EABL shuts down South Sudan depot after currency losses

EABL chief executive officer Charles Ireland. PHOTO | FILE 

By MUGAMBI MUTEGI

In Summary

• EABL last year shut its facility in Juba, opting to supply the market through distributors and sales teams from Nairobi.
• Businesses in South Sudan have been hit hard by inaccessibility of US dollars, the predominant trading currency in the country.
• EABL’s multinational competitor, SABMiller, is preparing to shut down its brewery next month.

Beer maker East African Breweries Limited (EABL) has closed its South Sudan depot after the business posted huge currency losses resulting from a devaluation and sustained political instability in the country.

The regional brewer late last year shut its facility in Juba, opting to supply the market through distributors and sales teams from Nairobi.

EABL says the free-fall of the South Sudan pound has in the six months to December cost it $9 million in currency losses, aggravating low sales attributed to political instability.

Businesses in South Sudan have been hit hard by inaccessibility of US dollars, the predominant trading currency in the country.

The dollar shortage and ongoing civil war in the country caused net sales to dip 74 per cent.

EABL’s multinational competitor, SABMiller, is preparing to shut down its brewery next month.

READ: SABMiller to close South Sudan operations on low forex supply

“We have closed that depot as a result of safety concerns and to ensure that our cost base is managed,” said EABL’s chief executive officer Charles Ireland in a Friday interview.

“We will be operating through our sales force in South Sudan and distributors who are getting stock from Nairobi.” The brewer opened its Juba depot, with a holding capacity of 100,000 cases, in September 2013.

It also bought a piece of land adjacent to the Nile River for expansion.

Years of civil war between political factions has resulted in a near economic collapse in the landlocked country, a crisis that is reflected by fuel shortages and a dearth of foreign currency.

Shortage of US dollars in the country early last year saw EABL reveal that it was operating at two-thirds below capacity.

South Sudan, which gained independence from Sudan in 2011 only to fall into civil war two years later, has seen its currency steadily weakening on the unofficial market.

The currency depreciated 85 per cent in just two days after its government stopped fixing its exchange rate last year, leaving cash holders and bank depositors with drastically slashed wealth.

“From our successful operations in the last couple of years, we accumulated a cash exposure which was significantly impacted by the devaluation in December,” said EABL’s group finance director Gyorgy Geiszl, on Friday.