How CBK awarded Sh14.5bn currency printing deal in secrecy

By Newsflash Team

The Central Bank of Kenya (CBK) is under scrutiny for awarding a Sh14.5 billion tender to a German firm for printing banknotes without notifying the country’s procurement watchdog, raising fresh concerns over transparency, pricing, and the contractor selection process.

The Auditor-General has flagged the CBK for failing to involve the Public Procurement Regulatory Authority (PPRA) in the awarding of the contract, which was treated as a classified procurement. This lack of oversight violates the law, which requires the regulator to be engaged in all secret state tenders.

In April last year, CBK handed Germany’s Giesecke+Devrient Currency Technologies GmbH (G+D) a Sh14.5 billion ($109,422,740) five-year contract to produce new currency, replacing the UK-based De La Rue, which had printed Kenya’s money for years.

Regulations require that the PPRA oversee all steps in classified procurements to avoid manipulation, insider arrangements, and inflated pricing due to lack of competition. The watchdog is supposed to advise the Treasury before such contracts are finalized.

CBK defended its choice by citing urgency, saying the country faced a potential shortage of banknotes, which could have triggered serious economic and security risks, justifying the use of a classified procurement process.

Auditor faults procurement process

Under Kenyan law, the procurement authority, Treasury, and Cabinet must be involved in confidential tenders. But the Auditor-General says CBK bypassed these requirements.

“An audit of the procurement revealed that the internal steps before awarding the contract were not followed in line with Regulation 84 of the Public Procurement and Asset Disposal Regulations, 2020,” Auditor-General Nancy Gathungu stated.

She pointed out that there was no proper identification or evaluation of suppliers, no formation of a special procurement committee, and no monitoring by the PPRA’s Director-General.

Neither CBK nor the Treasury issued any formal responses when approached for clarification.

The German company is expected to print 2.04 billion banknotes in five years to replace old or damaged ones. At the moment, about 330 billion notes are estimated to be in circulation.

It was only after pressure from the National Assembly’s Finance and Planning Committee that CBK Governor Kamau Thugge disclosed the name of the firm and the total cost to the public.

Classified tenders under spotlight

Regulation 84, based on Section 9 of the Public Procurement and Asset Disposal Act, 2015, gives PPRA the authority to supervise classified procurement and make proposals to the Treasury CS.

“The Authority’s role includes overseeing classified procurement, including those from security organs, and offering advice to the Cabinet Secretary,” the law reads.

Though not explicitly detailed, PPRA’s advice can include assessing whether a selected supplier is suitable, if the pricing is fair, and whether the quality of items meets required standards.

Additionally, the regulations require the PPRA’s Director-General to collaborate with the Treasury to access the list of classified items or services.

CBK was obligated to submit the list of items to be procured, along with reasons for using the classified method, to the Treasury for review.

“If a public officer handles classified items under section 90(2) and (5), they must present a list of those items to the CS by July 30 each year. This should include reasons for classified procurement and projected costs for each item,” the regulation adds.

A detailed report on supplier selection must accompany the list to the Treasury, which must then forward it to Cabinet for approval.

“All secret procurements must be monitored by PPRA as required under Section 9(1)(d) of the Act. The Director-General must work with the CS to get access to the procurement list,” the law stipulates.

The new notes will carry the signatures of CBK Governor Dr. Kamau Thugge and Treasury PS Dr. Chris Kiptoo. The 2024 series will include updated security features like color-shifting threads unique to each denomination, though other elements will remain similar to the 2019 series.