Co-op Bank injects $3.2m into South Sudan unit

 

 

By JAMES ANYANZWA

Kenya’s Co-operative Bank has pumped in additional capital of Ksh372 million ($3.2 million) to its subsidiary in South Sudan. The unit has accumulated losses of Ksh3.29 billion ($28.36 million) in its eight years of operation.

The Juba-based subsidiary commenced operations in September 2013, and runs four branches.

It made a loss of Ksh484.41 million ($4.17 million) in 2021 up from a loss of Ksh1.56 billion ($13.44 million) in 2020.

The lender, listed on the Nairobi Securities Exchange, said it has also written off a cost incurred to implement a new software amounting to Ksh671.56 million ($5.78 million).

The use of the software was discontinued when Co-op adopted a uniform core banking platform, which is now being implemented.

In its 2021 annual report, the bank said it increased its capital in its South Sudan operations to Ksh2.64 billion ($22.75 million) from Ksh2.27 billion ($19.56 million).

“The Co-operative Bank of Kenya Limited injected additional capital of Ksh372 million ($3.2 million) into Co-operative Bank of South Sudan in 2021,” the report states.

In 2013, Co-op Bank, which is 64.6 percent owned by co-operative societies in Kenya, invested Ksh2.27 billion ($19.56 million) for a 51 percent stake in its South Sudan subsidiary. The remaining 49 percent is held by the government of South Sudan through a joint venture agreement.

Last year, Co-op Bank extended the joint venture by three years. The lender said the planned transfer of the minority stake to the South Sudanese Co-operative movement had been delayed by economic and political challenges in the country.

The subsidiary’s only profit came in 2015, at Ksh849.72 million ($7.32 million).

Hyperinflation

According to the International Accounting Standards 29 Financial Reporting in Hyperinflationary Economies, from 2016, the South Sudanese economy was considered to be hyperinflationary.

The country’s civil war, from 2013 to 2020, led to a massive write down of assets, loss of revenue and hyperinflation. This resulted in banks reporting losses due to reassessment of assets and liabilities.

The seven years of fighting led to the collapse of oil production in areas affected by the war.

KCB started operations in the country in 2006, Equity in 2009 and Co-op Bank in 2013.

In 2014, KCB shut three branches in South Sudan after the war broke out. In 2017, Equity Bank closed seven of its 12 branches in the country.