Attorney-General, the Chief of Kenya Defence Forces, the Director-General of the National Intelligence Service and the Inspector-General of the National Police Service.

Until now, the CBK had not disclosed the firm's identity, raising questions about the deal's transparency.

“The Classified procurement process for currency became necessary on account of … an imminent stockout of the banknotes particularly the Sh1000 which would have resulted in serious economic and security implications for the country,” he said.

“There was thus an urgent need for the ="https://www.standardmedia.co.ke/article/2001500751/cashless-transactions-call-for-an-end-to-printing-banknotes#google_vignette">currency procurement.< The previous supply contract had lapsed and Dela Rue had already shut down the Nairobi factory and dismissed all the staff.”

Thugge said CBK sought approval from the Cabinet through the CS, National Treasury.

“Due to its national security implications, CBK's request was initially considered by the National Security Council prior to its tabling before the full Cabinet,” he said.

The deal involves the printing of new-look bank notes published on Wednesday, covering the 50 shilling, 100 shilling, 200 shilling, 500 shilling and 1,000 shilling denominations.

Thugge said the CBK progressed with direct procurement after the approvals.

“All the processes required under the classified procurement process including confidentiality were strictly followed,” he said.

“The contract was reviewed and approved by the Attorney General as required by law before execution by the parties,” he said.

The new banknotes bear the signature of the Governor of the Central Bank of Kenya, Dr Thugge, and the Principal Secretary of the National Treasury, Dr Chris Kiptoo, with the year of print as 2024 and new security threads with colour-changing effects.

Past currency printing deals in Kenya have been marred by transparency issues, with British firm De La Rue previously holding a stranglehold on the lucrative business before suspending operations in the country last year.

The CBK said earlier all banknotes currently in circulation will remain legal tender and will circulate alongside the new released banknotes, with the 1,000 shilling notes being issued first.

German banknote printer Giesecke & Devrient has had business ambitions in Kenya.

The firm had previously been involved in a bitter fight with British firm 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. Other firms which fought for the lucrative contract include Crane Currency (United States) and Oberthur Fiduciaire of France.

De La Rue had quoted $112 million (about Sh14 billion) for the lucrative contract for printing new notes that comply with the Constitution.

De La Rue Plc suspended its printing operations in Kenya last year citing reduced orders and a poor economic climate.

The Kenyan law allows a procuring entity to use direct procurement if any of the following conditions are met.

The goods, works, or services are only available from a particular supplier or contractor, or a particular supplier or contractor has exclusive rights to the goods, works, or services, and there are no reasonable alternatives or substitutes.

There is an urgent need for the goods, works, or services due to war, invasion, civil unrest, natural disaster, or other catastrophic events, and engaging in a tendering or other procurement process would be impractical.

The procuring entity has already procured goods, equipment, technology, or services from a supplier or contractor, and it determines that additional supplies should be procured from that same supplier or contractor for reasons of standardization or compatibility with the existing items.

The procuring entity is acquiring goods, works, or services provided by a public entity, and the acquisition price is fair, reasonable, and compares well with known prices in the circumstances.

In these cases, the procuring entity may bypass the typical competitive tendering or procurement procedures and instead use direct procurement to acquire the necessary goods, works, or services.

De La Rue retained a Sh10 billion-a-year tender to print Kenya’s new-look currency in 2018 which paved the way for the retirement of the Sh1,000 older generation notes.

The announcement of halting its Kenya operations came a week after the UK firm suffered a major financial blow after the Kenyan High Court ordered De La Rue PLC to pay the Kenya Revenue Authority (KRA) Sh1.1 billion from a long-running tax dispute with the taxman.

The shock move by the UK-based firm sparked jitters among hundreds of its local employees and concerns over the supply of the country’s pile of cash and coins.

De La Rue said it was disappointed with the ruling, ="https://www.standardmedia.co.ke/article/2001388819/state-prints-sh15b-in-one-week-to-plug-cash-shortfall">and added that its Kenyan< subsidiary was preparing a further appeal.

De La Rue operated in the country through a joint venture with the Kenyan government, in which the Nairobi government held a 40 per cent equity share.

De La Rue suspended its activities in Kenya, slightly over a decade after De La Rue threatened to stop local currency printing operations in the country if negotiations for a joint venture with the Government failed. It also threatened at the time to pull out of Kenya.

The firm at the time said other countries were willing to sign long-term investment deals with it.

It was referring to stalled joint venture talk days after the firm faced criticism over its local operations.

Its Nairobi factory acts as the regional base for the export of its products to other countries and central banks and currency-issuing authorities around the world.

The De La Rue Kenya site has been manufacturing for over 25 years, and “was the first and still is the only site on the African continent to hold the highest level of security accreditation covered by ISO 14298,” said De la Rue in its website.