Regional companies with subsidiaries in South Sudan were last week staring at a substantial drop in profits as well as translation loss on investment after Juba devalued its currency by 84 per cent as the government abandoned efforts to fix the exchange rate.
Last week, the South Sudan Central Bank announced that it will allow the country's currency, the pound, to trade freely, surrendering to prices charged in the black market.
Already, banks have responded to the change with KCB in Juba quoting the exchange rate at SSP20 to the dollar, reflecting a depreciation of about 85 per cent.
Central Bank Governor Kornelio Koriom Mayik said that they have adopted the black market rate of 18.50 per dollar from a previous fixed rate of 2.96 per dollar, noting that the currency was already devalued, as people were no longer receiving money at the official rate.
In the third quarter of 2015, the South Sudan subsidiaries of three Kenyan banks contributed an average of 15 per cent to the parent banks' overall profits, with KCB's subsidiary contributing 17 per cent of the group's assets and 9 per cent of the group's revenue. Shareholders' funds stood at $43 million.
Equity Bank's subsidiary contributed 12 per cent of the assets and 3.3 per cent of the profit before tax, with the shareholders' funds standing at $40 million. Co-operative Bank's subsidiary posted a $2.46 million profit before tax.
The devaluations impact on the earnings of Kenyan companies operating in the country will be felt from 2016, as these firms have already converted their income statements at the average exchange rate during the year.
Standard Investment Bank, in a note to investors, said that there will be no immediate impact on 2015 earnings but it will encourage international humanitarian and development organisations as well as foreign investors to inject more hard currency into the fledgling economy to spur economic activity.
"The conversion of income statement items to Kenya shillings is based on average exchange rate over the reporting period. Next year, earnings conversion at the weakened rate will erode earnings contributions from South Sudan," SIB said.
Daniel Kuyoh, senior research analyst at Alpha Capital, said that the companies that do business with South Sudan have been hedging against currency movements on the Sudanese pound through the use of dollars.
"We haven't seen a lot of exposure coming from these firms other than the profit dips largely attributed to slowdown in trade. In fact, through the use of dollars, they are gaining," Mr Kuyoh said. "In terms of translation losses, these firms will lose if they exchanged their funds, due to the dollar price movement." Regional firms like SAB Miller, Equity Bank, UAP Holdings, East African Breweries Ltd (EABL), and Co-operative Bank are among companies operating in South Sudan. Mr Mayik admitted that the South Sudanese pound's stability may be difficult to maintain in the short term without availability of adequate foreign exchange reserves. "In the interim, we are going to sell dollars in the market but we also need to understand that this 24-month conflict, coupled with a drop in the oil prices, has had a detrimental impact on our dollar reserves," Mr Mayik said. South Sudan Finance Minister David Deng Athorbei said that the devaluation measure is difficult but necessary. "We have seen a drop in our oil earnings from $100 per barrel to the current $37 per barrel. This means that even though we are still producing oil, the money we earn does not match what we use on our almost 100 per cent import-driven economy. This has caused shocks, budget deficits and dollar scarcity," Mr Athorbei said. South Sudan's currency woes have been blamed on government officials having access to the hard currency brought in as oil revenue. On Tuesday, Enough Project, a policy lobby launched a report that accused government officials of fuelling the black market currency trade in order to pocket as much as 600 per cent returns. "Officials with access to the hard currency brought in as oil revenue are in some cases able to leverage the difference between the official and black market exchange rates to turn huge profits on the dollar. At the time of publication, the official exchange rate was 2.9 SSP to the dollar and the black market rate was 18 SSP to the dollar, giving a 586 to 620 per cent return on the dollar," the advocacy group said. Economic policy analyst Gabriel Garang Atek said that the devaluation is meant to unite both the parallel and official market. "A fixed rate is not sustainable as government can't supply dollars to meet the demand at fixed rate. South Sudan has shown serious appetite to join EAC, and liberalisation of exchange rate is a prerequisite to joining the EAC. However, there were many fiscal and monetary incentives that should have been deployed" he said.Newer articles:
- South Sudan, Uganda agree to demarcate border - 02/01/2016 07:00
- 2016 to Be Year of Peace, South Sudan Rebel Leader Says - 31/12/2015 19:47
- South Sudan president calls for defence of 28 states despite criticisms - 31/12/2015 11:40
- American Lives, Sudanese Lives: What's the Calculus in Congress?" - 29/12/2015 22:56
- South Sudan Swears in New Governors Amid Warning Over Peace Deal - 29/12/2015 04:25
Older news items
- Syria to South Sudan: aid groups list their top humanitarian concerns for 2016 - 28/12/2015 01:21
- Sudan Is a Waypoint on East Africans’ Trek to Europe - 28/12/2015 00:00
- South Sudan Rebels Urge President to Rescind New States Decree - 27/12/2015 23:37
- South Sudan President creates 28 new states, threatening peace process - 25/12/2015 07:41
- South Sudan Leader's Creation of 28 New States Threatens Peace Pact - 25/12/2015 07:38
Latest news items (all categories):
- South Sudan vows probe after two Ethiopian peacekeepers killed in Jonglei ambush; Ethiopia, UN and Egypt condemn attack - 26/08/2026 13:06
- Dozens killed in rebel attacks on Sudan’s Kordofan, medical group says - 26/08/2026 13:03
- The truth about the South Sudanese vice president being prevented from travelling to Kenya - 26/08/2026 13:01
- WHO Regional Office Country Focus Coordinator visits South Sudan to strengthen health sector support - 26/08/2026 12:58
- South Sudanese Catholic Bishop Presents Women’s Leadership as Alternative Ahead of First-Ever General Election - 26/08/2026 12:56
Random articles (all categories):
- Yuot Alaak trained to be a child soldier, until his father's determination led him to a brighter future - 08/08/2020 01:56
- South Sudan: Event Tracking Report: Jonglei State #105 (01 January - 17 April 2026) - 24/04/2026 18:41
- South Sudan to allocate proceeds from a cargo of oil monthly to pay salaries - 03/08/2022 00:54
- Picking up the pieces: UNHCR helps victims of South Sudan camp clash - UNHCR (press release) - 27/03/2013 15:00
- Dozens killed in RSF drone attack in war-torn Sudan’s South Kordofan - 29/01/2026 15:28
Popular articles:
- Who is the darkest person in the world, according to Guinness World Record? - 25/10/2022 02:34 - Read 148899 times
- School exam results in South Sudan show decline - 01/04/2012 17:58 - Read 28003 times
- Top 10 weakest currency exchange rates in Africa in 2023 - 19/07/2023 00:24 - Read 25085 times
- No oil in troubled waters - 25/03/2014 15:02 - Read 24393 times
- NDSU student from South Sudan receives scholarship - In-Forum - 29/09/2012 01:44 - Read 22339 times
