Dollar shortage hits businesses in South Sudan

Kenyan businesses in South Sudan have been hit by a biting shortage of dollars following the shut-down of more than half of the country’s oil wells, the main foreign currency earner.

Commercial banks with operations in South Sudan have benefited in recent years from the heavy use of dollars in the newly independent country.

The shortage has also slowed trade between the two countries, which is done in dollars. Kenyan firms export goods such as roofing materials, cement, petroleum products, vegetable oil, milk, and other goods.

Major exporting companies include Mabati Rolling Mills, Athi River Mining, East African Cabels, New Kenya Cooperative Creameries (KCC), and Bidco East Africa.

“The dollar shortage has caused queues in commercial banks, which have to take clients’ applications to the Bank of Sudan, a process that is taking too long,” said Martin Oduor Otieno, the chief executive of Kenya Commercial Bank, which has a subsidiary in South Sudan

Mr Otieno said that Kenyans exporters to South Sudan are required to open dollar accounts to negotiate for overdraft facilities.

Equity Bank CEO James Mwangi said on Monday that the bulk of the bank’s forex income last year was earned from South Sudan.

“The bulk of our earnings came from South Sudan because that is where the business is,” said Mr Mwangi in a presentation to the parliamentary select committee investigating last year’s rapid depreciation of the shilling.

Equity Bank Group’s forex earnings nearly tripled to Sh1.52 billion in the nine months to September, from Sh597 million in the same period in 2010.

This comprised Sh508 million from the Kenyan operation, meaning it accounts for only about one-third of the forex earnings

Exporters said that they are having to wait longer to get their orders for dollars from commercial banks.

“We are seeing that new orders from South Sudan are being delayed nowadays due to lack of enough dollars,” said Mr Julius Nyambicho the marketing manager at Athi River Mining.

The miner exports between 200 and 300 tonnes of cement to South Sudan, in addition to quick lime, sodium silicate, mineral elements and fertiliser.

The firm said that demand for cement has been affected as distributors cannot replenish their stocks regularly due to the dollar shortage.

The closure of oil wells has dwindled South Sudan’s export earnings at a time when heavy demand for food and other raw materials for the construction sector are straining the Bank of Sudan’s forex reserves. Oil exports account for 90 per cent of South Sudan’s forex.