Now AG office blocks De La Rue currency deal

The Office of the Attorney General has blocked De La Rue plc of the United Kingdom from concluding a controversial joint venture deal in which the Kenya government is to purchase a 40 per cent share in the British company’s local subsidiary in exchange for a 10-year exclusive currency printing contract with the Central Bank of Kenya.

The proposed joint venture is a high-stakes affair — in part because the deal is believed to have powerful supporters in the corridors of power, and also because of the sheer size of the banknote printing contract in Kenya.

For instance, between May 2006 and October 2010, Kenya ordered 900 million bank notes from De La Rue’s local plant — all in the form of short-term contracts awarded without competitive bidding.

De La Rue’s prices varied according to specific bank notes, the most of expensive being the Ksh1,000 note printed at a price of $53.7 per 1,000 notes.

Approved by the Cabinet last year, the proposed joint venture has elicited widespread opposition from civil society and parliament, with critics charging that it is a ploy to allow the British currency printer to lock out its competitors from participating in banknote printing contracts in Kenya.

The latest prominent voice to speak out against the deal is that of former governor of the Central Bank of Kenya, Micah Cheserem, who last month, argued that Kenya’s interests would be served better if the country purchased bank notes through international competitive bidding.

But such has been the support for the deal with the corridors of power that despite loud opposition from parliament and notwithstanding the fact that two legal suits by members of civil society challenging the transaction are pending in the High Court of Kenya, De La Rue and the Treasury have been pressing ahead, quietly working on formally sealing the deal.

By late December 2011, the negotiating teams had drafted all the necessary agreements, copies of which were then sent to the Office of the Attorney General for scrutiny and approval.

The manner in which the Office of the Attorney handled the draft agreements was not without drama.

In a case of one hand not knowing what the other was doing, Deputy Solicitor General Dorcas Achapa, passed the agreement, signalling that the Office of the Attorney General had scrutinised the agreements and approved them, thus giving the Treasury the go-ahead to consummate the deal with De La Rue. Achapa’s letter to the Treasury was dated December 21.

The ink on that letter had not dried when the following day, another officer from the Office of the Attorney General fired off a letter directing the Treasury to hold the signing of the agreements in abeyance until after the outcome of the court cases.

“This will avoid the government being seen as acting with impunity and (being) disrespectful of the court process,” said the letter signed by Senior Deputy Solicitor General Muthoni Likimani.

Four separate agreements must be signed by the parties before the deal can be consummated: A joint venture agreement; a business transfer agreement; a share sale and purchase agreement; and a shareholders agreement.

The two cases pending before the High Court of Kenya claim breach of the right of access to information and the lack of public participation in the process.

While it remains to be seen how the saga will play out, the secretive De La Rue is likely to find itself permanently under public scrutiny.
According to the Cabinet paper that approved the deal, the government was supposed to pay $7.8 million for the 40 per cent stake in De La Rue’s local subsidiary.