JUBA (HAN) March, 12 .2016. Public Diplomacy & Regional Security. Foreign companies operating in South Sudan are expecting financial relief in the long run following the country’s admission into the East African Community.
Under the EAC Monetary Union, member states must adhere to the convergence criteria spelt out in Article 5 of the Monetary Union protocol. The criteria touch on monetary and exchange rate policies, inflation, taxation, deficits and regulation of financial systems.
South Sudan has three years to work on the legal procedures to meet the obligations of the Community Treaty, and bring under control the currency devaluation that has affected companies’ bottom line.
Last year, foreign companies lost more than $136 million due to the 84 per cent devaluation of the currency in December. The loss is expected to be the same or even worse into the year as the South Sudanese pound has further lost its value by 72 per cent, moving from the 18.5 units to the dollar in December to 32 units to the dollar at the end of January this year.
Kenya Commercial Bank, Equity, UAP Holdings, East African Breweries Ltd, CfC Stanbic Bank and Co-operative Bank have already registered losses.
CFC Stanbic, which has operations in Juba, booked a $70 million loss also attributed to the devaluation that saw its net profit dip by 14 per cent.
“The South Sudan environment continues to deteriorate portending a challenge to not only us but firms within this market. We saw our balance sheet move from $80 million in 2014 to $10 million last year after the devaluation in December,” CfC Stanbic Bank chief executive Philip Odera said.
Last week, KCB said that it had booked a $61 million foreign exchange loss, mainly from its South Sudan operations. The value of Equity’s assets ib South Sudan declined to $194 million in December last year from $542 million last September. On Tuesday, the bank announced that it had suffered a $57 million forex loss, mainly from its South Sudan subsidiary.
EABL announced a $90.8 million foreign exchange loss. EABL group managing director Charles Ireland said that the South Sudan market has become uncertain because of the political and economic situation.
“We will now be rebasing our operations from South Sudan because the market fundamentals have changed with a lot of currency pressure,” Mr Ireland said.
Early this year, SABMiller said it will close South Sudan’s only beer factory by the end of this month due to an acute shortage of foreign currency.