Banknote printer De La Rue is releasing close to 300 employees following the freeze of Kenya operations on low business as the multinational firm prepares a fresh fight to overturn the Sh1.1 billion judgment in favour of the taxman.
The global firm, which prints notes for Kenya through the local joint venture that is 40 percent owned by the Kenyan government, will release the last lot of workers by March.
The firm said it does not expect any banknote printing order from the Central Bank of Kenya (CBK) for at least the next 12 months due to low market demand.
While Kenya has struggled to retain and attract multinational manufacturers, it has recently become a magnet for technology firms and financial service companies seeking a hub for a larger share of the African market.
Global tech giants, including Microsoft, Alphabet Inc and Facebook, have been increasing investment in Kenya in recent years to take advantage of growing economies with rising access rates to the Internet by a youthful population.
But industrialists, especially multinationals, are constantly on the hunt for bargain production locations much like they do tax havens, a trend that has seen Kenya lose firms like Schneider Electric, Colgate Palmolive and Reckitt Benckiser.
On De La Rue Kenya, multiple workers who have since been released told the Business Daily that the banknote printer has shed jobs since mid-last year.
The workers said about 60 of their colleagues who were on contract were let go in July. Another 72 employees who were serving on permanent terms were released in September.
“Government is not printing any new notes now. Those of us who were dealing with notes left. The last order of banknotes they (De La Rue) got was up to September 2022,” said one of the workers who sought anonymity.
De La Rue late 2018 won an £85 million (Sh13 billion) tender to design and manufacture Kenya’s new currency generation notes as the country moved to remove the faces of individuals from its currency.
The sources said the firm will be releasing another lot of workers by the end of January.
The last group of workers, mainly drawn from the authentication division and management, will leave by the end of March.
“By end of this month, around 15 will be left. We were told the government does not need banknotes now. The issue of technology is also affecting us because, with mobile banking, the demand for security documents has dropped,” said another worker.
The firm’s authentication division supplies a range of physical and digital solutions such as tax stamps, cheques and bank cards.
De La Rue’s results for the six months ended September 2022 showed profits from the Kenyan unit had dropped by 58 percent from £1.2 million (Sh184.5 million) to £0.5 million (Sh76.9 million) on reduced revenue, highlighting the impact of low business.
Profit for the full year ended March 2022 had also dipped from £3.1 million (Sh476.6 million) to £2.2 million (Sh338.3 million).
The Treasury earned £0.9 million (Sh138.4 million) from De La Rue’s full-year profit for the 40 percent stake it acquired at £5 million (Sh768.7 million) in 2019.
Also read: Treasury earns Sh132m from De La Rue venture
CBK disclosures show that currency production costs, which include ordering, printing, minting, freight, insurance and handling expenses, hit Sh2.39 billion in the financial year ended June 2022 compared with Sh2.09 billion in the previous year.
The freezing of operations comes barely a week after De La Rue lost a Sh1.1 billion case and is now expected to pay the Kenya Revenue Authority (KRA) the amount, which relates to revenues earned between 2013 and 2017.
The firm says it will be seeking to overturn the KRA claim at the Court of Appeal as it tries to safeguard its revenues.
“De La Rue is disappointed with the ruling and its Kenyan subsidiary is preparing an appeal to the Court of Appeal,” said the firm.
Freezing Kenyan operations means De La Rue will now be left with three banknote sites — UK, Malta and Sri Lanka — down from four at the beginning of the year and five in 2020, highlighting the declining demand for banknotes globally as digital transactions gain traction.
De La Rue has been working in Kenya for over 25 years from where it serves other markets such as Tanzania, Uganda, Zambia and Rwanda.
The UK-headquartered firm will keep the Kenyan unit active and will try to explore other business opportunities within the country and the region in the hope of resuming operations.
"The company continues to explore further business opportunities, both in Kenya and for export from Kenya, with a view to restarting production if the economic climate permits," De La Rue said.