RE: ANOTHER ANGLO-LEASING IN THE OFFING

George Rono wrote:

We need answers on CBK contract change

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Published on November 28, 2007, 12:00 am

Last week we judged it a matter of public interest to report that Finance Minister Mr Amos Kimunya had cancelled an existing three-year cash printing contract the Government had entered into last year with De La Rue.

We also judged it important enough and in the public interest to reveal that the minister had given the go-ahead for the Central Bank of Kenya (CBK) to enter a joint venture transaction incorporating a long-term banknotes supply arrangement with De La Rue and Security Print Ltd.

Kimunya has been uncharacteristically quiet on this matter and even the CBK Governor only touched on it fleetingly. Even then he maintained that the bank has honoured its contracts with De La Rue and the planned joint venture would not affect its relationship with the firm.

In our view, the matter is not as simple us saying that the cancellation of the contract counts for nothing because CBK has honoured its obligations with De La Rue. Again, in our view the issue is not whether the joint venture will or will not affect the relationship between CBK and De La Rue.

Our concern is what the cancellation of the contract means for the taxpayer and what it means for the CBK to enter into a cash printing venture. It is towards understanding these situations attendant to the cancellation of the contract that we wish to pose several questions to the minister and the CBK.

The New Generation banknotes contract was signed on May 4 last year and the joint venture was approved on May 29. What actually happened between these two dates as to invalidate the earlier contract, which was arrived at through a competitive bidding and validate the joint venture, which did not lend itself to a similar process?

Taxpayer to fork out more

Is it true, as Ministry of Finance sources confide, that the New Generation currency would have been cheaper by Sh1.33 per note but that under the new arrangement the taxpayer will now have to fork up an extra Sh2.2 billion to print the same 1,710 billion pieces locally?

Is it also true that to cover the gap in its stocks, since the contract stands cancelled CBK will order some 390 million pieces over two years and pay more than Sh518.7 million over and above the new price?

Our information, which we believe to be right, is that CBK made a 50 per cent advance payment of Sh2 billion for the new currency in May last year which money De La Rue continues to hold.

We also are informed by Ministry of Finance sources that CBK made a further payment of Sh561 million for an interim order of some 164.05 million pieces to cover currency supply requirements for up to next January.

Does this not mean that until the joint venture is finalised the CBK remains hostage to De La Rue? Who, may we ask, will be the owners of the 75 per cent shareholding in this joint venture? Can we completely rule out the possibility of the shareholders being individuals in Government?

Is it usual or best practice for central banks to engage in the business of printing currency? Does this not deviate from the CBK’s core mandate of managing monetary policy and being the Government’s banker?

Kimunya and CBK need to publicly assure the taxpayer that in this regard the proposed 25 per cent shareholding of the CBK would not amount to a convenient conduit for sustained siphoning of public funds through exclusive escalated printing costs without any need for competitive tendering.