Kenyan traders eye big gains as S. Sudan joins regional bloc

The admission of South Sudan into the East African Community bloc is a boon for Kenyan businesses as they seek to widen their business horizons. The bloc’s market size has now jumped to a massive 162 million people.

EAC members are now six. Others are Uganda, Tanzania, Kenya, Rwanda and Burundi.

In Juba, the decision was reportedly received with excitement with the troubled nation taking the move as a vote of confidence.
Analysts see South Sudan’s admission as an opportunity for Kenyan traders to sell their goods and services on a bigger platform.

“It is very good for Southern Sudan to be admitted into the EAC in as far as Kenya is concerned. The ultimate aim is to make EAC a free market for goods, services including financial services and labour,” said Mr John Kirimi Sterling Capital executive director.

“Kenya has a more developed and diversified market for all the three and it will therefore stand to benefit most.”

A huge number of Kenyan corporates already have operations in South Sudan. They include several banks and small scale enterprises all of which have set up base in Juba and other areas. Some of the firms operating in South Sudan through subsidiaries or cross-border sales networks include UAP Holdings, East African Breweries Ltd (EABL), KCB, CFC Stanbic Bank, Equity Bank, Co-operative Bank, and Kenya Airways.

However there are a number of concerns as well. Businessmen who spoke to Smart Company said while South Sudan accession is welcomed, the country has to prove that it is committed to open trade by offering a level playing field for Kenyan traders.

“Kenyan business people have suffered a lot in South Sudan on issues concerning the currency devaluation but also enforcement of contracts. To us we hope this admission will usher in a new era where the South Sudanese plays using an agreed set of rules. That is our only hope,” said Kenya National Chamber of Commerce and Industries Chairman Mr Kiprono Kittony.

Lack of enforcement of contracts, Mr Kittony said had particularly impacted negatively on Kenyan traders.

Analysts also say the South Sudanese economy could collapse in a matter of weeks if a unity government is not implemented as agreed between the warring factions.

LOSS ON INVESTMENT

Regional companies with subsidiaries in South Sudan from December stared at a substantial drop in profits as well as loss on investment after Juba devalued its currency by 84 per cent as the government abandoned efforts to fix the exchange rate.

Tens of thousands of skilled workers from Kenya run South Sudan’s mobile telephone network, banking sector, oil operations, hotels and many other areas.

In 2014 however the South Sudanese government rattled the region when it flip-flopped on its policy towards foreign workers. Juba had ordered all foreign workers to leave, but later reversed the decision as pressure mounted from EAC member states.

“All non-governmental organisations, private companies in general, banks, insurance companies, telecommunication companies, petroleum companies, hotels, and lodges working in South Sudan are directed to notify all the aliens working with them in all the positions to cease working as from October 15 forthwith,” read part of an order issued on September 12 by then South Sudan’s labour minister Ngor Kolong Ngor.

The order required the companies to advertise for the positions of executive directors, personnel managers, secretaries, HR officers, public relations officers, procurement/logisticians, front desk officers, protocol officers and receptionists. Many incidents of Kenyans being violated has since been reported.

But firms like KCB and CFC Stanbic have said their earnings growth for the full year ended December 2015 were slowed significantly by South Sudan unrest. However, hope for the end to the conflict has risen lately with a political solution in sight.

Protracted negotiations between President Salvia Kiir and opposition leader Riek Machar over forming a unity government after more than two years of civil war are expected to bear fruit this month when the leaders are expected to actualize a transitional unity government.

According to Mr Paul Odhiambo and Mr Augustus Muluvi, policy analysts in the trade and foreign policy division at the Kenya Institute for Public Policy Research and Analysis (KIPPRA), the admission of South Sudan into EAC is a win-win for Kenya and South Sudan.

“Since independence in 2011, South Sudan has deepened bilateral ties with Kenya and other regional states. …Kenya has stood out as one of the most ardent supporters of South Sudan’s quest to join the EAC. As South Sudan is a key market for Kenyan goods, her entry in EAC will mean fewer restrictions on the movement of goods and investment,” they wrote last year for global think tank Brookings Africa Growth Initiative’s on the impact of prolonged South Sudan crisis on Kenya’s Economic and Security Interests.

Trade statistics show that in recent years, South Sudan has become an important export destination for Kenya.

For example, in 2012, Kenyan exports to South Sudan accounted for 10.2 per cent of total exports to Common Market for East and Southern Africa (COMESA) according to the Kenya National Bureau of Statistics.

“This puts South Sudan as the fourth-largest export destination for Kenya out of the 18 other members of COMESA. Exports to the COMESA region constitute 34 percent of total Kenyan exports to the world,” Odhiambo and Muluvi said.