Can South Sudan become a serious business destination?
Southern Sudan’s agriculture sector holds good potential for investment across the value chain.
Southern Sudan’s agriculture sector presents both potential and great challenges for prospective business people and investors. Photo: OxfamThe region, with a population of 8.26 million, recently voted in favour of independence in a referendum that was part of a deal to end decades of conflict between north and south, driven by religious and ethnic divides.
“Southern Sudan’s agricultural sector is . . . a nearly limitless asset waiting to be acknowledged. It is absolutely underserved in every sense of the term and has an unfathomable depth for expansion,” says David Raad, a consultant who helps companies invest in the region.
According to UK non-governmental organisation FARM-Africa, southern Sudan has a vast natural resource base and huge agricultural potential, with more than 90% of the land being suitable for farming. The civil war has, however, had a devastating effect leaving much of the south of the country with little discernible infrastructure and a lack of social services.
Denise Melvin writes on the FAO’s website that “southern Sudan is blessed with ample land, a good water supply, and a generally favourable climate for agriculture.”
In an article for Pachodo.org, Dr James Thubo Ayul, a professor in agricultural economics, notes that although southern Sudan is currently a net importer of agricultural goods, the region has a good natural resource base for the production of a wide range of crops, forest trees, fisheries and livestock. He says opportunities exist for rain-fed mechanised schemes for grains and cash crops; irrigated farms for sugarcane, fruits and vegetables production and processing; dairy, pig and poultry farms; and banking and financial services, to name a few.
Despite the possibilities, he says that significant challenges remain. These include inadequate financial services; poor rural infrastructure that hampers access to markets; weak agricultural and livestock research and extension services; lack of control to pests and diseases of both crops and livestock; and a shortage of skilled labour.
Raad explains there are opportunities across the value chain. “I like to tell my more strategic-thinking investors [southern Sudan] is the place for entire business industries to be set up. For example, when investors talk about mechanised farming, I try to explain the unmet needs for not just production of every type of agricultural good, but also the inefficiencies in the rest of the industry. That means that there are opportunities in transportation, storage, processing, marketing, retailing, etc.; the list is as long as the value chain.”
According to Raad, southern Sudan has virtually no agricultural processing facilities such as flour mills and dairy plants. “Imagine the investor that can see and shape the entire process of their product getting to consumers; it can be almost limitless and massively lucrative. We haven’t seen this type of opportunity in 30 or so years in the region and we may not see it again elsewhere.”
“Smart investors, savvy analysts and individuals familiar with emerging markets know that southern Sudan is poised to become Africa’s next best bet.”
While the people of southern Sudan are anticipating their own independent state, many business people are eyeing opportunities in the region.So says consultancy David Raad and Associates (DR&A) on its website. The company helps businesses explore and undertake opportunities in southern Sudan.
In the week from 9 to 15 January, southern Sudanese voted in a referendum to secede from Sudan. On 23 January, the Southern Sudan Referendum Commission’s website stated that with nearly all votes processed, 98.81% of voters voted in favour of secession. The final count is expected to be released by 14 February.
The referendum was a core component of the 2005 Comprehensive Peace Agreement (CPA) that ended decades of conflict between the Southern Sudan People’s Liberation Movement (SPLM) and the Khartoum government.
Eyeing business opportunities
With the south almost certain to secede from the northern part of the country, some regional and international investors are eyeing business opportunities in a newly independent southern Sudan.
The region has few industries outside the oil sector and almost non-existent infrastructure.
Cement companies is one group that is seeing possible growth opportunities in southern Sudan. Manufacturers are hoping for an increase in demand from the south as the region develops its infrastructure. Pradeep Paunrana managing director of Kenya’s Athi River Mining, producer of the Rhino cement brand, told Business Daily that southern Sudan will see considerable economic development over the coming years and that cement will be central to improving infrastructure. East Africa Portland Cement managing director Kephar Tande said his company is also very interested in the southern Sudan market but that any investment is dependent on the outcome of the referendum.
Reuters reports that Kenya Commercial Bank (KCB) expects to double its branches in southern Sudan if the region manages to conduct a successful referendum.
One of the few major foreign investments in southern Sudan over recent years has been SABMiller’s Southern Sudan Beverages Ltd (SSBL) brewery in Juba. The brewery produces White Bull lager and Chairman’s Extra Strong Beer as well as the Club Minerals Sparkling Soft Drinks range and Source Pure Drinking Water. SSBL has also announced it will also start production of two of SABMiller’s existing brands Nile Special Lager and Club Pilsner.
