Kibaki ‘gave nod to end currency deal’

President Kibaki supported the cancellation of a controversial currency printing deal that cost the taxpayer more than Sh2 billion, a parliamentary committee was told on Tuesday.

Former Finance Minister Amos Kimunya said President Kibaki supported the cancellation because of the risk posed by transporting 1.7 billion freshly printed notes from Mombasa to Nairobi for safe keeping in an election year.

“The President supported the cancellation of the contract after he was briefed on the challenges that the CBK faced in securing the large amount of freshly printed notes,” Mr Kimunya told the Parliamentary Accounts Committee at Parliament Buildings in Nairobi.

The Transport Minister said that the absence of a substantive governor and the risk of the government being accused of printing money to finance President Kibaki’s re-election campaign informed his decision to support the cancellation of the deal.

Mr Kimunya, who was Finance minister then, also blamed the controversy over the cancelled contract with De La Rue for the supply of new generation currency in 2006 on former acting governor Ms Jacinta Mwatela.

Mr Kimunya said the source of the bad blood was because he had advised against the appointment of Ms Mwatela because the courts had not concluded a case against the then governor, Mr Andrew Mullei.

“I was under immense pressure from Jacinta Mwatela to appoint her the governor, including summoning her husband to go to State House to see the President over the matter. But I advised against it because there was a substantive governor. I worked with her even after this, if I had anything against her, I would have had her sacked over other matters that I do not wish to disclose here,” he said.

He said that even though Ms Mwatela had demanded to be paid like a substantive governor, he had negotiated a higher salary for her. “We had a governor in court over matters engineered within the Central Bank and an acting governor who wanted to have her signature on the currency.

“She was annoyed because her signature could not be immortalised in the currency,” Mr Kimunya told the House team.

Order documents

He said Ms Mwatela handled the interim order documents on the contract, which only concentrated on the cost per piece of currency without factoring in other additional costs of transporting and storing the currency that was to be printed in Malta.

Mr Kimunya claimed that the cost of printing currency in the last five years would have been much less than what the contract had indicated for three years, but could not immediately provide figures.

“When I asked why we were printing 1.7 billion pieces of currency instead of the 400 million pieces we need every year, the answer I got was shocking. That because of tendering, we had to change the design of the currency to give firms a level playing ground because De La Rue had the patent rights on the currency (in circulation).”

He said the tender was “disastrous” as it would have presented a logistical nightmare on transportation, distribution and storage.

Among the issues being considered by Ms Mwatela, he said, was to have Times Tower revert to Central Bank ownership, while the other money would have been stored in Kisumu and Eldoret.

He said the government would also have had to change the currency every three years to meet the tender requirements.

The minister said the problem was compounded by the intended delivery of the currency just months before the 2007 General Election, which would have raised “political risks” as the government would have been accused of printing money for campaigns.

He added that unscrupulous people could have taken advantage to print fake notes at a time when the money in circulation in the country is usually high.

Mr Kimunya said after consultations with President Kibaki, it was agreed to have the delivery of the notes delayed to January 2008 — after the elections.

However, he added, this was again overtaken by events, leading to the government’s negotiated stake in De La Rue. (READ: Files on money printing deal destroyed)