Current Date:

Monday, 20 November 2017
 

Businesses Close as South Sudan Civil War Takes Its Toll

(NJIRAINI MUCHIRA, THE EAST AFRICAN, SSN;) Kris Mbaya, the managing director of UAP Old Mutual South Sudan, who was posted to the country in early 2013, is among business managers who have seen the good, the bad and the ugly of South Sudan’s business landscape in its short history of 11 years as an independent state.
Indeed, UAP Equatorial Tower, the tallest building in the country at 15 storeys high, is a fitting analogy of how businesses that flocked into South Sudan following the signing of the Comprehensive Peace Accord in 2006 have crashed.
UAP was among the first companies to venture into South Sudan at Independence, and invested $30 million in putting up the building in 2011 to provide foreign investors with ultra-modern office space.
But the breakout of violence in 2013, following the fallout between President Salva Kiir and his then deputy Riek Machar meant that the building could not be completed on time and as such had no tenants for a long time.
The tower — with only 23 per cent occupancy —is a painful reminder of a strategic investment decision that went awry.
Occupancy will rise to 35 per cent when the Kenyan embassy in Juba relocates to the building by end of the year.
Although it generates minimum revenue, the building generates costs. Every month, UAP spends $15,000 for diesel to power the generator, which is the only source of power, and $5,000 for satellite Internet. In Kenya, it would cost only $400 for the same Internet capacity.
However, the building also represents the long term view of South Sudan opportunities.
“We believe in the long term potential of South Sudan. This country represents the mantra of high risks, high returns for us as a business,” said James Wambugu, UAP Old Mutual Group managing director in charge of general business.
While UAP believes in the potential of South Sudan, other companies have fled because of insecurity, political uncertainty and a struggling economy.
Sme’s close down
Several small and medium enterprises owned by foreigners have also closed down, while traders bringing goods into the country, particularly foodstuffs and other consumer products, are operating in a difficult environment.
“Business in Juba used to boom, but things have been tough since the crisis,” said Peter Kaikara, a Uganda national who supplies alcoholic beverages to several outlets in Juba.
Considering that South Sudan largely depends on imports, the cost of living and of basic commodities is high due to the poor state of roads and lack of electricity. The country has only 400 km of paved road.
A bottle of 500ml Kenyan beer brand Tusker that costs $1.9 in Kenya is $3.3 in Juba. Rent for a one-bedroomed apartment ranges from $1,500 to $2,000 per month.
Juba has one mall, City Mall, which is a pale shadow of those found in other East African capitals.
Unemployed young people crowd the streets in Juba, idling away and drinking strong tea; motorcycles (boda bodas) are the main source of earning a living for many.
The unemployment crisis has been exacerbated by the exit of numerous foreign companies while others have scaled down their operations after experiencing losses.
Kenyan multinationals like KCB Group, Stanbic Holdings, Equity Group, Co-op Bank and CIC Insurance are some of the businesses that have significantly reduced their operations in the country.
The hopes of prosperity and opportunities that came with the signing of the Peace Accord in 2006 have been diminished.
Three years of political instability and prolonged fighting between government forces and rebels, particularly in the oilfield states of Paloch, Upper Nile and Maiwut, have crippled the economy that is highly dependent on oil.
Cash crunch
The cash crunch from oil earnings has made it impossible for the government to meet even basic financial obligations, including paying salaries of civil servants, teachers and the police, some of whom are earning $20 per month.
The government has no money to finance key programmes like health, education and agriculture to secure food production.
Despite its huge tracts of fertile soil and water resources, South Sudan remains largely a subsistence agriculture state. Currently the country imports 70 per cent of food from Kenya and Uganda, and humanitarian organisations say that about half of the population is food insecure.
“Food security continues to deteriorate across South Sudan with life-threatening hunger spreading in scale and scope, making 2017 the most food-insecure year in the country’s history,” states a report by the United States Agency for International Development.
By July, approximately six million people were experiencing crises or higher levels of acute food insecurity and were in urgent need of emergency aid.
Despite being a significant oil producer, South Sudan depends on imports of petroleum products for local use, with diesel in the country being among the most expensive in East Africa at $1.05 per litre, compared with $0.95 in Kenya.
The government has established a fuel subsidy programme to ensure fuel trades at $0.2 per litre.