MTN, the troubled South African telecoms group, is paring back its operations in South Sudan, blaming currency volatility and economic turmoil.
After investing over $170 million over the past two years, Africa’s biggest mobile phone firm has failed to generate a profit in Africa’s newest nation. Its struggles have forced the company to cut its workforce in South Sudan from 170 to 80 people, and halt plans to build 40 communications towers across the country.
On Tuesday, (Mar. 29) Khumbulani Dhlomo, head of corporate services at MTN, told reporters in Juba, South Sudan’s capital, that its subscriber base was in decline. “People now have to choose between buying a phone, buying airtime, and buying bread,” he said.
South Sudan gained independence from the north in 2011, ending one of the continent’s most entrenched conflicts. But the hopes that came with independence quickly dissipated as divisions within the new country’s political leadership led to a civil war in 2013 that left thousands dead. A peace deal struck last August between Salva Kiir Mayardit, the country’s president, and rebels loyal to ex-vice president Riek Machar ushered in an uneasy truce.
Nevertheless, the conflict decimated the country’s oil-dependent economy, cutting production by a third. At the same time, the falling price of oil in global markets led to a collapse in value of the country’s currency, forcing the central bank to devalue the South Sudanese pound by 84% against the US dollar last December.
“The biggest challenge is the exchange rate. It’s either the US dollars are too expensive for the company or not there.” MTN’s Dhlomo said, according to Bloomberg. “If the economy doesn’t change, the dollar keeps on doing what it is doing, then you can’t survive.”
The decision to pull out of South Sudan is the latest in a series of setbacks for MTN in recent months. Regulators in Nigeria slapped the company with a $5.2 billion fine over failures to adequately register SIM cards. (Negotiations are ongoing over settling the record penalty that’s since been reduced to $3.9 billion.) Meanwhile, in Uganda the company was hit with another fine for anti-competitive behavior. MTN has appealed the decision.
MTN is not the only company struggling to do business in South Sudan. SABMiller shut down the country’s first and only brewery last month, citing a shortage of foreign currency needed to buy raw materials.
“We are trying as much as possible to do what we can so that at the end of the day we don’t find ourselves in a position where we have to close the company,” MTN’s Dhlomo said.