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Fresh queries over Treasury’s Sh300m De La Rue cash

The Treasury has inflated by more than Sh160 million the amount of money set aside for the purchase of a 40 per cent stake in Nairobi-based currency and security printer De La Rue, raising fresh questions over the exact pricing of the joint venture with the UK firm.

Budget documents that the Treasury has submitted to Parliament show that the venture has been allocated an additional Sh300 million in the next financial year – a move that if pushed through will put the price of the total transaction at Sh800 million (6.25 million pounds).

The Treasury had earlier priced the deal at Sh640 million (five million pounds), meaning the total allocation would be Sh160 million or 1.25 million pounds more at the current exchange rate of Sh128 to the pound.

READ: Treasury gets Cabinet nod to cut off MPs in bid for De La Rue stake

The Sh300 million that the Treasury plans to set aside for the venture in next year’s budget is the second allocation that will top up the Sh500 million allocated for the joint venture in the current (2016/17) budget. 

Official documents submitted to the National Assembly Committee on Finance, Planning and Trade show that the Treasury has earmarked Sh300 million in the next financial year for purposes of “buying a 40 per cent ownership in De La Rue.”

READ: De La Rue in fresh push for currency printing contract

The Treasury two years ago signed an agreement to start a joint venture that would see it acquire a 40 per cent interest in De La Rue’s wholly owned Kenya subsidiary for five million pounds.

The transaction was to be completed by end of this year and De La Rue would continue operating and managing the business.

Treasury Secretary Henry Rotich and Principal Secretary Kamau Thugge insisted there has been no cost inflation in the transaction and that it would cost five million pounds as earlier indicated.

“The cost is five million sterling pounds. What is in the current financial year 2016/17 is Sh500 million, being part payment of the five million pounds,” Mr Rotich said, adding that the 2017/18 budget was still under preparation.

Dr Thugge also denied that the Treasury had allocated Sh800 million for the purchase of a stake in De La Rue, insisting nothing had changed in the original pricing.

“The price is five million pounds. The provision in the current budget is Sh500 million, balance yet to be provided,” he said in an SMS response to questions on the matter.

‘Equity acquisition’

Dr Thugge, however, did not explain the Sh300 million in the budget documents he submitted to Parliament for the 2017/18 financial year. The money is provided for in the Treasury’s budget vote head titled ‘Equity Acquisition in De La Rue’.

The Finance, Planning and Trade committee chairman, Benjamin Lang’at, could also not explain the huge allocation but defended the Treasury on grounds that the figures before his team are estimates.

De La Rue said in an August 12, 2016 press statement that Martin Sutherland, its chief executive officer, had endorsed the joint venture as securing the firm’s position as a “supply hub of currency and security solutions for the largest economy in East Africa and ensuring a continuing and stable supply of technically advanced currency.”

The De La Rue facility in Nairobi will become one of three manufacturing centres of excellence for bank note and security printing.

“These centres of excellence will share up to 15 million pounds of investment over the next two years,” Mr Sutherland said, adding that the Kenya facility will produce for both domestic and export markets. It directly employs 290 people locally.

The Nairobi factory comes with the capacity to produce one billion bank notes a year and has the potential to increase output by 50 per cent with the installation of new equipment.

Kenya is the only African country with a De La Rue factory. The UK firm has similar facilities in Malta, Sri Lanka and the United Kingdom.

De La Rue has printed Kenya’s bank notes since 1963 and has had a factory in Nairobi since 1994. The company sells high security paper and printing technology to more than 140 countries.

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