De La Rue faults MPs over Treasury share offer

Currency and security printer De La Rue has defended its proposed joint venture with the Treasury saying the government would recover its initial investment within three years.

The venture has raised eyebrows after the Central Bank of Kenya distanced itself from the deal, for which no feasibility study was done.

READ: MPs question Cabinet move on Sh650m deal

CBK said it would not guarantee the firm the business of printing Kenya’s currency.

Mark Crickett, the commercial head of De La Rue Currency and Security Print Kenya, said the Treasury’s initial investment would be Sh665million (£5million) for a 40 per cent stake.

“The government will have its investment repaid within three years,” he told a media briefing in Nairobi on Wednesday.

The period for the return on investment is based on projections that earnings before interest and tax (EBIT) would be pound sterling 4.7 million in the coming financial year, rising to £5 million in the 2013/4 fiscal period and Sh705 million (£5.3 million) a year later.

If the government takes a 40 per cent stake, it would earn £1.88 million in the current year, £2million next year and £2.1 million in the 2014/15 period.

Data, however, showed that De La Rue earnings dipped from £5.3 million in 2009 to £3.5 million in 2010 and £2.8 million in 2011. The estimate for the current financial year is £4.2 million, a 50 per cent improvement from last year.

Mr Crickett said the erratic earnings arise largely from the cyclic nature of the currency printing business where repeat orders take a while to come through after the deliveries are made.

He said the proposed value of allotment to the Treasury was derived from two independent audits that valued De La Rue’s business in Kenya at between £15 million and £18 million or between Sh2 billion and Sh2.4billion.

Mr Crickett said the firm had invested Sh3 billion in the facility todate.

The Cabinet in November 2011 approved the purchase of a 40 per cent stake in De La Rue by the Treasury as recommended by a Parliamentary Committee on Finance.

The Treasury supported its push for the joint venture on the strength that it would safeguard local jobs, taxes, forex and currency features which are currently in the hands of the Ruaraka-based printer.

The Treasury had also argued that leaving the currency printing job solely in the hands of a private printer exposed the government to high costs of production and risks of counterfeiting.