Kenya: De La Rue gets another currency deal without rival bids

kenya_banknotesThe government has quietly decided to grant the local subsidiary of the UK currency printing firm, De La Rue, a massive contract through single-sourcing. Under the deal, the UK company is to print a total of 450 million banknotes in different denominations at a contract value of about $20 million (Sh1.6 billion).

The contract will run until August 2010.

Well-placed sources told the Sunday Nation that the decision to grant the huge order to the UK company was made at a recent meeting of the Cabinet Committee on Finance, Administration and Planning, which is chaired by the Prime Minister.

The committees secretary, Dr Mohammed Isahakia, is understood to have delivered the decision by the committee to the Treasury and the Central Bank.

On the face of it, the reasoning behind the decision to circumvent competitive tendering in the award of this large contract makes a great deal of sense.

The reasoning is that since the Treasury and De La Rue are still in the middle of negotiating the purchase by the government of a 40 per cent stake in the local subsidiary, it does not make sense to procure a long-term printing contract through competitive bidding.

The joint venture deal, which was approved by the Cabinet in May 2007, has been under negotiation for more than two years.

But any keen follower of the shenanigans surrounding the currency contract since then Finance minister David Mwiraria cancelled the last long-term contract with De La Rue in 2005 and proceeded to float and negotiate a new $51 million contract for new generation notes in May 2006, will have seen how the government has been tying itself in knots over the controversial agreement at every stage of the deal.

Though the Central Bank went to the extent of paying a $25 million deposit on the second generation contract, the competitively procured agreement never saw the light of day.

As far back as November 2007, a committee of the Central Bank, chaired by then Deputy Governor, Jacinta Mwatela, had warned that the joint venture with De La Rue would only serve the companys interests not only by killing the cheaper second generation contract which the government had successfully negotiated and signed but also allowing De La Rue to corner future contracts.

It is not clear why the joint venture has to bind Kenya to continue with the existing generation banknotes which are more expensive compared to the new generation banknotes, the committee had said in a memo signed by the then bank secretary J.M. Gikonyo.

Sunday Nation

Post published in: Economy

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