Kenyan multinationals with subsidiaries in South Sudan have lost billions of shillings to devaluation of the neighbouring country’s currency.
The cost of living in South Sudan hit a cumulative three-year rate of 1,285.3 per cent in December.
The runaway inflation has also led to a 97.3 per cent depreciation of the South Sudan pound against the US dollar, diluting the value of assets denominated in the local currency -- including cash and loans held by the Kenyan companies.
The South Sudan pound is currently trading at 109.3 units to the dollar compared to 2.95 units at which it was fixed until December 2015.
KCB Group, Stanbic Holdings and CIC Insurance Group have reported combined net asset losses of nearly Sh5 billion in their South Sudan operations in the year ended December.
The losses were deducted from the companies’ respective total income, lowering their net earnings in the review period.
Equity Group and Co-op Bank are among other Kenyan multinationals that are also expected to report the impact of the runaway inflation and currency rout in the coming days.
Analysts say the end of hyperinflation can leave companies with a gain or loss, which they will carry as the value of their assets as they enter a period of relatively stable cost of living.
“If the hyperinflation ceases, the (accounting) standards are clear that the last reported gain or loss is the carrying amount,” said Sammy Onyango, the chief executive of consultancy firm Deloitte East Africa.
KCB banking hall in South Sudan. Photo courtesy