Economy

Kenyan traders lose jobs, savings in S. Sudan turmoil

One of the Kenyans who were evacuated by the Kenya Defence Forces from South Sudan at Wilson Airport in Nairobi last month. FILE
One of the Kenyans who were evacuated by the Kenya Defence Forces from South Sudan at Wilson Airport in Nairobi last month. FILE 

The recent outbreak of war in South Sudan has put the dreams of thousands of Kenyans, forced to flee the country, in a freezer.

Official government statistics show that more than 20,000 Kenyan professionals and businesspeople have come home on forced and indefinite leave, suffering multi-million-shilling losses and pushing up the number of unemployed people in East Africa’s largest economy.

The majority of the returnees are young Kenyans who have invested in small and medium-sized businesses but have had to flee South Sudan since internal conflict broke out three weeks ago.

Many now fear that the mayhem that has characterised the sectarian conflict in the past three weeks could consume their investments.

The entrepreneurs’ troubles have been deepened by the fact that Kenyan banks with subsidiaries in South Sudan have refused to transfer their savings in the war-torn country, effectively freezing their Sudanese pounds-denominated accounts.

“Our money is stuck there in pounds because banks are not transferring and we are jobless,” said Gideon Mungai, the chairman of the Kenyan Diaspora in South Sudan Society.

Mr Mungai said he was operating a hotel in the South Sudanese capital Juba and lost a generator, fridges and mattresses to looters after fighting broke out.

Kenya is expected to pay a high price for the close economic ties it has maintained with South Sudan since its independence from Khartoum in July 2011.

“The net effect is that these are potential remittances Kenya will not receive in the near term, amounting to a reduction in ‘exports’ that could depress demand for goods and services and lead to job losses at home,” said economist X.N Iraki.

Prolonged war is also expected to limit the flow of goods to South Sudan, which is heavily reliant on Kenya for raw materials and consumer goods, further harming Kenya’s economy.

Data from the Export Promotion Council shows that Kenya exported Sh18 billion worth of goods and services to South Sudan against Sh14 million worth of imports in 2012

The returnees have now been forced to depend on their friends and relatives for upkeep even as efforts to end the conflict drag on in the Ethiopian capital Addis Ababa.

The Salva Kiir-led government has attributed the fighting that is now concentrated in Jonglei and Bentiu provinces to an attempted coup by forces sympathetic to former vice-president Riek Machar.

Kenyan banks, insurers, universities and other businesses that had opened regional operations in South Sudan are also victims of the turmoil. KCB has closed three of its 18 branches in South Sudanese towns of Bor, Bentiu and Malakal.

Kenya’s banking sector has been a major beneficiary of expansion in South Sudan, which contributed 47 per cent of the Sh5.1 billion earned by their foreign subsidiaries last year. Income from the young nation has mainly been from forex transactions with minimal lending due to lack of collateral.

The list of Kenyan lenders operating in South Sudan includes Equity, Co-operative and CFC Stanbic with Sh64 billion worth of assets as at end of 2012.

Kenyan businesses had rushed to capture the virgin market immediately South Sudan won its independence.

Mr Mungai said most of the Kenyan investors had restocked their businesses in early December in anticipation of high sales during festivities only to lose it in the chaos.
More than 7,000 Kenyans have remained in the relatively calm Juba to protect their stock.

Vincent Lubanga, a partner at Peterson Contracting and Construction Company, who fled back home two weeks ago said he plans to return to Juba this week to access his funds following assurances that the town was calm.

“President Kiir’s declaration of a curfew forced banks to close at 2 p.m. so as to serve those locked in by 6 p.m. making it difficult to access cash,” he said.

Lenders who have loaned out cash to investors in South Sudan are also facing defaults as income channels of their customers dry out. A credit officer in a mid-tier bank told the Business Daily that they are offering the borrowers a grace period in the hope that ongoing peace talks will soon produce a settlement.

The two opposing sides are meeting in Ethiopia to negotiate ceasefire terms under the leadership of the Intergovernmental Authority on Development (Igad).

Some Kenyan entrepreneurs who have lost property in the melee want the Kenyan government to have them compensated for the losses when calm returns.

In 2008, Uganda and Rwandan businesses, which incurred losses due to the post-election violence in Kenya, sought compensation to the tune of Sh5 billion from Kenyan authorities.

No amount has been paid out yet to the businessmen who based their claim on partnerships built under the East Africa Community.

Mild disruptions

Kenya’s trade with South Sudan has in the past experienced mild disruptions caused by lack of dollars in the young nation.

The cash crunch is usually a result of disagreements between South Sudan and Sudan, which sees the latter close the exit channels of South Sudan’s oil.

To support trade between the two nations the Central Bank of Kenya has in the past held talks with the Bank of South Sudan to set up an official exchange rate between them.