Auditor Flags CBK’s Sh14.5 Billion Secret Banknote Printing Deal

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The Office of the Auditor-General has raised procurement compliance concerns over the Sh14.5 Billion Secret Banknote Printing Deal between the Central Bank of Kenya (CBK) and Germany’s Giesecke+Devrient Currency Technologies (G+D).

The classified five-year contract, meant to print and replenish Kenya’s banknotes following the De La Rue exit from the market, was awarded without public disclosure and only came to light during a parliamentary inquiry.

CBK had previously relied on British firm De La Rue for its currency printing needs. But following De La Rue’s exit from the Kenyan market, the central bank turned to G+D, citing the urgent need to prevent a looming currency shortage that could have affected the economy and national security.

Governor Kamau Thugge defended the deal as necessary and confirmed it had received security clearances from the National Security Council and Cabinet.

The details of the Kenya Secret Banknote Printing Deal were disclosed only after sustained pressure from the National Assembly’s Finance Committee during hearings in August 2024.

CBK confirmed that Giesecke+Devrient Currency Technologies (G+D) had been contracted to produce 2.04 billion banknotes across all denominations over five years, solely for the purpose of replacing worn-out currency rather than issuing a new series.

According to Auditor-General Nancy Gathungu, the central bank’s actions contravened several provisions of the Public Procurement and Asset Disposal Regulations (2020). In her report submitted to Parliament, Gathungu concluded that CBK “did not fully comply” with Regulation 84, which governs classified tenders.

Nancy Gathungu audit flagged three major failures:

Inadequate Supplier Assessment

CBK failed to conduct a comprehensive assessment of qualified global currency printers. Regulation 84 requires procuring entities to evaluate competent suppliers even under classified arrangements.

Gathungu noted that CBK did not carry out a global market scan that could have included firms such as France’s Oberthur Fiduciaire, Sweden’s Crane Currency, or Switzerland’s SICPA.

The absence of a documented supplier evaluation process raised questions about whether CBK obtained the most cost-effective and technically competent provider, potentially exposing the country to inflated costs or subpar service delivery.

No Special Classified Procurement Committee Appointed

CBK did not appoint a dedicated classified procurement committee, as required by the procurement law. Instead, the bank relied on its internal procurement team, bypassing a legally mandated oversight body.

Regulation 84 stipulates that classified tenders must be handled by a committee of senior officials with security and procurement expertise.

The omission weakened internal checks, potentially allowing for procedural irregularities and heightening risks of conflict of interest, especially given the no-bid nature of the contract.

Failure to Involve the PPRA

Gathungu’s report also faulted CBK for excluding the Public Procurement Regulatory Authority (PPRA) from the process.

Under Section 9(1)(d) of the Public Procurement and Asset Disposal Act (PPADA), the PPRA Director-General must monitor classified procurements to ensure they comply with legal and ethical standards.

CBK did not notify or involve the regulator, effectively removing an independent layer of oversight over the high-value contract.

The contract’s deliverables include updated notes printed with 2024 as the year of issue, incorporating improved colour-shifting security threads by denomination while retaining the core features of the 2019 banknote design.

The new notes will also feature the signatures of CBK Governor Kamau Thugge and National Treasury Principal Secretary Chris Kiptoo.

While CBK maintains that the deal was approved through proper security channels due to the sensitive nature of currency production, lawmakers have opened a fresh probe into the Sh14.5 Billion Secret Banknote Printing Deal.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.