Kenya and Uganda stand to lose most if South Sudan disintegrates into a full-scale civil war.
In fact, EAC experts say the two countries have more than quadrupled their exports in goods and services to South Sudan in the past 10 years. Uganda exports are valued at $200 million; Kenya’s at over $180 million.
Kenya’s corporate sector is among the hardest hit by virtue of some of the companies like KCB bank, Cooperative Bank, Equity Bank and UAP Insurance having subsidiaries in South Sudan, while others like East Africa Breweries, East Africa Portland Cement and Bidco Group have strong distributor networks there.
South Sudan is a key market for Kenyan banks. Central Bank of Kenya (CBK) data shows that the 11 banks with subsidiaries in the region made a combined profit of Ksh5.1 billion ($60 million) in 2012, up from Ksh2.3 billion ($25 million) the previous year.
Subsidiaries operating in South Sudan accounted for 47 per cent of the total profits, followed by Tanzania at 31 per cent, Uganda 12.5 per cent, and Rwanda 9.6 per cent.
Ugandans dominate the informal market in the capital Juba and such enterprises have suffered heavily as people stay away and seek refuge at the United Nations premises to escape from the chaos.
Various sources, including UN agencies said by last Friday, more than 500 people had been reported dead and thousands more injured. Foreign missions like that of the US and Britain have ceased operations and called on their citizens to evacuate from the country.
“We already had enough supplies there but nothing is happening now. No deliveries are being made and everything is at a standstill,” said Vimal Shah, the chief executive officer of the Bidco Group, one of the main suppliers of edible oils, fats and hygiene products.
His company will, however, not have to evacuate any staff as all its workers in South Sudan are locals.
Dominic Kiarie, group managing director of UAP insurance company said the firm’s operations in South Sudan have not been disrupted but company officials are monitoring the situation.
“We have been assured by the government of South Sudan that everything is and will remain under control,” said Mr Kiarie through the company’s communication unit.
One of Uganda’s biggest private security firms said it had suspended its operations there. The CEO of the Uganda-based GM Security Group Africa Enock Makanga said operations ceased as even the director in charge of South Sudan operations is unable to move beyond his residence.
Kenya Airways, RwandAir, Air Uganda and Fly 540 suspended flights to the country following the closure of the airport. But Kenya Airways and Air Uganda resumed flights to Juba last Thursday following what officials said were government assurances.
John Mirenge, the CEO of RwandAir, said the suspension was due to safety reasons. “We shall resume when the situation normalises,” he said.
Fly 540’s operations director Nixon Ooko said the company expects “significant losses” estimated at up to $50,000 per day.
Spokesman for the Ugandan government Ofwono Opondo said while the border with South Sudan remains open, vehicles transporting supplies from Kenya and Uganda have started piling up at the Nimule and Oraba points.
Kenya bulk suppliers prefer using the Uganda route to South Sudan because of the dilapidated state of the Kitale-Lodwar road, and insecurity.
Uganda earned an estimated $1.3 billion from exports to South Sudan in 2012, mainly from informal exports, according to the Bank of Uganda. The value was nearly double exports worth $630 million recorded in 2010, still consisting of mainly informal exports according to Africa Development Bank (AfDB).
The value of informal exports has, however, been decreasing by up to 80 per cent during some periods because of lack of foreign currency in South Sudan and the formalisation of foreign trade, constraining the ability of informal exporters to meet the required products standards.
Kenyan exports to South Sudan increased slightly from $207.3 million in 2010 to $210 million in 2012, according to the Export Promotion Council.
Kenyan government spokesman Manoah Esipisu said Kenya stands with South Sudan and will offer whatever advice or consultation the government of South Sudan might be available for. “We are keen to ensure that the situation doesn’t become a big issue,” said Mr Esipisu.
Although South Sudan has been rated high risk on all parameters according to Aon, a global provider of risk management, the current developments have worsened the risks to businesses and also increased the risk rating of the entire eastern Africa region.
The risk of civil war is high and if it happens, it could open up the region to illicit small arms and endanger security across the region.
It could also reverse the current trend of resettlement of refugees, triggering another wave of escaping refugees filtering into Kenya, Uganda and Ethiopia.
It could also worsen the dire humanitarian situation in the country that is only recovering from decades of civil war with the northern neighbour, Sudan.
On infrastructure, the million-dollar Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor project would suffer a major blow. Last October, at a meeting in Kigali, the presidents of Kenya, Uganda, Rwanda and South Sudan resolved to fast-track the project.
A pipeline to run 1,500 kilometres from Hoima near Lake Albert in western Uganda to Lamu port on Kenya’s coast is one of the key initiatives under the project. The project is expected to be commissioned by 2017, when the two states are expected to officially join the league of oil-producing countries.
In their meeting in August in Mombasa, the presidents of Uganda, Kenya and Rwanda (Yoweri Museveni, Uhuru Kenyatta and Paul Kagame respectively) had directed government officials to ensure that the South Sudan-Lokichar-Hoima crude oil pipeline is integrated into the Lapsset corridor project by December 31.
“If Sudan disintegrates, Lappset will surely suffer,” said Joseph Kieyah, a principal analyst at the Kenya Institute for Public Policy Research and Analysis (KIPPRA).
Prof Kieyah said Kenya and Uganda will also suffer due to the many professionals that have been hired by the South Sudan government to help train locals and set up various institutions.
Gituro Wainainah, the acting director general of Kenya’s development blueprint Vision 2030 called for calm, saying the EAC and the international community would not let the country relapse to chaos.
“The region must encourage and support reconciliation efforts since President Salva Kiir has already said he is ready for dialogue,” said Dr Wainainah.
But the director- general of the Lapsset Corridor Development Authority (LCDA) Silvester Kasuku said that the project planning and execution will go ahead as the authority has not received contrary communication from the Government of South Sudan.
“We are on course,” said Mr Kasuku. He said meetings planned with South Sudan counterparts will go ahead as scheduled.
South Sudan has 85 per cent of Sudan’s oil output — estimated at about 520,000 barrels per day. This offers the EAC a unique opportunity to have the country as a partner state in the bloc’s Common Market and Monetary Union.
In terms of geographical and geopolitical location, South Sudan could link the EAC to North Africa, Central Africa and other continental sub regions, the report indicates, according to a recent verification report on South Sudan.