“The decision was taken to produce in southern Sudan primarily for two reasons. One, the market size had the potential to support [the] local production of beverages, and two, the investment climate was right for us to invest in southern Sudan. We are the first major multinational company to invest in southern Sudan and we have thus become the case study for anyone else to base their investment decisions on,” Ian Alsworth-Elvey managing director of SSBL told South Africa’s Carte Blanche television programme.
Kenya’s East African Breweries Ltd (EABL) is also set to establish a brewery in southern Sudan. EABL last year said that it plans to build a 700,000 hectolitre (hl) plant in Juba, which can be expanded to 1 million hl.
Adopting a wait-and-see approach
Many business people are, however, waiting to see how the situation in the country pans out.
Uganda’s Daily Monitor reports that irrespective of the outcome of the referendum, many Ugandan traders will not return to southern Sudan until they can be assured of their safety. According to the newspaper, Ugandan traders in southern Sudan have reported cases of harassment and human rights abuse by security officers and influential people in the region.
Adel Ali chief executive of United Arab Emirates-based Air Arabia told Reuters that southern Sudan needs significant infrastructure development before the region’s aviation industry can really be developed. Air Arabia has been operating flights to Khartoum since 2004 but has no immediate plans to service the south. Ali added that although southern Sudan’s aviation sector holds possible potential for investment, more clarity is needed on the new government’s investment plans.
Risks of doing business
According to David Raad, who used to be a United States diplomat before starting to consult companies and individuals looking to invest in Sudan, health issues are among the major risks of doing business in the region. “It is an inhospitable area. Malaria and other debilitating diseases are widespread and deadly. Medical services are limited. Culturally the southern Sudanese people are warm, welcoming and very law abiding, so foreigners’ physical safety isn’t really a problem. Robbery is very uncommon although there were a few limited instances of robbery of foreigners several years ago.”
Government and private business
Raad says one of the most common misconceptions about southern Sudan has to do with the administration’s attitude towards the private sector.
“I hear the same questions from almost every client I advise: Will the government expropriate my property, business or investment? Do I need to have some government figure in my business? The answer to both of these questions is no,” he told How we made it in Africa in an exclusive interview.
“I have yet to see the government even ‘threaten’ to get involved in a businesses’ endeavours. The southern Sudanese leadership has always been careful to avoid this notion and it has served them well,” Raad adds.
He also debunks the notion that investors need to involve a government or political figure in their ventures for better protection or access. “This is a very dangerous and ill-advised path. Frankly, it’s not necessary and I have yet to see one example that has worked to anyone’s satisfaction.”
Competing for skilled staff
Raad admits that business people might find it challenging to source talented local personnel. “Imagine a working environment that for nearly 50 years has had no innovation, no steady employers, no training and no tangible experiences that the working population can use as a standard to gauge performance. It’s been a subsistence life for almost everyone for nearly their entire adult lives; either living in refugee camps or living under the shadow of an occupying (Northern) government intent on establishing a client state. It has not been an environment that fosters a competitive work ethic,” he explains.
Although skilled staff do exist, many are picked-up by NGOs. “There are good, hard-working, talented and successful workers in this market, but businesses will be competing with ‘non-productive’ entities (NGOs, the UN, etc) for them. This will prove expensive because the NGOs and the UN are prepared to pay a premium,” says Raad.
nvestors eyeing opportunities in southern Sudan
“Smart investors, savvy analysts and individuals familiar with emerging markets know that southern Sudan is poised to become Africa’s next best bet.”
Air Arabia’s Adel Ali says southern Sudan needs to improve its infrastructure before the region’s aviation industry can really be developed.So says David Raad and Associates (DR&A) on its website. The company helps businesses explore and undertake opportunities in southern Sudan.
Southern Sudan yesterday began voting in a referendum to determine whether to remain part of a united Sudan or become a separate state. The referendum was a core component of the 2005 Comprehensive Peace Agreement (CPA) that ended decades of conflict between the Southern Sudan People’s Liberation Movement (SPLM) and the Khartoum government.
With few industries outside the oil sector and almost non-existent infrastructure, many international and regional investors are eyeing business opportunities in a newly independent southern Sudan.
Cement manufacturers are hoping for an increase in demand from the south as the region develops its infrastructure.
Pradeep Paunrana managing director of Kenya’s Athi River Mining, producer of the Rhino cement brand, told Business Daily that southern Sudan will see considerable economic development over the coming years and that cement will be central to improving infrastructure.
East Africa Portland Cement managing director Kephar Tande said his company is also very interested in the southern Sudan market but that any investment is dependent on the outcome of the referendum.
