Mr Rob Hutchison (left), the De La Rue Group director for marketing communications, with Mr Mark Crickett, the commercial lead, during a press conference in Nairobi, on Wednesday. They said the Treasury would recover the investment in three years although the firm’s earnings have been declining since 2009.
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.
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.
It said frequent tendering and redesign was expensive while engaging a new printer through tendering would cost Sh2 billion.
The Treasury’s concerns were heightened by reports that the UK company had been the subject of an intended takeover by French firm Oberthur, the world’s third-largest bank note printer after De La Rue and Giesecke and Devrient respectively.
The purchase of stakes in De La Rue has, however, met resistance from the Central Bank of Kenya (CBK) and some legislators who claimed that the deal would deny the country a chance to competitively source for the service.
CBK governor Njuguna Ndung’u last week told the Public Accounts Committee (PAC) that the bank would continue sourcing for the service competitively, a position that may not favour De La Rue.
“We are an independent body which cannot be bound by anyone. We have a duty to Kenyans to ensure that currency is sourced whether within or outside the country through a competitive bidding and pricing,” Prof Ndung’u told the committee recently.
He said that CBK has been procuring currency from De La Rue at exorbitant prices following directives by former Finance ministers David Mwiraria and Amos Kimunya.
Mr Crickett denied the claims saying De La Rue quoted competitive prices for all its operations worldwide.
The official also down played claims by PAC chairman Boni Khalwale that the government risked buying into a bad business that would require huge injection of investment to revamp its obsolete technology and ageing equipment.
“Decisions on future investments will be jointly done by the board of the joint venture if need be. Our equipment is still in perfect condition to produce world-class currency notes,” Mr Crickett said.
Under the proposed venture, De La Rue would provide three directors and the government two.
The Treasury would also appoint a chairman and have full access to the balance sheet of the new company, De La Rue Kenya EPZ.
Operating under the Export Processing Zones would give the company tax holidays in the initial years of the business.
He said the company could be forced to shut down its Kenyan operations should the planned joint venture not materialise.
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