Kenya lost Sh2.7bn in currency deal

The Central Bank of Kenya on Thursday said the country had lost Sh2.7 billion in a controversial currency printing deal with a British firm.

It also distanced itself from the deal between the Treasury and De La Rue Ltd for a 10-year contract to print currency, saying it was not a party to the agreement.

In a move likely to cause friction between the bank and Ministry of Finance, CBK governor Njuguna Ndung’u told Parliament’s Public Accounts Committee (PAC) that he was not aware of negotiations for the Treasury to buy a 40 per cent stake in De La Rue.

In return, De La Rue would be awarded a monopoly in currency printing and its licence to operate at the EPZ renewed.

“My office is not party to any of those transactions on the joint venture and any questions on this should therefore be directed to the Treasury,” Prof Ndung’u said, citing the CBK Act that prohibits the bank from engaging in any commercial transactions.

On Wednesday, Treasury permanent secretary Joseph Kinyua told the PAC that the bank had all the documents on the ownership deal since it was the “central player” in the transaction.

However, the agreement between the firm and the Treasury indicated that “…CBK will therefore approve the deal and contract the firm to print the currency for a period of ten years.”

The revelations were made during a public hearing by PAC on the government’s intention to buy a stake in the British firm.

The governor warned that CBK would opt out of the deal if it did not get better pricing irrespective of whether the government entered into a joint venture.

It also emerged that taxpayers lost more than Sh2.7 billion after the government cancelled a cheaper international order for new currency notes in 2003.

The contract that would have seen the country print notes at Sh2,395 per 1,000 notes was cancelled in November 2007 by then Finance minister Amos Kimunya on grounds that the government had decided to purchase a stake in  De La Rue.

CBK was then directed to issue a short term contract to the latter at Sh3,721 for every 1,000 pieces.

“…This decision arose from the government policy that was given by the minister for Finance directing that the contract be cancelled,” Prof Ndung’u told the committee.

Since then CBK has engaged the firm in six interim printing orders at cost of Sh9.9 billion.

In 2006, the bank issued an international tender for currency printing deal.

De La Rue International won the contract to print the notes at their factory in Malta at an average cost of Sh2,395 for every 1000 pieces.
Lose jobs

But the Treasury argued that awarding the firm the contract would see 260 Kenyans lose their jobs, a position that was accepted by the Central Bank.

PAC chairman Boni Khalwale, who is the Ikolomani MP, dismissed the argument, saying “…we do not want anyone in the Central Bank to hide in the smokescreen of creating jobs for wananchi.”

He cited Section 491 of the CBK Act that grants the governor autonomy and protection from any external interests in executing his duties.

Prof Ndung’u said the bank was initiating public policy since it was a government agency and would not therefore incur the cost of exporting jobs if the Malta contract was signed.

Bura MP Nasir Abdi said it did not make economic sense to save 260 jobs at a cost of Sh780 million and commit the government to a loss of Sh2 billion.

It also emerged that the CBK entered another deal with De La Rue in December last year whose particulars could not be disclosed immediately.