Business outlets rejecting old Sh1000-notes ahead of Monday deadline

Business outlets rejecting old Sh1000-notes ahead of Monday deadline

September 29, 2019 0 By mykenyancareers
NOTES NEW GENERATION - Business outlets rejecting old Sh1000-notes ahead of Monday deadline
The old Sh1000-note will cease to be legal tender by Oct 1. COURTESY/CBK.

NAIROBI, Kenya, Sep 29- Kenyans were counting hours Sunday to the September 30 deadline for exchanging old notes that ends on Monday night.

The Central Bank of Kenya Governor Patrick Njoiroge has declared there will be no extension of the deadline that was set on June 1, when he unveiled a new set of all currency notes to replace the old ones.

But is the Sh1000-note, the largest denomination that is being demonetised.

“There will be no extension at all,” Njoroge declared.

But with just a day to the deadline, Kenyans have only exchanged slightly more than half of the targetted 217 pieces of Sh1000 old-generation notes that is in circulation.

Would people with huge hordes of cash have resigned to fate for fear of answering questions on the source of their illicit cash?

That was the big question CBK officials were left wondering where the money could have gone.

Most wholesale and retailers across the country have already started declining old notes, fearing they may be caught up with time for the exchange.

Giant telecommunications company Safaricom and supermarkets like Naivas, Tuskys and Carrefour have already stopped taking the old notes, days to the official deadline.

Fast-food outlet Pizza Inn, Chicken Inn and Creamy Inn on Thursday informed customers of their decision to only take new currency notes for Sh1000.

The trend was similar in Public Service Vehicles where conductors in some routes already started rejecting the old sh 1000 notes since Friday.

AFP reports that last week a man walked into a Nairobi car yard and paid for a luxury Mercedes with a mountain of 1,000 shilling ($10/9 euros) banknotes, desperate to offload cash that within days would be worthless.

NJOROGE THAO - Business outlets rejecting old Sh1000-notes ahead of Monday deadline
Central Bank of Kenya Governor Patrick Njoroge./CFM-FILE.

With a deadline looming before the Central Bank of Kenya bans all old edition 1,000 shilling notes, big fish with their fortunes stashed in cash are under pressure to find ways to jettison their money.

The operation is aimed at flushing out dirty money being hoarded by tax evaders, crooked businessmen and criminal groups.

Large deposits of the old notes, embossed with the image of Kenya’s founding father Jomo Kenyatta, raise alarm bells at banks and require paperwork to prove their origin.

The central bank in June said there were roughly 218 million 1,000 shilling notes in circulation, but declined to say what proportion was being stashed as black money.

Kenyan economist Aly-Khan Satchu said devaluing these bills works by “taking its owners by surprise”.

“Four months is a short period of time when you want to launder big sums of money,” he said.

“People who have that money will definitely try to save what they can”.

– Car wash –
So people are getting creative, devising schemes to quickly unload small amounts of their cash while avoiding detection by the authorities.

John, a car dealer in Nairobi, recalled his customer last week counting out thousands upon thousands of banknotes to purchase a luxury car worth $74,000 (67,000 euros).

“People want to get rid of their old notes, but they know very well that questions will be asked if they go put the money themselves in the bank,” said John, who declined to offer his real name due to the nature of his business.

“When I go to the bank to deposit money from a car sale, people ask for the papers from the sale, sometimes even copies of emails, but it never goes further.”

Other businesses are finding a lucrative side trade in washing 1,000 shilling notes through their tills — for a bit in return.

“I was approached by a friend through another friend and we struck a deal. I get around 500,000 shillings every day to bank together with my daily sales,” said a liquor shop owner who declined to be named in Hurlingham, a district near downtown Nairobi.

“In return I get between five and 10 per cent, depending on the amount.”

The amounts being deposited are below one million shillings, the threshold at which banks required detailed paperwork under a new transparency policy imposed by the central bank in June 2018.

– Gentlemen’s agreement –
One canny businessman in western Kenya dished out his cash in the form of small, interest-free loans of around 50,000 shillings.

The amounts are low, so those exchanging the old bills avoid detection, and upon returning the debt his money is cleaned into new bills.

“Nothing is written down, it is a gentleman’s agreement,” he said, declining to be named.

Other methods involve sinking cash into real estate or investment funds, or businesses moving large volumes of money, several businesspeople told AFP.

But it’s not all underhanded and hush-hush.

One bar in the coastal city of Mombasa is offering to swap banknotes on behalf of drinkers, encouraging punters to spend big at their “Old Notes Send Off Party” being held the eve of demonetisation.