The race is on, as banks jostle for a place in Southern Sudan

by Jackson Okoth

It is all guns blazing as Kenyan-based commercial banks rush to increase their footprints in Southern Sudan, ostensibly to cash in on the big-ticket deals and new revenue streams coming out of the region.

The battle for a piece of Sudan, which is slowly coming out of a crippling 25-year civil war, is growing more intense by the day, with Kenya Commercial Bank and Equity leading the pack.

In their wake, the list is growing for those planning to set up camp there. Commercial Bank of Africa (CBA) is the latest addition this year to a growing list of banks planning to open branches in Sudan.

Although details are scanty, Co-operative Bank is still pursuing plans to enter Sudan, its sights set on the country’s untapped co-operative sector.

But it is Kenya Commercial Bank (KCB), with the largest network in Southern Sudan, which appears well placed to become this region’s banking linchpin.

"There are enormous opportunities in construction, infrastructure, housing, building, roads, transport with prospects in agriculture, mining and forestry as the country opens itself up," Martin Oduor-Otieno, KCB Group CEO told Financial Journal.

While Sudan is considered the largest country on the continent, conventional banking is restricted to the southern parts of the country. The mostly Arab North has Islamic banks.

Kenyan banks are looking at Southern Sudan as the expasion option of choice. Above: KCB Group CEO, Martin Oduor-Otieno, and Equity Group CEO, Dr James Mwangi Photo: courtesy

KCB has previously done rights issues, one last year and another in 2007, mainly to fund its network expansion, including establishment of new branches in Southern Sudan. Southern Sudan is considered one of the most heavily regulated markets, with the minimum capital prescribed for an investor standing at $ 15 million, to be paid over a two-year period. This is compared to between $2million and $3million in other destinations in the region.

Although investment costs of setting up in Southern Sudan remains relatively expensive, owing to poor infrastructural facilities there, Kenyan banks have not faltered in their aggressive expansion into the region.

Not even the fact that most of the new branches in Southern Sudan are yet to break even, is discouraging expansion and interest in the region.

" Although it is still early days, we are seeing opportunities across the board in this young market," said Oduor-Otieno

A pioneer in Sudan 2 years ago, KCB has been able to break even. But this is not so for close competitor Equity Group, which is yet to begin making profits but which is still hanging on.

" We can smell the oil in Sudan. This is why we are here to benefit from the spillover of this boom," Equity Group CEO, Dr James Mwangi, told Financial Journal in a recent briefing. The bank made its entry to Southern Sudan last year, with a target of setting up shop in Juba, Malakal, Yambyo, Wau, Kaya and Nimule.

Both KCB and Equity’s expansion in the Sudan is partly driven by the need to finance Kenya businesses across the region, providing convenience for those seeking to use one bank for their cross-border transactions.

" We are taking advantage of the low penetration in this market, as well as spreading our risks to cushion shareholders from a decline in any particular market," said Dr Mwangi.

KCB is also seeking to get a better return on investment for their shareholders. It is an opportunity to increase shareholder value," said Oduor-Otieno.

KCB has been eyeing the great demand for accommodation, housing and office space in Sudan for the many businesses starting operations there.

The bank is offering loan facilities to finance rehabilitation initiatives by owners of dilapidated properties within the central business districts of major towns in Southern Sudan.

KCB (Sudan) Limited was incorporated in December 2005 as a wholly owned subsidiary of Kenya Commercial Bank.

It becomes part of the KCB Group, which comprises KCB Kenya, KCB Tanzania and Savings and Loan (S&L) Kenya, KCB Uganda Limited and KCB Rwanda.

" We now have six branches in Sudan, a size that we consider sufficient to grow our business in this market," said Oduor-Otieno.

jokoth@standardmedia.co.ke

 

 

Read all about: Southern Sudan Martin Odour Otieno Juba KCB Kenya Commercial Bank

 

 

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