Brief history of Kenya's currency printing politics - Daily Nation

Brief history of Kenya's currency printing politics

Sunday December 16 2018

currency printing

Kenya's new generation currency, launched by Central Bank of Kenya on December 11, 2018. The fight to control the currency printing is a huge battle won in boardrooms and over coffee. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

By JOHN KAMAU
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Between late 1989 and early 1990, President Daniel Moi gave one of his British friends, Roland ‘Tiny’ Rowland, a contract to print the Kenyan currency — and that was the only person ever to edge out De La Rue out of the multibillion-shilling contract.

This deal was actually fixed at the Norfolk Hotel, then part of Tiny Rowland’s empire, and where he had a reserved table on the right side of the entrance.

Here, he would hobnob with all the deal brokers, wire-pullers, power players and busybodies who would want to meet him when on the Kenyan business tour.

Mr Rowland loved Nairobi and would later build the iconic Lonrho House between Kaunda Street and Standard street, and where Moi’s court-jester, Mark Too, a semi-literate former milkman, had an office as the deputy chairman of the Lonrho East Africa; the face of the company’s massive interests in the region.

Actually, Lonrho East Africa had no chairman by then — and Mark Too was not deputising anyone. He would later assume the title of chairman.

LIAISON

Mr Too had earned the position at the Norfolk when Mr Rowland was desperate to get into the inner circle of the Nyayo regime.

He was told of a Mr Mark Too, a Nandi businessman; and Mr Rowland went upcountry to meet him.

According to Mr Rowland’s biographer Tom Bower, the 1979 meeting was a test: “Can you get the president on the phone?” he asked.

Mr Too is reported to have picked the phone and dialled the new president. They spoke — and in a second, the British tycoon was convinced that this was the man he wanted in East Africa.

As a result, Mark Too managed to edge out Lonrho’s executive director, the Princeton-trained banker Udi Gecaga, then husband to Jomo Kenyatta’s daughter, Jeni.

‘Tiny’ Rowland, as he was best known because of his height (he was 1.8 metres), knew how to mix business and politics — and that is how he managed to get multimillion dollar deals.

"No wonder the British Prime Minister Edward Heath once described him as 'the unpleasant and unacceptable face of capitalism' but the tycoon didn’t give a hoot: 'You can never have enough enemies."'

CURRENCY

When Udi was brought to Lonrho, he was to occupy a position similar to that of West Africa’s Mr Fix-it Gil Olympio, the brilliant son of the first president of Togo, Sylvanus Olympio, who was killed in 1967 in a successful army coup led by Sergeant Gnassingbe Eyadema.

Gil was a graduate of Oxford and London School of Economics and once worked with the International Monetary Fund (IMF).

In Nairobi, Mr Rowland had Mark Too, a complete opposite of Mr Olympio, who would also broker deals from this table — the Lonrho power desk, known for its unending flow of top-notch Chardonnays and expensive steak cuts.

At the back, some managers of Harrison and Sons had an office and they would fly to Nairobi and spend a week at the Lord Delamere Terrace bar — just waiting for Tiny Rowland’s appearance, according to a source familiar with the itinerary.

Actually, Tiny Rowland had not founded Harrison and Sons but had acquired this company, established in 1750, just about the time he was meeting Mark Too, to print currency given its long tradition of printing bank notes and stamps for the British government.

MR FIX-IT

The business of printing currency is cartel-based, cut-throat and a reserve of just a few companies.

While De la Rue had been printing Kenyan currency for ages, it had always managed to outwit its competitors in Kenya — at times by playing diplomatic and commercial politics.

Winning currency printing contracts — often through single-sourcing — is a high-stakes business because it is continuous and lucrative for both the brokers and the shareholders.

By then, Mr Rowland was a well-known corporate raider and his company, Lonrho, was one of the most prominent at the British stock market with the Financial Times describing it as the “symbol of buccaneering capitalism”.

“He tried to look and speak with the affected airs and eccentricities of an arch-type Old Etonian,” Gordon Fischer wrote in his book Fleeting Moments.

At first, Lonrho was looking for a Mr Fix-It in East Africa and poured his troubles on Kenyatta’s colonial-era minister Bruce McKenzie to the Kenyan High Commissioner in London, Mr Ngethe Njoroge.

The Kenyan diplomat had been introduced to Rowland by Zairean diplomat Thomas Kanza, regarded as one of the first Africans to attend the distinguished Louvain University near Brussels.

CONTRACT

Mr Njoroge was a brother to Kenyatta’s Cabinet minister Njoroge Mungai, and was quick to recommend his relative, Udi Gecaga.

