, NAIROBI, Kenya, Apr 17 – Cabinet Minister Amos Kimunya has said a string of contributing factors led to the controversial cancellation of a 2006 currency printing contract with UK printing firm De La Rue.
The one-time Finance Minister who appeared before the Public Accounts Committee (PAC) on Tuesday said the 2006 contract that entailed the production of 1.7 billion pieces of currency was a disaster from the word go.
“When we came in as a Narc government there was a feeling that everything done by KANU must be done away with… and that contract suffered that issue and it had to be restarted,” he said.
Issues surrounding the delivery date, transportation and storage of the currency meant to be produced in the contract raised queries, with the then Finance Minister who questioned its logic.
On average, the Treasury would require 400 million pieces of currency annually, which Kimunya reasoned was no need for an additional 1.7 billion pieces of currency to be pumped into the market for three years.
As explained by the Central Bank of Kenya (CBK) at the time, the currency still in circulation had to be replaced for the three years of the contract, hence the doubling of the amount of notes needed.
“I started getting deeper into what this contract is and why we are paying 50 percent upfront. We are paying $25 million upfront for money to be delivered in the next year. What kind of contract did we get ourselves into?”Kimunya recounted probing CBK on the contract in 2006.
He added that the fact that the contract was least-cost driven was simply not enough to give the go-ahead to produce new generation currency, especially taking into account that the country was facing an election year, posing political risks.
After consulting President Mwai Kibaki on the feasibility of such a deal during the campaign season – which the president termed irresponsible – Kimunya approached the CBK on freezing the contract.
“I went and told Central Bank that we’ve consulted as a government and we must agree that there cannot be any new currency brought into this country before January of 2008 to mitigate the political risks,” he told Parliament’s Public Accounts Committee.
The chairman of PAC Boni Khalwale challenged the move to forbid the entry of money into the country during an election year, arguing that there was no such rule permitting such action.
Kimunya, who joined the Treasury in February 2006, responded that it was not worth the risk of fraudsters taking advantage of new currency, which then informed the postponement of the currency delivery dates to immediately after elections.
In addition, Kimunya said the CBK then under acting Governor Jacinta Mwatela, failed to alert banks on the changes that would come about as a result of the new generation currency that would require reconfiguration of ATMs and notifying the public in sufficient time.
The threat of De La Rue closing down its Ruaraka-based factory in the absence of the contract, pushed the government to look at alternatives to achieve competitive costs internally to print the money, leading to the proposal of a joint venture with the British printing firm.
The joint venture talks for the government to acquire a stake in De La Rue subsequently deemed the new generation currency contract as null and void as it had been overtaken by events.
Kimunya added that the delay in getting the signatures from then acting governor Mwatela to De La Rue in time for production also led to the cancellation of the contract as it was overhauled by the joint venture negotiations.
“The rush to comply with a deadline of May (2007) became overtaken by events and hence that issue of signatures never became an issue except by one person (Mwatela) who kept saying ‘I need my signature on this money. I am the acting governor,” he revealed.
On September 24, 2007 Kimunya advised the CBK that the Cabinet approved a joint venture and that they were to provide technical support on the negotiations.
“On the 1st of November 2007 following discussion on the joint venture I notified the bank that the contract stood cancelled and I advised them to liaise with De La Rue to print any stop gap measures in accordance with the previous interim measures,” he said.
Khalwale said it was those very stop gap measures directed by Kimunya that caused taxpayers to foot an almost Sh3 billion bill, which Kimunya refuted saying the decision instead saved Kenyans money.
“Governor of the CBK tabulated the cost of the interim orders we have been making to date. We are not imagining evidence so you cannot declare to the public that the taxpayer saved money. Saved where?” Khalwale retorted.
Kimunya said it was a matter of being ‘penny wise and pound foolish’ in what it would cost taxpayers over the six year period for the twin three year contracts.
“Penny wise you look at per piece; it cost us so much per piece, but if you look at the bigger picture, to service currency for a three year period it was going to cost the country $51 million. For the second three years it was going to cost another $51 million minimum,” he said.
After an intense four and a half hour grilling, Khalwale observed that the Minister was micromanaging the CBK throughout the deal.
Kimunya said it was unfortunate that the decision meant to safeguard jobs, costs and security of currency for the country into the future had been politicised and turned to appear as a well laid-out plan of personal interest.