Kenyan businesses feel the brunt of dollar scarcity in S Sudan

By   Kenneth Kwama

Josephat Rimbiu’s fresh vegetable business in the Southern Sudanese town of Rumbek is flourishing, but when his wife of seven years asked him to send an equivalent of $200 (Sh17,000) back home to Kenya to secure a standard one place for their daughter who’s just graduated from nursery, he couldn’t pay.

This, despite a healthy business that he says earns him a profit of about $1,000 (Sh85,000). This translates to about 3,200 Sudanese Pounds. And while his savings are in excess of 16,000 Sudanese pounds ($5,000), he is considering closing his business because he can’t pay suppliers due to dollar shortage in Southern Sudan.

Business suffering

It is the dollars that drew in Kenyans in their droves to Southern Sudan in the first place, but things have now changed and for small merchants who sell handfuls of tomatoes, onions and lemons to the masses, customers now don’t have the luxury of carrying dollars or buying merchandise in the US currency.

“The problem has festered for long, but small traders like me have been able to stay afloat because of the availability of dollars in the black market. Initially, we were exchanging Sudanese pounds for dollars from street currency traders, but their stocks too are getting depleted and the dollar is becoming more expensive,” says Rimbiu.

Strict instructions

With the foreign exchange shortage in South Sudan, banks are under strict instructions from the government to give priority to essential services like food, medicine and fuel imports in their foreign exchange allocation.

The order has locked out small time traders and professionals who now have to scramble for the little dollar inflows on the black market.

The black market too has been stoked by the severe dollar shortages, with the unofficial exchange rate being pushed up by the day as desperate traders — including what some unofficial sources told Business Weekly are big enterprises — seeking the hard currency the Sudanese government is unable to provide in order to settle debts for imported fuel and other fees.

The result has been a phenomenal 50 per cent appreciation of the dollar value in the black market. The dollar now exchanges for 4.8 pounds, up from the official exchange rate of 3.2 pounds.

 Cannot send money

The dollar shortage means Kenyans who have been migrating to the world’s newest State in search of opportunities — like Rimbiu — are unable to send money back home to their families, because Kenya does not have a currency exchange agreement with Southern Sudan.

Other investors have either scaled down or closed their businesses as they adopt a wait and see attitude.

“People doing business in Sudan are on a go-slow, but nobody is sure when dollars will start flowing in again,” says industrialist Manga Mugwe.

It is anticipated that the dollar crunch will end in about two months’ time once South Sudan resumes exportation of its oil, which was suspended in January. The country is expected to start exporting again next week following the signing of an agreement between it and Khartoum on September 27 in Addis Ababa.

However, even with the assurance of expected dollar inflows, investors like Mr Mugwe say they will tread carefully until they see the actual dollars, meaning the crisis could last longer than anticipated.

“Nobody wants to take a risk by investing more in the current circumstances. We have to wait and see how things pan out,” Mugwe says.

The situation is being exacerbated by the fact that banks are now withholding their dollar proceeds, rather than immediately converting them into Sudanese pounds because of fear of uncertainty.

Very helpful

“Equity Bank has been very helpful to us. Initially, they allowed us to withdraw the equivalent of the amount of money we have in our pounds dominated account with Equity Sudan in dollars in Nairobi, but we were informed that its board of directors had said no to this kind of arrangement,” says Elly Aluvale, Managing Director of Jetlink.

Aluvale says the bank got jittery because the arrangement would have exposed it, especially in case of fluctuations in currency exchange rates.

Jetlink uses about $200,000 (Sh17 million) every week on fuel to run its entire fleet and the shortage of dollars was a big blow to a business that resorted to selling air tickets to its passengers in Sudanese pounds, just when the dollar scarcity began to bite in January following the suspension of Sudan’s oil exports.

Suspended flights

The airline has since suspended its flights. Aluvale says that the suspension of flights is primarily due to the airline’s inability to access over $2 million in ticket sales from South Sudan, due to the foreign exchange crisis.

The currency shortage comes after a standoff between Sudan and South Sudan over oil export transit fees forcing the South to stop refining its oil in Khartoum.