In a revealing report submitted to Parliament on August 21, 2024, the Central Bank of Kenya (CBK) disclosed the severity of the financial predicament that had loomed over the country—a potential “stockout” of KES 1000 banknotes that could have disrupted Kenya’s financial system. This crisis followed the unexpected closure of the De La Rue plant in Ruaraka, which had been the primary producer of Kenya’s banknotes for decades. The report laid bare the vulnerabilities in the country’s currency production infrastructure and the steps taken to prevent a catastrophe.
For over 60 years, De La Rue (DLR) and its predecessors had held a near-monopoly on the printing of Kenyan banknotes, solidifying their presence with a local plant established in Nairobi in 1992. Kenya’s dependence on DLR for its currency supply had never been seriously challenged until the abrupt end of the 2019-series banknote contract in January 2023, which coincided with DLR’s decision to exit the Kenyan market. The exit triggered an urgent need for a new supplier, creating a potential currency supply crisis that required immediate action.
The immediate threat was dire. A potential shortage of KES 1000 notes—the denomination most widely used in large financial transactions—risked creating a liquidity crunch in the economy. With De La Rue gone and no other supplier lined up, Kenya was on the brink of a financial catastrophe. The CBK highlighted that a shortage of currency would have disrupted everyday transactions, from paying for groceries to larger business operations, paralyzing the economy.
To avert this crisis, CBK had to act fast, initiating an emergency procurement process. Currency printing is considered a matter of national security, and in Kenya’s case, the gravity of the situation led CBK to seek approval from the National Treasury for a classified procurement procedure. Classified procurement was seen as the most viable solution, given the urgency and security considerations involved in currency production. Kenya’s Cabinet and the National Security Council approved the move, acknowledging that the situation warranted swift and confidential action.
A new supplier was needed, and quickly. Through a confidential and classified procurement process, the CBK identified Giesecke+Devrient Currency Technologies GmbH (G+D), a German firm with an established global reputation in banknote production. G+D was deemed the best candidate to step in and fill the void left by De La Rue. The contract, valued at €103.2 million, was critical in ensuring the uninterrupted supply of banknotes to Kenya. The Attorney General reviewed and cleared the contract, which adhered to the stringent requirements of the Public Procurement and Asset Disposal Act (PPADA).
The rapid transition to G+D ensured that Kenya averted a major disruption to its financial system. However, the situation brought to light how deeply Kenya’s currency production was intertwined with national security. The supply of banknotes is not merely a logistical matter; it is central to economic stability and trust in the country’s financial system. A stockout of KES 1000 notes could have rippled through all sectors of the economy, creating widespread disruption in commerce, financial markets, and public confidence.
The crisis also underscored Kenya’s dependency on foreign suppliers for critical aspects of its financial infrastructure. De La Rue’s exit from Kenya exposed the risks of over-reliance on a single supplier, prompting calls for diversification in the country’s currency production strategy. While the swift action by CBK averted disaster, the experience served as a wake-up call for the Kenyan government and financial institutions to build more resilient systems for currency management.
By engaging G+D, CBK not only ensured that Kenya’s immediate banknote needs were met but also gained an opportunity to strengthen the long-term security of the currency supply chain. G+D’s technology and expertise positioned Kenya to be better prepared for future challenges in banknote production. However, this strategic shift also came at a significant financial cost, raising concerns about how the country might manage similar crises in the future.
Kenya’s successful transition to G+D serves as an important case study in how critical financial operations must be closely monitored and managed. The CBK’s ability to secure classified procurement approval and engage a new supplier in a compressed timeframe demonstrated the central bank’s agility and the importance of maintaining solid relationships with global financial service providers. With the continued oversight of Parliament and the National Treasury, Kenya’s currency supply chain remains stable for now.
As CBK concluded its report to Parliament, it became clear that the issue of currency stockouts had broader implications than previously imagined. The risk of a supply shortage extended beyond economic inconvenience to affect national security, social stability, and the perception of government competence. The Kenyan experience highlighted the delicate balance between operational efficiency, security, and contingency planning in national financial systems.
In conclusion, Kenya’s quick response to the impending currency crisis allowed it to avoid a major financial and social disruption. The lesson learned from this near-crisis is the importance of developing a robust, diverse, and secure currency production infrastructure. Moving forward, Kenya must continue to ensure that its financial systems are fortified against external shocks, leveraging technology and international partnerships to protect the country’s economic sovereignty.
Kenya’s journey through this potential crisis illustrates the intricate interdependence of national security and financial management, showing how critical the supply of banknotes is to maintaining public trust and economic stability.
