UK’s De La Rue renews push for exclusive money printing contract

British currency printer, Dela Rue, is lobbying the Jubilee government for yet another 10-year contract to exclusively print Kenya’s currency notes.

The Business Daily has learnt that a Cabinet paper supporting the proposal to award the currency note printer an exclusive 10-year deal is ready for tabling this week.

If the Cabinet approves the proposal, the Central Bank of Kenya (CBK) will have a free hand to negotiate prices directly with De La Rue without considering offers from other international currency printers.

ALSO READ: Currency printing cost rises sharply to Sh2.4 billion

Originally approved by the Kibaki Cabinet — at a meeting on September 13, 2011 — the proposal is returning to President Uhuru Kenyatta’s table after an investigation by Parliament’s Public Accounts Committee (PAC) criticised it for, among others, going against public procurement laws and regulations on competitive bidding.

A sitting of the full House controversially overturned the PAC’s findings in a debate that took place against the backdrop of intense behind-the-scenes lobbying.

Matters got complicated later on when the then Finance minister Njeru Githae demanded a fresh opinion on whether an exclusive deal negotiated as proposed was in line the with public procurement laws and regulations.

The matter was left in abeyance for a protracted period until the exit of the previous administration before a decision was made.

Whether the Uhuru Cabinet will approve the deal remains to be seen.

But the question as to whether the proposal is in breach of procurement laws and regulations has definitely not been resolved.

Early this year, the Public Procurement Oversight Authority (PPOA) — the agency that oversees procurement by public entities — argued that even where the law gave public entities the leeway on choice of procurement methods, competition and transparency had to be maintained – effectively casting shadows on the validity of the proposal.

In a letter dated February 13, 2013, PPOA director general J O Juma argued that De La Rue Printing Kenya Limited was a private entity and was under obligation to comply with the Public Procurement and Disposal Act in its dealings with the government.

“As long as the purpose is not to avoid competition, the law provides for alternative methods for public entities to source for suppliers,” he said, stressing that the key object of the Act was to “promote competition and to obtain best prices”.

De La Rue has argued that the exclusive deal they are looking for will still deliver competitive prices because parties will be holding biannual review of bank note prices in light of prevailing market prices and technological advancements.

When they meet over the matter this week, the Cabinet will be expected to make a decision on whether the government should buy 40 per cent shares in De La Rue’s Ruaraka-based subsidiary. If the acquisition is approved, the government will purchase the shares at Sh600 million in a completely new company to be jointly owned by the government and the British printer.

The government will appoint two directors to sit with De La Rue’s three on the board.

The government will appoint the chairman of the company while the management will be in the hands of the foreign investor.

If the Cabinet approves the acquisition, it will not be without precedent in Africa.

The Nigeria Security Printing and Minting PLC is owned 77 per cent by government and 2.9 per cent by De La Rue, the rest of the stake is in private hands.

In April 2009, a meeting of the Cabinet committee on Finance and Planning directed the Treasury and the CBK to demand an ownership interest higher than 50 per cent.

What remains controversial is the demand by De La Rue that the proposed acquisition must necessarily be accompanied by a 10-year exclusive currency production contract.

Kenya must replace all currency notes with completely new bank notes because the Constitution prohibits the use of a person’s portrait on the notes.

The CBK has not floated a competitive international tender for currency notes since it was established in 1966.

De La Rue has had a stranglehold on the business except for the period between 1966 and 1985 when the country’s bank notes were printed by a UK company known as Bradbury Wilkinson that was later acquired by De La Rue.

Towards the end of 2002, when all indications were that the regime of  President Daniel arap Moi was about to leave the scene, the CBK moved quickly and signed a 10-year exclusive deal with De La Rue in the eleventh hour.

That contract took effect on January 1, 2003, a few days before President Kibaki was sworn into office.

In the initial months of the Kibaki administrations, the signs were that the British currency printer had lost favour with the new governing elite.

On March 14, 2003, Finance minister David Mwiraria cancelled the 10-year exclusive currency printing contract and ordered an international tender.

When the CBK floated the tender in 2006, De La Rue won a three-year contract to print 1.7 billion pieces at a cost of $51 million.

The new currency was supposed to be issued in July 2007.

The banknotes procured through the competitive process did not see the light of day after the Kibaki administration decided  to take the route of purchasing shares in De La Rue’s Ruaraka-based subsidiary.

ALSO READ: Treasury ‘will not fund De La Rue purchase’

To date — and even after the new Constitution demanded new designs — the status quo persists. De La Rue continues to exclusively print currency under opaquely-negotiated interim orders.

[email protected]