Economy

The Dark Side Of German Firm Awarded Sh14B CBK Money Tender

Four years prior to competing for the Kenyan tender, the family-owned German company had been caught up in a scandal back at home.

Published

2 months ago

September 27, 2024

Kenya Insights Team

Central Bank of Kenya Governor Kamau Thugge has failed to table contract documents and due diligence reports on the procurement of a German firm to print Kenya’s new bank notes at a cost of Sh14.2 billion.

Dr Thugge on Thursday snubbed a meeting called by the National Assembly’s Finance and National Planning Committee to receive the documents that Dr Thugge promised to make public last month.

The CBK signed a Sh14.2billion ($109,422,740) five-year deal with Germany’s Giesecke+Devrient Currency Technologies GmbH (G+D) to print new notes to replace old ones and also avoid possible stock-outs.

The CBK picked the German firm to print new notes, months after allowing the local subsidiary of British printer De La Rue – in which it owns a 40 percent stake-to shut down for lack of new business.

The committee, chaired by Molo MP Kuria Kimani, has launched an investigation after the CBK revealed that a German firm had been hired to print new notes.

The committee expected to receive the signed contract documents and due diligence reports that the CBK signed with the German currency printer which was picked through classified procurement.

Future date

The CBK boss wrote to the Clerk of the National Assembly on September 23, 2024 seeking postponement of the meeting on grounds that he will be engaged in the bi-monthly meeting of the Monetary Policy Committee (MPC) technical meetings.

Dr Thugge had earlier told the committee that the German firm was picked through a classified procurement amid risks of a stock- out of bank notes which would have had grave economic and security implications for the country.

The new German printer took over the multi-billion shilling currency printing contract after De La Rue Kenya EPZ Limited, a banknote printer in which Kenya bought a 40 percent stake for £5 million (Sh820.5 million) in 2019, closed its Nairobi plant and ceased operations 19 months ago.

Giesecke & Devrient

Giesecke & Devrient eventually bagged the Kenyan currency tender this year after losing another lucrative tender to De La Rue rival in 2006.

CBK had floated an open tender in January 2005 for the printing of 1.71 billion pieces of bank notes. The tender attracted five bidders — Giesecke & Devrient, De La Rue, Orell Fussli (Switzerland), Francois Chades Oberthur Fiduciaire (France) and Job Enschede Banknotes (Holland).

However, the entire tender was cancelled on June 6, 2005 due to various anomalies and fresh tendering carried out. De La Rue bagged the contract on May 4, 2006 at a total cost of $51,195,840. The only other firm to get to the final stage of the tender was Giesecke & Devrient, which quoted $76,331,500.

The Dark Past

Four years prior to competing for the Kenyan tender, the family-owned German company had been caught up in a scandal back at home.

In January 2002, millions of 100 euro notes that had been produced by the company were shredded due to a misprint.

According to the BBC, the company misprinted a security feature designed to stop forgers from using photocopiers to make fakes of the new currency.

“The fault was spotted only after Giesecke & Devrient had delivered 325 million of the 100 euro notes to Germany’s central bank, the Bundesbank,” the BBC reported.

According to the publication, the issue was not a design flaw, but a mistake by the printers. Euro notes produced by other printing plants across the eurozone were not affected.

In 2008, the Munich-based company stopped supplying banknote paper to the Reserve Bank of Zimbabwe following pressure from the German government, which demanded that it stops working with the country then led by President Robert Mugabe.

At the time the company had been criticised for supplying bank notes to Zimbabwe and basically making Mugabe’s hyperinflationary economic practices possible. It is then that the company stopped shipments of notes to the country.

Apart from Germany, the United Nations and European Union had also cautioned the company from working with Mugabe.

In an official communication, the company said that it was subject to strict rules that are defined by the World Bank in delivering banknotes and paper, and it was continuously relying on the political and moral assessment provided by the international trade regulators.

“Our decision is a reaction to the political tension in Zimbabwe, which is mounting significantly rather than easing as expected, and takes account of the critical evaluation by the international community, German government and general public,” Karsten Ottenberg, the chairman of the company’s management board and CEO, said.

Earlier, in 1995, the money printing firm had been accused of inflating the price of its banknotes by making a dye (used in printing ink) 70 per cent more expensive than the normal price.

Trade Practices said that it all started when a partner company in Switzerland bought the dye from Giesecke & Devrient, raised its price and then sold it back to the German firm, which saw the price rise even higher.

Giesecke & Devrient was started in June 1, 1852 by 21-year-old Hermann F. Giesecke and Alphonse Devrient, 31. On its website, the company says that it was started in Leipzig and within a short time the partners had made it big as it became a leading money printer.

It states that some of the groundbreaking inventions that saw it go up the ladder include anti-counterfeiting and printing technology.

The firm has different divisions that handle banknotes, smart cards, cash handling systems, identification systems, securities printing and e-payment systems.

When it was started, the company handled half of Germany’s currency production from 1958. In 1991, the firm produced the first SIM card. To date it also produce chip passports and smart cards.

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