Broke South Sudan now looks to Kenya and Uganda for bailout

South Sudan is pleading with Kenya and Uganda for economic support to avert a humanitarian crisis after a fresh conflict brought the country to its knees. TEA GRAPHIC |  NATION MEDIA GROUP

By ALLAN OLINGO

In Summary

• South Sudan is pleading with Kenya and Uganda for economic support to avert a humanitarian crisis after a fresh conflict brought the country to its knees.
• Mid last week, a delegation of Transitional Government of South Sudan officials led by First Vice-President Taban Deng Gai was in Kenya on a mission seeking a bailout.
• The EastAfrican has learnt that Juba will also be reaching out to Uganda later this month to craft a bailout package that will see Kampala pay its traders the $35.2 million Juba owes them in a bid to have them resume supplies to the country.

South Sudan is pleading with Kenya and Uganda for economic support to avert a humanitarian crisis after a fresh conflict brought the country to its knees. 

Mid last week, a delegation of Transitional Government of South Sudan officials led by First Vice-President Taban Deng Gai was in Kenya on a mission seeking a bailout.

The EastAfrican has learnt that Juba will also be reaching out to Uganda later this month to craft a bailout package that will see Kampala pay its traders the $35.2 million Juba owes them in a bid to have them resume supplies to the country.

“The vice president will go to Kampala to request the Ugandan government to pay traders who supplied cereals to Juba but haven’t been paid. The money will then be converted into a loan, for which Juba and Kampala officials will work out a repayment plan,” a diplomatic source with the knowledge of the matter said.

The delegation to Nairobi, which included four ministers, met with Kenyan President Uhuru Kenyatta, Cabinet Secretary for Foreign Affairs Amina Mohamed and a number of Kenya government officials.

A source privy to the discussions told The EastAfrican that Mr Gai informed President Kenyatta that the country’s economy was in a perilous state and needed urgent help.

Mr Gai implored the Kenya government to give his country a soft loan to help it deal with its current problems.

“We have been facing difficulties in delivering services to the people and we briefed President Kenyatta about the current economic difficulties the country is facing. We are experiencing severe inflation because of the civil war, poor oil production and the low oil prices, which have basically drained us as we are not making money. We asked Kenya for help so that our economy does not grind to a halt,” Mr Gai said when he addressed a press conference at the Nairobi Intercontinental Hotel after a meeting with President Kenyatta.

The delegation also requested Kenya’s support for implementation of the peace agreement by the Transitional Government as currently formed. This would mean excluding former first vice president Riek Machar.

“The President’s view was that he would not act outside Igad,” said the source.

Economic bailout

On the requests for a soft loan and food supplies, President Kenyatta is reported to have advised the group to send their finance minister, their Central Bank Governor and agriculture minister to Nairobi with a clear proposal, including the amounts needed and the modalities for repayment.

Kenya can then determine its level of commitment “cognisant of the fact that we have interests in South Sudan and cannot be aloof to the suffering of its people.”

The loan, the source said, could be worked out along the same lines as the economic bailout of Zimbabwe by South Africa a while back. South Sudan relies on Kenyan traders for key supplies including food, edible oils, pharmaceuticals, electronic products and manufactured goods.

Uganda is South Sudan’s biggest trading partner and exports maize, vegetables, sugar, iron and steel, cement, beer, motor lubricants and detergents. However, following fresh fighting in the country in July, most foreign traders have returned to their countries for security reasons.

In an interview with The EastAfrican, South Sudan Finance Minister Stephen Dhieu Dau declined to provide details on how the proposal would be structured.

“I am yet to get a briefing on the discussions in Nairobi and any other that will take place. However we are pursuing fiscal, monetary and diplomatic routes in a bid to unlock the economic challenge the country has been facing,” Mr Dau said.

Last week, Mr Dau cancelled all unpaid cheques to suppliers due to “lack of money.” The country is also yet to pass a new budget for the 2016/17 financial year, with sources saying that the new budget will be tabled before the Council of Ministers in the first week of September and later forwarded to the National Assembly for approval.

Evacuation of traders

Figures released by South Sudan’s National Bureau of Statistics (SSNBS) last week showed that inflation increased by 405 per cent in the past two months to peak at 661.3 per cent in July, due to low supplies of food following the evacuation of Kenyan and Ugandan traders.

READ: Kenya, Uganda lose $12m as South Sudan inflation hits 600pc

The evacuation was a result of the mid July dispute between President Salva Kiir and his former deputy Riek Machar that degenerated into fierce gun battles. South Sudan’s presidential spokesman Ateny Wek Ateny said that the diplomatic overtures will Juba to stabilise the supplies of goods to the country.

“There will be more contacts with Kenya and Uganda as a follow up because we need to restore the supply in order to forestall food shortages. We have seen a massive reduction in supplies from these two countries, which has caused the current food crisis,” Mr Ateny said.

It remains to be seen how the plea to Uganda will be received, given that in 2014, Juba entered into a mutual agreement with Uganda to pay the $45 million debt owed to the 22 Ugandan companies, in a deal that was to see Kampala seek compensation from South Sudan after its economy had stabilised.

The matter is under discussion by a subcommittee established at Uganda’s Cabinet to decide on how money for traders held in South Sudan banks can be released. The Uganda Cabinet also asked Juba to form a joint co-operation commission that would engage its team on the matter.

Kenya and Uganda’s move to evacuate their nationals, and the subsequent travel advisories on Juba have seen South Sudan’s inflation more than double in July to reach an annual rate of over 650 per cent, the highest in Africa.

South Sudan President Salva Kiir has already asked his military to escort both Kenyan and Ugandan traders delivering goods to the nation in a bid to check the skyrocketing food prices.

Kenya’s Long Distance Truck Drivers and Allied Workers Union secretary-general Nicholas Mbugua welcomed the move but remained sceptical of Juba’s reassurances on security.

READ: Kenyan companies count losses from South Sudan war

“In July, we saw a lot of transporters pull out of South Sudan, with some choosing to deliver the goods to Elegu, the Uganda-South Sudan border town. If we can have discussions between the Kenyan and Ugandan governments, then we believe we can work out an amicable solution to this,” said Mr Mbugua.