The latest attempt to find long-lasting peace in the oil-rich South Sudan has raised optimism among Kenyan banks with subsidiaries in the war-torn country.
President Salva Kiir and his former vice and now Opposition leader Riek Machar, on September 12, shook hands and signed a revitalised peace deal, pledging to end a five-year civil war that has sent the nascent economy into convulsions.
The deal inked in Ethiopian capital Addis Ababa, however, remains shaky, with scepticism rising over implementation of the agreement.
But Kenyan banks, which run subsidiaries in the country that got independence from Sudan in July 2011, are cautiously optimistic of a lasting solution.
The commitment by Kiir and Machar to ending the devastating civil strife, perhaps the largest in Africa since the 1994 genocide in Rwanda, is seen as likely to restore stability in the battered economy.
KCB Group, the first to venture into Juba chasing petro-dollars in 2006 after a peace-deal brokered in Naivasha a year earlier, said it’s keeping a close eye on the developments.
KCB, the largest lender in South Sudan, has over the last three years temporarily closed down some of its 19 branches owing to deteriorating economic activities there.
Group head of corporate and regulatory affairs Judith Sidi-Odhiambo did not disclose how many branches are currently operational, although the bank had in March revealed plans to temporarily shut five outlets.
“Currently, we have scaled down our operations. The recently signed peace deal has revived hopes of economic stability being restored,” Ms Sidi-Odhiambo told the Sunday Nation.
“This is a market that we are certainly excited about and we look forward to resumption of peace and stability in the country, primarily for the sake of the South Sudanese people.”
KCB is among a host of Kenyan lenders such as Equity, Co-operative and Stanbic, which ventured into South Sudan following a peace deal in 2005, attracted by a large unbanked population and oil wealth.
The return to civil war barely three years after independence has, however, seen most lenders temporarily close outlets and retain only essential services. Suspension of oil production, which used to support 90 per cent of the economy, from late 2013 send the economy into a tailspin.
The resultant shortage of dollars has over the years plunged the struggling country’s currency, the South Sudanese pound, into a free fall while the measure of cost of goods and services topped 800 per cent — technically hyperinflation.
At the height of currency devaluation in 2015, Kenyan lenders booked tens of billions of shillings in losses.
That, together with labour unrests, has made operation costs unbearable for most businesses.
Equity Bank, which booked Sh5.7 billion in forex losses as a result of devaluation of its assets in South Sudan in 2015, has since scaled down its operations to focus on humanitarian organisations such as the UN missions.
The bank had by early last year reduced to seven its branches in the war-ravaged country from 12 it initially operated.
Ms Mary Wamae, Equity’s group executive director for regional subsidiaries, said the recent attempt to end the civil strife offers a glimmer of hope to revitalising some of the services it had suspended such as loans and foreign exchange.
“South Sudan has been in war since 2013 but it is looking up now. We are hoping that this time round the settlement is going to come to fruition and protagonists are going to agree on way forward for the country,” Ms Wamae said in an interview on August 16.
“We hope that in the next few months if the peace initiative succeeds, we should be able to go back to full banking model.” Doubts are, however, being cast on the commitment by Mr Kiir and Mr Machar with reports of fresh fighting emerging last week. UN’s undersecretary-general for peacekeeping operations Jean-Pierre Lacroix reported renewed hostilities in some states.
"Reports indicate that these hostilities are in response to alleged government attempts to install local authorities in opposition-controlled areas. Both sides appear to have mobilised reinforcements to support these operations to secure territory," the Voice of America quoted Mr Lacroix as having told the UN Security Council members on Tuesday in New York.
Re-emergence of civil clashes will deal a major blow to the economy, with the country having reportedly resumed production of 20,000 barrels per day (bpd) of oil late last month for the first time since 2013.