A meeting was arranged and the two met in London: “Call me Tiny,” Mr Rowland said as he extended his hand. “Can I call you Udi?”

Udi was only 26 but Mr Rowland had found what he was looking for: a gatekeeper with a foot at State House.

But with Kenyatta’s death in 1978, he had to look for another person, Mark Too, and that is how he would manage to get a chance to print currency through the now defunct Harrison and Sons, which was single-sourced to print Sh20 and Sh50 notes in addition to second generation identity cards.

The Kenyan currency was printed by De La Rue during colonial times, but later it lost the tender to an English company, Bradbury & Wilkinson, after it started printing its own currency in 1966 with the death of the East African currency board.

Although De La Rue would manage to get back this contract, it also bought Bradbury & Wilkinson, its major rival, through an acquisition concluded in 1986. It was one of the many ways to survive as a company — purchasing and killing your rivals.

BIWOTT

The entry of Tiny Rowland and his grabbing of the high-circulation Sh20 and Sh50 notes sent shock waves to the British company, and they decided to do something: They started to plot on how to buy the company from Lonrho, which they did in 1997.

Elsewhere, according to Tiny Rowland’s biographer Mark Bowen, the business mogul had fallen out with Kenya’s Cabinet minister, Nicholas Biwott, now deceased, who demanded some kickbacks.

“The trouble with Biwott is that everyone in Kenya knows that he has collected tens of millions in commissions, but not from us, which is why we didn’t get the sugar or the pipeline, or any other contract for that matter,” Mr Rowland told his own The Observer publication as he launched an incessant attack on Mr Biwott in the British newspaper.

It is now known that Mr Rowland also encouraged other British newspapers to protest about corruption in Kenya — which eventually led to his fall out with Moi and he lost the printing contract.

In 1991, just about the time that Tiny Rowland had started winning some currency tenders, De La Rue was allowed to build a factory at the former Central Bank of Kenya playfield on LR 78784, and was given an EPZ (Export Processing Zone) status — thanks to Hezekiah Oyugi, then a powerful permanent secretary for Internal Security, and Ketan Somaia, the now jailed conman and thief.

This allowed the company to enjoy a 10-year tax holiday and they brought some old machines then stored in Malta, and which had previously been used in New Zealand which had abandoned the making of paper notes for polymer.

OPEN TENDER

Whether this led to the fall out between Tiny Rowland and Somaia is not clear, but historian Charles Hornsby — author of a Kenya: A History since Independence — says that the British businessman wrote to Moi during that period “claiming that Somaia had shown him procurement forms from the Office of the President with spaces for prices left blank, to be filled as he wished”.

By the time Moi was leaving office, De La Rue had managed to get an exclusive 10-year contract signed a few days before Mwai Kibaki was sworn in.

This was the first contract that President Kibaki cancelled after a meeting with his Finance Minister David Mwiraria and Central Bank governor Andrew Mullei in March 2003.

In a letter dated March 13, 2003, Dr Mullei wrote to Mwiraria to confirm the State House agreement: “That De La Rue be informed that a decision has been made to go for open tender for the supply of our notes for the period after December 2004, it being understood that De La Rue will be free to participate in bidding.”

This move, together with the loss of the Land Rover contract for government vehicles, incensed the British government, which eyed Kibaki with suspicion.

The reason the deal was cancelled was because it had been single-sourced and was to become effective on January 1, 2003 after the Narc government came to power.

Mwiraria described this contract, signed by former CBK governor Nahashon Nyaga, as “fishy”.

ANGLO LEASING

Mwiraria had told Dr Mullei in a letter: “There was no reason for the former government to award the contract as early as they did unless there was something fishy.”

The attempt to right the wrongs on currency printing deals backfired so badly as the companies bidding for the tender got entangled in the Anglo Leasing crisis.

In the restricted tendering, some of the companies invited to show interest included French company François-Charles Oberthur Fiduciaire, Germany’s Giesecke & Devrient, Canadian Banknote Company, Britain’s De La Rue, Holland’s Joh Enschede Banknotes, Orell Fussli of Switzerland and Australia’s Note Printing Australia Limited.

But when CBK picked the finalists, it dropped Canadian Banknotes and Note Printing Australia leading to a protest by the Canadian High Commission in Nairobi.

But with the emergence of Anglo Leasing scandal, one of the top bidders, François-Charles Oberthur Fiduciaire, was busy handling the damage done after it was linked to the aborted passport printing saga.

It is a long story … but of interest is that behind the tenders and the fight to control the currency printing is a huge battle won in boardrooms and over coffee. There are many other sideshows, thanks to deal brokers and wire-pullers.

Mr Kamau is the Editor, Investigations and Special Projects. [email protected]; @johnkamau1