Jetlink case only the tip of the iceberg as South Sudan defaults on large scale

JETLINK SAGA PUTS PRESSURE ON KENYA GOVERNMENT TO ACT ON SOUTH SUDAN

The halt of operations by Jetlink, one of Kenya’s leading privately owned airlines, has not only stunned Kenyans but also exposed a weak link in the relations between Kenya and South Sudan, namely payment for goods and services rendered. It is understood from the top management of Jetlink, that for weeks they sought political intervention from both governments to have the Central Bank of South Sudan release their ‘stuck’ ticket payments received in local currency in Juba, amounting to well over 2 million US Dollars. With only good words but no concrete action following, did the bankers of Jetlink, reportedly Equity Bank which has a branch in Juba, pull the plug on the company after accommodating them for the past few months, worried over growing exchange risks and the un-business like attitude of South Sudan’s central bank staff.

The Jetlink case, while spectacular without doubt, is however only the tip of the iceberg and more and more details are now emerging in the open media of how South Sudan has increasingly defaulted on payments, causing now a major economic and growing diplomatic rift between the two countries. As companies are now gathering the courage to come out in the open and demand publicly that their government assists them in getting paid for goods delivered and services rendered to South Sudan customers, it is becoming increasingly evident that the amounts in question run in the tens of millions of US Dollars outstanding, putting investments, jobs and in fact the entire Kenyan economy at risk, should South Sudan actually default as some have started to suggest. Some of Kenya’s top companies are said to be seriously affected such as breweries and soft drink producers, construction material suppliers and fuel suppliers, a situation mirrored in neighbouring Uganda where some companies have halted exports to South Sudan unless paid in advance.

‘Official Kenya’ is trying to downplay the situation and even Kenyan Central Bank officials, reported to have stayed in hotels in Juba run by Kenyan managers, have been unwilling to concede that the growing list of unpaid invoices has even been discussed between them and their colleagues in Juba. Pressure is now however intensifying, also through Kenya’s business associations – similar to what is happening in Uganda – to have the Kenyan government take a tougher stand on South Sudan and demand a payment schedule to be introduced so that outstandings can be recovered and Jetlink resume operations. The forthcoming COMESA Summit in Kampala, where a business forum is being held alongside the political meetings, will no doubt also raise this issue under either a main agenda item or else under any other business, using the forum to gain political support to resolve the problems brought upon them by South Sudan’s growing hunger for imports but lack of cash to pay for it.

And in closing, South Sudan’s inability or unwillingness to pay will undoubtedly have an impact on their chances to fast track their ascend to the East African Community, as the business sectors in Uganda and Kenya are now getting increasingly vocal to have their governments serve notice to Juba, to either pay up or else risk a longer waiting period to join the trade block. Watch this space.