Reuters reports that Kenya Commercial Bank (KCB) expects to double its branches in southern Sudan if the region manages to conduct a successful referendum.
One of the few major foreign investments in southern Sudan over recent years has been SABMiller’s Southern Sudan Beverages Ltd (SSBL) brewery in Juba.
The brewery produces White Bull lager and Chairman’s Extra Strong Beer as well as the Club Minerals Sparkling Soft Drinks range and Source Pure Drinking Water. SSBL has also announced it will also start production of two of SABMiller’s existing brands Nile Special Lager and Club Pilsner.
“The decision was taken to produce in southern Sudan primarily for two reasons. One, the market size had the potential to support [the] local production of beverages, and two, the investment climate was right for us to invest in southern Sudan. We are the first major multinational company to invest in southern Sudan and we have thus become the case study for anyone else to base their investment decisions on,” Ian Alsworth-Elvey managing director of SSBL told South Africa’s Carte Blanche television programme.
Kenya’s East African Breweries Ltd (EABL) is also set to establish a brewery in southern Sudan. EABL last year said that it plans to build a 700,000 hectolitre (hl) plant in Juba, which can be expanded to 1 million hl.
Many business people are, however, adopting a wait-and-see approach.
Uganda’s Daily Monitor reports that irrespective of the outcome of the referendum, many Ugandan traders will not return to southern Sudan until they can be assured of their safety.
According to the newspaper, Ugandan traders in southern Sudan have reported cases of harassment and human rights abuse by security officers and influential people in the region.
Adel Ali chief executive of United Arab Emirates-based Air Arabia told Reuters that southern Sudan needs significant infrastructure development before the region’s aviation industry can really be developed.
Air Arabia has been operating flights to Khartoum since 2004 but has no immediate plans to service the south.
Ali added that although southern Sudan’s aviation sector holds possible potential for investment, more clarity is needed on the new government’s investment plans.
Only 4.5% of South Sudan’s land currently under
cultivation
A satellite land cover survey by the Food and Agriculture Organisation (FAO) has revealed that only 4.5% of South Sudan’s available land is currently under cultivation, highlighting the agricultural opportunities in the world’s newest country.
A southern Sudanese women working in the fields of a cooperative farming project. Picture: ACT AllianceOn 9 July South Sudan gained independence after the region earlier in the year voted in favour of secession from the north. The referendum was a core component of the 2005 Comprehensive Peace Agreement (CPA) that ended decades of conflict between the Southern Sudan People’s Liberation Movement (SPLM) and the Khartoum government.
George Okech, head of the FAO in South Sudan, said in a statement that the region has an abundance of natural resources and that the agricultural sector holds great potential.
The civil war had an negative impact on agriculture. “There are cases where populations within a locality or within an area would cultivate and within no time, there would be conflict and they would run away and leave the crops behind, and all the crops would be destroyed,” Okech explained.
“The few places where there was some relative peace, people just . . . concentrated on cultivating within the homesteads. You can imagine that this was a very small area just surrounding the homestead, which was just barely enough eat. Maybe they could just afford to eat one meal a day,” he added.
Dr James Thubo Ayul, a professor in agricultural economics, last year wrote in an article for Pachodo.org, that even though South Sudan is currently a net importer of agricultural goods, the region has a good natural resource base for the production of a wide range of crops, forest trees, fisheries and livestock. He says opportunities exist for rain-fed mechanised schemes for grains and cash crops; irrigated farms for sugarcane, fruits and vegetables production and processing; dairy, pig and poultry farms; and financial services, to name a few.
South Sudan’s agriculture minister, Anne Itto, earlier in the month told reporters that the country wants to export cereals. She said the ministry of agriculture is planning to produce two million metric tonnes of cereals alone in three years time. “We only need 840,000 metric tonnes of cereal for ourselves. The rest needs to go somewhere,” she noted.
She added that other African countries should be able to import cereals from South Sudan, instead of Russia or the US.
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| The Juba-Nimule road in South Sudan. The route is one of the new country’s most heavily-travelled, connecting the capital, Juba, with a border dusty town that serves as a gateway into and out of Uganda. But it is unpaved and years of civil war had left it strewn with mines that had to be removed by a Swiss compan |
Contractors eye South Sudan
By David Rosenberg /The Media Line
The Juba-Nimule road in South Sudan. The route is one of the new country’s most heavily-travelled, connecting the capital, Juba, with a border dusty town that serves as a gateway into and out of Uganda. But it is unpaved and years of civil war had left it strewn with mines that had to be removed by a Swiss company
If one wants to get a sense of the challenges and the opportunities facing South Sudan, the world’s newest country, take a ride down the 190km Juba-Nimule Road.
