De La Rue Eliminates 300 Nairobi Jobs, Appeals Sh1 bn KRA Ruling

Following the suspension of operations in Kenya due to poor business, banknote printer De La Rue is laying off over 300 staff members as the international company gears up for a new legal battle to reverse the Sh1.1 billion ruling in the taxman’s favors.

The final group of employees will be let go by March by the international company that manufactures Kenyan currency through a local joint venture that is 40% owned by the Kenyan government.

Due to low market demand, the company stated that it does not anticipate receiving any banknote printing orders from the Central Bank of Kenya (CBK).

While Kenya has had difficulty retaining and luring multinational manufacturers, technology companies and financial service providers looking for a base for a larger piece of the African market have recently found it irresistible.

Global IT giants like Microsoft, Alphabet Inc., and Facebook have been boosting their investment in Kenya in recent years to take advantage of the country’s expanding economies and young population’s increasing Internet connection rates.

However, businesspeople, particularly multinationals, are always looking for cheap production sites, much like they do with tax havens. As a result of this trend, Kenya has lost companies like Schneider Electric, Colgate Palmolive, and Reckitt Benckiser.

The Business Daily was informed by many former employees of De La Rue Kenya that the banknote printer has been cutting positions since mid-last year.

The workers said that in July, 60 of their contract-based co-workers were let go. In September, 72 additional workers on long-term contracts were let go.

“Government is not printing any new notes now. Those of us who were dealing with notes left. The last order of banknotes they (De La Rue) got was up to September 2022,” said one of the workers who sought anonymity.

Late in 2018, Kenya decided to stop printing people’s faces on its currency, and De La Rue was awarded an £85 million (Sh13 billion) contract to design and produce the new generation of notes.

According to the sources, the company will let go of another group of employees before the end of January.

By the end of March, the final set of employees will depart, primarily from the authentication section and management.

“By end of this month, around 15 will be left. We were told the government does not need banknotes now. The issue of technology is also affecting us because, with mobile banking, the demand for security documents has dropped,” said another worker.

The company’s authentication section offers a variety of tangible and digital products, including bank cards, checks, and tax stamps.

The impact of slow business was shown by De La Rue’s results for the six months ended September 2022, which revealed that Kenyan unit profits fell by 58 percent from £1.2 million (Sh184.5 million) to £0.5 million (Sh76.9 million) on lower revenue.

Additionally, the profit for the entire fiscal year ended in March 2022 fell from £3.1 million (Sh476.6 million) to £2.2 million (Sh338.3 million).

The cost of producing money, which includes ordering, printing, minting, freight, insurance, and handling fees, reached Sh2.39 billion in the fiscal year that ended in June 2022 compared to Sh2.09 billion the year before, according to CBK reports.

Just a week after De La Rue was ordered to pay the Kenya Revenue Authority (KRA) Sh1.1 billion in respect to earnings received between 2013 and 2017, the company’s operations were frozen.

In an effort to protect its profits, the company claims it would ask the Court of Appeal to reject the KRA claim.

“De La Rue is disappointed with the ruling and its Kenyan subsidiary is preparing an appeal to the Court of Appeal,” said the firm.

De La Rue will only have three banknote locations left with the freezing of Kenyan operations, down from four at the start of the year and five in 2020. This highlights the falling need for banknotes around the world as digital transactions take off.

De La Rue has operated in Kenya for more than 25 years, from which it also services Tanzania, Uganda, Zambia, and Rwanda, among other areas.

In the hopes of restarting operations, the UK-based company would aim to seek alternative commercial options within the nation and the region while keeping the Kenyan branch operational.

“The company continues to explore further business opportunities, both in Kenya and for export from Kenya, with a view to restarting production if the economic climate permits,” De La Rue said.