Business Daily (Nairobi)
Mugambi Mutegi
21 April 2011
Shortage of dollars has slowed down Kenyan exporters’ sales in Southern Sudan, prompting some manufacturers to sign currency exchange agreements with commercial banks.
Beer maker EABL, edible oils manufacturer Bidco Oil Refineries and paint producer Crown Berger all said dollar shortages were diminishing supplies to the newly created state, which is deemed as a lucrative, high growth market for Kenyan companies.
The US dollar is the currency of choice for external trade while the local Sudanese pound is used for domestic transactions.
Low export volumes and an under-developed financial system has however limited supply of dollars to Southern Sudan.
Bidco Oil Refineries Limited which exports its products to the oil-rich country says that their sale volumes have been slashed by over half in the past six months as a direct consequence of the dollar crunch as their customers are hard pressed to access the currency to pay for goods.
“Export sales from our Jinja factory are down by between 60-70 per cent. As a short term measure we proposed that customers could pay in Ugandan shillings but this too has not yielded much success”, Mr Mitul Shah, the Head of Sales for Bidco Oil Refineries said.
The company only delivers goods after payment.
East African Breweries Limited (EABL) has also felt the dollar shortage pinch even as it forges on with plans on possible expansion into the country to tap into the 0.4 million hectoliter alcohol market.
“We faced challenges with regard to forex exchange availability which impacted negatively on our business in the back half of last year and a couple of months into this year. Since we get paid in dollars, the little foreign exchange available proved challenging”, EABL Group Managing Director, Seni Adetu said.
EABL controls 50 per cent of the Southern Sudan beer market, with the rest being supplied by London based manufacturer SABMiller through a factory in Juba.
EABL’s half year results indicate no increase on the net sale value in the country, a fact industry analysts attribute to the dollar scarcity and a general slowdown in economic activities in the run-up to January’s referendum.
This shortfall has led the brewer to sign partnerships with local banks to ease foreign currency transactions for their customers.
“EABL has partnered with banks having roots in Kenya allowing traders to pay into these accounts in local currency after which the banks pay us and allow customers to replenish their stocks,” Mr Adetu said.
Mr Rakesh Rao, the Managing Director for paint maker Crown Berger said that they have resorted to signing agreements with customers who pay upfront a fraction of the total costs of goods supplied and the balance within a stipulated time.
According to Mr Rao, since the situation is not their customer’s fault, they resolved to be “compassionate” with them and allowed for staggered payment for goods already received.
These currency pressures and depressed business climaxed during the run up to the referendum forcing Crown Berger Limited to halt their exports to the region.
Maintenance of foreign currency accounts, especially US dollars, is a common practice among traders who pay into them in their local currency for repayment to business partners in dollars, a transaction subject to prevailing exchange rates.
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