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Long wait for new banknotes continues

Kenyan banknotes. FILE PHOTO | NMG
Kenyan banknotes. FILE PHOTO | NMG 

Clearly, the road to issuance of new generation banknotes is proving to be more and more rocky.

This week, the High Court temporarily stopped the award of the printing contract to De La Rue International, pending the result of a case filed by activist Okiya Omtata.

I can’t wait to see how the protracted and vicious fight for the lucrative contract plays out. By all accounts, at stake is a massive tender.

You only appreciate the scope of the job of replacing all banknotes in circulation by comparing the contract being floated with the figure paid for a mere 1.7 billion notes during the first and last competitive tender for banknotes in 2006.

At that time, De La Rue agreed to provide that service at a contract price of $55 million. The estimate right now, going by the average quotes by bidders on the contract in dispute is that the Central Bank of Kenya will spend in excess of $100 million on new generation notes.

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When you include the cost of other jobs, including having to building new currency centre and buying new currency processing centres- the bill for the transition to new notes will be massive indeed.

And, there will be risks. As the Ghanaians found out a few years ago, the incidence of counterfeit activity increases exponentially whenever a country is replacing its bank notes.

In a sense, it does not surprise that the transition to new generation bank notes is being fought for so viciously. The world over, currency-printing contracts tend to generate controversy and corruption allegations.

In 2015, former Argentina vice-president Amado Bouduo appeared in court accused of using shell companies and secret middlemen to gain control of the company that was given a contract to print the country’s banknotes.

In Australia, currency printer Securency International, which is half- owned by the Central Bank of Australia, was in 2010 investigated by authorities after it was accused of paying $50 million to middlemen in a number of corruption-prone developing countries to win lucrative tenders.

De La Rue has maintained a stronghold on the currency printing contract since Independence. Between 1966 and 1985, Kenya banknotes were printed by an entity known as Bradbury & Wilkinson of the UK, which was later acquired by Thomas De La Rue in 1986.

Since then, De La Rue has been printing banknotes for Kenya by signing 10-year contracts.

The end of the regime of former president Daniel arap Moi in December 2002 presented a major challenge for the banknote printer especially because the exit of the former president coincided with expiry of its last ten-year contract with the Central Bank of Kenya.

Towards the end of December that year- hardly a week before the swearing of president Mwai Kibaki, De La Rue moved with alactrity to make sure that it had another 10- year deal in the bag.

Three months later and with the Kibaki regime having settled down in office, the 10-year bank note printing contract with De La Rue was cancelled and the Central Bank of Kenya ordered by the government to – for the first time in Kenya’s history - float an international tender for printing new generation banknotes.

Yet when the competitive tender was floated and other banknote printers invited to participate in May 2006, it was De La Rue that emerged winner.

The UK printer quoted prices that were significantly lower than prices at which it had hitherto provided services under the 10-year contract that that was cancelled by the government.

The new currency was to be issued beginning July 2007. It has not happened to date.

Instead of making sure that this contract with cheaper prices was rolled out, the Treasury cancelled the contract and decided instead to purchase shares in the local subsidiary of De La Rue.

The joint venture negotiations went on for many years during which time De La Rue had opportunity to supply banknotes under stop arrangements. The beat goes on. Let’s wait and see how the ongoing court case will play out.

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