Jubilee, NBK put South Sudan expansion on the back burner

Corporate News

Jubilee chairman Nizar Juma (left) with the insurer’s CEO Patrick Tumbo when they announced the firm’s results last week. Photo/FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• Insurer and lender doubt stability in Kenya’s neighbour.
• Jubilee says it will concentrate its efforts on other markets where it is currently unrepresented.
• National Bank says it will also have to wait a bit longer before joining peers who have already opened subsidiaries in South Sudan.

Jubilee Insurance and National Bank have frozen plans to expand into the South Sudan underscoring the economic consequences of the on-going political unrest on Africa’s youngest country and the region.

Kenya’s largest underwriter planned to enter the market by the end of this year through a buyout or a green-field project but now says it has put this plan on ice as it weighs the political situation.

NBK has taken a stance similar to that of Jubilee, indicating that it is now looking at setting up in other countries first as it observes happenings in South Sudan.

Jubilee that is seeking to expand in the region by buying out insurance companies, now says it will concentrate its efforts on other markets where it is currently unrepresented.

It had earmarked South Sudan as its next base—given its low insurance uptake—as it scouts for other suitable countries but has now suspended these plans indefinitely.

“We wanted to set up in South Sudan later this year but the on-going instabilities have forced us to put that plan on hold for now,” said Nizar Juma, the Jubilee Insurance chairman, when announcing the firm’s 2013 results last week.

Jubilee, which posted a 10 per cent increase in its net profits to Sh2.5 billion last year, is present in Kenya, Tanzania, Uganda, Burundi and Mauritius.

READ: Jubilee hires former AIG executive to drive expansion bid

National Bank says it will also have to wait a bit longer before joining peers (Equity Bank, Kenya Commercial Bank and Co-operative Bank) who have already opened subsidiaries in South Sudan.

“Our first target was South Sudan but with the on-going conflict, we have had to halt that plan for now,” said Munir Ahmed, the managing director for National Bank.

“Somalia too was a target but you can see what is happening there. Going forward, we are looking at Ethiopia and it if opens up, we will be setting up there.”

READ: National Bank net profit up 50pc to Sh1.1 billion

Low penetration of financial services in South Sudan saw Kenyan banks (and insurance companies) scramble for the economy but the volatile political situation has seen firms make heavy provisions for the 2014 financial results.

A delicate political balance between political factions last year soured triggering deadly fighting and virtually disrupting production. This has come at a steep price for Kenyan firms already on the ground.

Equity Bank has set aside Sh700 million as a precaution on expected negative impact of the violence. The lender’s profits from its South Sudan unit last year dropped from Sh1 billion to Sh285 million.