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Uganda: Mutebile, Government Disagree Over Printing Bank Notes

bycitibusinessnews
December 23, 2016
in Africa, East Africa, Top Stories
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A multi-billion currency printing deal to a German firm has put President Museveni, Finance minister Matia Kasaija and other senior government officials against Central Bank Governor, Emmanuel Tumusiime-Mutebile.

Daily Monitor investigations suggest that the Governor is opposed to the deal and has listed the dangers of printing the money in Uganda.

Although the President, Mr Kasaija and Attorney General William Byaruhanga want the currency printed in Uganda so as to cut costs, Mr Mutebile reportedly warned that establishing a currency printing factory in Uganda would plunge the country into problems. Such a factory will be “questionable”, he says.

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In a November 2 letter to Mr Kasaija, the Governor said printing money in Uganda might compromise the security of the country’s currency as a result of “incidents of leakages of printing material or knowledge to counterfeiters.”

According to sources, the joint venture between Uganda Printing and Publishing Corporation and a German firm, Veridos Identity Solutions GMBH, signed on June 11, was negotiated amid tacit objections from technocrats in the Ministry of Finance. De La Rue plc, a banknote printing, security printing and papermaking company with headquarters in Basingstoke, Hampshire, England, which has printed Uganda’s currency for the last 50 years also voiced its objections.

The Bank of Uganda only came into the picture after the Attorney General cited Article 161 of the 1995 Constitution and Section 20 of the Bank of Uganda Act Cap 51 in a State House meeting of October 7. Mr Byaruhanga insisted that BoU should be informed about the proposed joint venture deal. It was then agreed in that meeting that the AG writes to Finance minister, who would in turn write to the Governor to “update” him on President Museveni’s directive and also seek his guidance on the way forward, regarding currency printing. In his response, the Governor and other senior officials in the Ministry of Finance, however, questioned the capacity of Veridos Identity Solutions GMBH which reportedly landed this lucrative contract without the due diligence and advertising.

“With specific reference to the company mentioned in the joint venture, kindly note that Veridos Identity Solutions are not a known banknote/currency printing company and from the publically available information, this company specialises in identity solutions like passport and national identity cards.”

While the Governor rejected the proposal, Mr Kasaija, in a letter dated October 20 had made it clear to him that “His Excellency, the President guided that Veridos Identity Solutions (GMBH) should also be tasked to print currency in the country” and that the company had confirmed that it will be in position to print currency in the country.

However, Mr Mutebile insisted that the current suppliers of the country’s banknotes have extensive experience and capacity and are economically sound and reputable. He also warned those peddling the money printing deal that “Banknote printing is a very specialised activity that is complex, with high quality and security sensitivity which a handful of reputable currency printers undertake in the world.”

No ordinary activity

Daily Monitor couldn’t speak to the Governor, but when contacted yesterday, the Bank’s acting communications director, Mr Kelvin Kizito Kiyingi, declined to comment on the matter and promised to get back to Daily Monitor as soon he is in position to comment.

When contacted last evening to explain how government is going to proceed with the deal, Mr Byaruhanga did not answer our call.

About the company

According to www.veridos.com, Veridos Identity Solutions GMBH’s scope of work is hinged on creating, “secure and pioneering identification and identity solutions.” The joint venture between Giesecke and Devrient GmbH “pools the specialist expertise, the many years of experience and innovative power of the two largest German providers for high security technologies to serve the international market.” The company also claims to cover the entire value chain for passports and prides itself as a reliable partner valued by governments and public authorities throughout the world.

The Governor also indicated that “This activity involves the use of highly specialised materials that range from paper and inks, embedded with various security features that are extremely restricted and heavily patented”, adding that “the public’s confidence and acceptance of banknotes ranges from, among others, the quality, reliability of the security features, availability, and low level of counterfeits.”

Mr Mutebile cited the World Bank figures, showing that most countries do not have currency printing factories and have instead opted to directly contract specific reputable private currency printing companies which operate in a complete secrecy.

And in disabusing the notion that the new joint venture would help Uganda cut costs, Mr Mutebile explained that even the few Central Banks and governments that have set up currency printing factories to tap into benefits such as increased employment, reduced cost of currency, regional hub for countries without such a factory, and use of local materials and services have faced numerous challenges.

For Uganda’s case, Mr Mutebile argues, the reduction in bank notes demand occasioned by mobile money and online banking cast doubt on the viability of the project.

He also cites extremely costly labour to start up, lack of economies of scale to make the plant viable (usually break-even is a billion bank notes a year), lapses in security causing leakages of printing materials or counterfeits, specialised materials like paper (substrate) and ink not available in Uganda.

“Currently the annual volume of the banknotes bought by BoU is not sufficient to make a bank note printing plant economically viable. Taking into account the BoU current cost of currency, the cost of operating a bank note printing plant would most likely go beyond BoU’s current cost of currency,” he argues.

Cost cutting measure

In the meeting with the Attorney General, Mr Museveni reportedly spoke about what he is said to have indicated were colossal sums spent on printing bank notes.

Ministry of Finance spokesman Jim Mugunga yesterday said he was not privy to the correspondences between Mr Kasaija and Mr Mutebile. He, however, explained that the Uganda Printing and Publishing Corporation to be taken over by the German firm, is a company supervised by ministry of Finance through the Privatisation Unit and that it’s up for divestiture.

According to State House sources, when De La Rue managers petitioned the President, the company was told to go back and see how they could work with the German firm. Later, they returned and informed the President that it was not possible to work with Veridos Identity Solutions (GMBH).

Another source with knowledge of the printing deal told Daily Monitor that another German firm, Muhlbauer High Tech International which took the national ID project deal, later came into the picture and insisted that they could also print money. However, it’s not yet clear whether any discussions have evolved on their bid.

Further details from the closed-door meetings at State House show that Mr Byaruhanga and President Museveni had agreed to actualise the vision of a domestic bank notes printing plant; a certified guarantee from Giesecke and Devrient GmbH and Bundesdrukeri GmbH, indicating that they will finance the joint venture, formal commitment from Veridos Identity Solutions GMBH expressing their ability to print the currency notes in Uganda and a comprehensive business plan for the envisaged projects under the proposed joint venture.

The BoU chief also asserts that with the current rapid growth in non-cash payments and the conversion of cash payments into electronic payments, “the future economic viability of a bank note currency printing plant in Uganda could be questionable.”

In East Africa, Kenya has a currency printing plant but, “due to concerns of possible security and knowledge leakages of bank note printing none of the countries within the region permits printing of their currency at this plant. Kenya recently requested for quotes from private printers for the printing of their bank notes despite a plant at home,” Mr Mutebile wrote to cement his opposition to the proposed project.

Mr Museveni, his Finance minister and the AG are yet to reply Mr Mutebile’s letter.

Daily Monitor couldn’t speak to the Governor, but when contacted yesterday, the Bank’s acting communications director, Mr Kelvin Kizito Kiyingi, declined to comment on the matter and promised to get back to Daily Monitor as soon he is in position to comment.

When contacted last evening to explain how government is going to proceed with the deal, Mr Byaruhanga did not answer our call.

About the company

According to www.veridos.com, Veridos Identity Solutions GMBH’s scope of work is hinged on creating, “secure and pioneering identification and identity solutions.” The joint venture between Giesecke and Devrient GmbH “pools the specialist expertise, the many years of experience and innovative power of the two largest German providers for high security technologies to serve the international market.” The company also claims to cover the entire value chain for passports and prides itself as a reliable partner valued by governments and public authorities throughout the world.

–

Credit: All Africa

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