The route is one of the country’s most heavily-travelled, connecting the capital with a border dusty town that serves as a gateway into and out of Uganda. But it is unpaved and years of civil war had left it strewn with mines that had to be removed by a Swiss company. Today, it takes eight hours to make the journey.
Louis Berger Group, an American company, is now paving the road for the first time ever, thanks to funding from USAID. When the $225mn project is complete in 2012, travel time will be a mere two hours. The new route could cut the cost of delivering goods and encourage new businesses to develop to serve travellers and take advantage of easy transportation.
Less than three weeks old, South Sudan is one of the world’s least developed countries and still suffering the aftershocks of a long civil war. But as a new country hopeful about its prospects, home to considerable oil reserves and, for now at least, enjoying the attention of the world’s aid community, South Sudan also spells an enormous opportunity for contractors.
“All of South Sudan has about 50km of paved roads. That shows the lack of infrastructure. Electricity, water supply, communications, roads all need to be built. That creates opportunities for companies,” Petrus de Kock, a researcher at South African Institute of International Affairs, told The Media Line.
A country the size of France, South Sudan has just 4,000km of roads compared with 1mn for France. Its rail system consists of 250km of a single narrow-gauge track. Just 15% of the population has a telephone and almost 40% has to walk a half an hour or more to get drinking water. Schools would be crowded at 129 pupils per classroom, but only about a third of its 8mn people have ever attended school.
Moreover, the war that officially ended in 2005 is still simmering as South Sudan and Sudan are still to finalise how to split the proceeds of the petroleum that is now on the South Sudan side of the new international border. Fighting in the disputed, oil-rich Southern Kordofan state has forced more than 73,000 people to flee their homes since June 5, according to the United Nations.
But South Sudan produces about 375,000 barrels of oil per day, making it among Africa’s biggest oil patches and generating considerable revenues for the government as it tries to build the country almost from scratch. It also means that the country is strategically significant, enabling it to keep the attentions of resource-hungry China. Sudan was China’s sixth-largest source of oil imports in 2010.
The infant state’s fertile White Nile valley includes some of the richest agricultural land in Africa. Large wildlife herds could be exploited to attract eco-tourists. Furthermore, the White Nile has sufficient flow to generate large quantities of hydroelectricity.
All that holds out promise for the future, but South Sudan is also attracting foreign aid – which it needs.
Oil brought earned some $1.5bn in revenue last year for South Sudan, noted a report issued last week by the Save the Children non-governmental organisation (NGO). The World Bank estimates that developing a comprehensive road system will cost over $7bn, and that electrification of the country will be as much as $13bn.
“South Sudan’s resource needs are massive and cannot be met by oil revenues alone,” Save the Children said.
The international aid largesse is substantial. Fourteen international donors disbursed $188mn in 2010 and as of July this year had made available some $440mn out of $548mn promised, about half going to infrastructure projects such as construction of a liquid waste treatment plant, 25 new school buildings and 513km of new roads.
According to the US Central Intelligence Agency, South Sudan has received more than $4bn in foreign aid since 2005.
With the money from aid and oil flowing in, South Sudan’s capital of Juba has turned into a boomtown. It population has more than doubled in the past six years to approximately 375,000, swelled by refugees as well as by opportunity.
Businesses have come as well, mainly from neighbouring African countries such Uganda, Ethiopia and Sudan itself. China National Overseas Engineering Corporation is also active. Others are looking to join. Besides roads and schools, other opportunities for business include helping foreign oil companies move their facilities from Sudan to South Sudan and building a new capital.
“The country has to be built from scratch, that’s why we must seize opportunity and find our place in South Sudan’s economy as soon as possible, with far-reaching intentions,” Russian President Dmitry Medvedev’s special envoy to Africa, Mikhail Margelov, said last week.
Besides continued violence, the big challenge facing South Sudan will be managing all the aid money and the private sector organisations that are now tripping over themselves to fund and manage projects, said de Kock of South Africa.
For instance in education, there are no uniform rules and non-governmental organisations (NGOs) teach curricula based on varying standards. South Sudan doesn’t have laws governing public financial management procurements or auditing, noted the Save the Children report. There is a big risk that money will be squandered or stolen.
“There is a bit of chaos right now. A huge complaint in South Sudan is corruption. There aren’t any set out procedures – if you want to provide a service to the government, or bid for contract from government, this is how you do it,” said de Kock “This has to be developed now.”
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