Markets & Finance

Exporters seek new markets as South Sudan dollar crunch bites


A margarine-packaging line at the Bidco refinery in Thika. The company says it has lost more than half of its Jinja plant sales due to the dollar crunch in South Sudan. Photo/ ANTHONY KAMAU

Kenyan companies that export goods to South Sudan are looking for new markets to cut their losses after Juba announced an indefinite extension of the suspension of oil production, adding uncertainty over the biting scarcity of US dollars in the economy.

Bidco East Africa, which exports edible oil among other products to South Sudan, says it has been looking for other markets in Africa to sell goods that it ordinarily produces for the new country.

Lost sales

The Kenyan-based manufacturer, which exports goods to Eastern, Central and Western African countries, says it has lost more than half of its sales from its Jinja plant in Uganda due to the dollar crunch in Southern Sudan.

“We have lost quite a good measure of sales opportunities. We are now looking at other African countries to take our products because we cannot continue relying on the South Sudan market any more,” said Mr Mitul Shah, the head of sales at Bidco.

READ: Dollar shortage stalls Kenya’s trade with Southern Sudan

The president of the Republic of South Sudan, Mr Salva Kiir, on Wednesday said resumption of oil production, which was expected on November 20, would remain suspended indefinitely.

This was attributed to new demands from Khartoum that the government of South Sudan stops supporting the Sudan People’s Liberation Movement (SPLM) rebels in South Kordofan and Blue Nile.

“We were supposed to restart oil production on November 15,” Kiir told crowds on Tuesday during the ceremonial laying of a foundation stone of a new oil refinery in Upper Nile State, according to a report by the AFP news agency.

READ: S.Sudan oil production stalled: Kiir

“Khartoum is looking for an excuse not to restart the oil. Suddenly Khartoum changed their minds, saying that we must denounce the Nuba Mountains and Blue Nile first,” he said, referring to Sudan’s civil war border regions, where renewed conflict broke out more than a year ago.

The managing director of Mabati Rolling Mills, Mr Kaushik Shah, said the Southern Sudan market has become like the Democratic Republic of Congo, where the company has lost sales to the raging war.

“The company is working to widen its market in other parts of Africa because it is now not certain when normalcy will return to South Sudan,” said Mr Kaushik.

New Kenya Cooperative Creameries Managing Director Kipkirui Langat said the suspension of oil production will make it much more difficult to supply the South Sudan market.

“Our agents had been anticipating that the issue will be put to rest but now they could be pushed out of business,” said Mr Langat.

He termed South Sudan as a “growing market” which he, however, said is not “as big as Uganda and Tanzania.” This made it easier to direct the merchandise elsewhere with minimal impact on the overall sales volumes.

The decision by Juba to delay oil exports is expected to have immediate negative effect on the economy of Sudan and South Sudan.

“Further delay in resumption of oil production is also expected to exacerbate the challenging business environment in South Sudan,” said Mr Cleveland Leshore, the Kenyan ambassador to South Sudan.

Khartoum has accused Juba of giving support to rebels who remained in the North after secession, an allegation that South Sudan denies.

Mr Gideon Mungai, the chairman of the Kenya Diaspora Association of Southern Sudan said the suspension means more import businesses will close, like a number of hotels and import businesses owned by Kenyans already have.

“We will see more serious problems unless the problem is addressed. It is our hope that an exchange rate agreement can be reached,” said Mr Mungai.

Exchange rate

The Bank of South Sudan has been in negotiations with the Central Bank of Kenya on a Memorandum of Understanding that could lead to the establishment of an exchange rate between the two countries.

South Sudan has suffered a dollar crunch since it stopped oil exports in January.

[email protected]