Who Rules South Sudan: Petroleum versus Foreign Investment?
6 min readBy Malith Alier
South Sudan this month organizes investment conference (December 4 -5) in Juba for the first time in its existence according to the Citizen Newspaper 3rd December issue. The conference is under the theme “Investment for Economic Diversification and Prosperity” The country organized such investment conferences outside for example in Europe and America.
This is a possible solution to too much reliance on unsustainable petroleum since the era of CPA. The black gold was discovered in South Sudan in the late seventies however, the actual exploitation began around 1999.
It is believed that Khartoum developed to the level it is today thanks to the Southern oil. On the other hand, the South did not benefit much because of many factors; the raging war (from 1983-2002) in the South and the rampant corruption after CPA to present. The warlords were quenching their material thirst in a lawless environment.
Direct foreign investment was discouraged by insecurity and bad governance during peace time. Interestingly, the country has since seen influx of individuals from unstable neighbouring countries like Somali, Ethiopia and Eritrea. Others are from Kenya and Uganda besides those who elected not to return to the remaining portion of old Sudan after separation.
South Sudan is a country of possibilities. It has expansive endowments under and above the ground. It has only to do away with lots of its past like insecurity, backwardness and laziness if it wishes to shed the failed state tag of 2013, the same year the investment conference is organized.
Resource blessing or curse
Very few countries in Africa are able to fully benefit from natural resources without much ado. South Africa and Botswana are the case in point. The rest have encountered trouble as they exploit natural resources. The likes of Angola, DRC, Zimbabwe, Libya, Nigeria and many more are in this category.
South Sudan has therefore, many lessons to learn from these spectacular failures to properly manage her resources in the best interest of the country.
It is a commendable idea that south Sudan has edged closer to Botswana, a country that has a lot to impart to it. The country’s president visits the Southern African country this year, 2013 on the invitation of his counterpart, Mr. Ian Karma. The Botswana president pledged to help South Sudan in the area of mineral development and management for economic development.
Our black gold is either a blessing or a curse depending on the way it’s managed. It is a blessing because God gave it to us directly under our feet. We have to enjoy full benefits from it with no external interference.
Various shortcomings prevent us from enjoyment of those exclusive rights; the issue of infrastructure, technology and skills suitable for proper petroleum and mineral management. The country has to look outside for them but in the process, it loses revenue.
It pays transit, processing and handling fees to the Sudan, an amount of 49 percent of total revenue. This was disclosed by the Ministry of Petroleum and Mining after resumption of production this year. Further, the Chinese, Malaysian and Indian companies working in the oilfields deduct their dues.
This means that south Sudan is left with about 20% out of this resource. This is no laughing matter. If this country was like a child as many politicians always say, it could keep crying for this unimaginable robbery by the Sudan and oil companies. But there is no immediate way out.
A production stoppage in 2012 almost brought the country down on its knees. The SPLM let government called for austerity regime and further embarked on massive borrowing. The Minister of Finance and Economic Planning under pressure to pay government employees salaries only disclosed this borrowing in November 2013. The loan is a little over forty million US Dollars.
Lack of foreside is to blame in this country. It was fully anticipated that separation was eminent. This was a fact after the copter crash that killed the only supporter of unity.
Mini oil refineries should have been started during interim period. Failure to have constructed these mini refineries has not only deprived the country of domestic fuel production but it also deprived it of petroleum by-products. The country continues to import petroleum byproducts like jelly and creams in addition to diesel and petrol for domestic consumption.
The mining industry has many suitors due to its demand worldwide. A company called White Nile was among oil firms to arrive in South Sudan. This author at one point in 2005 condemned potential early investors for oil rush but neglect agriculture and other investment areas other than oil.
Foreign investment climate in South Sudan.
South Sudanese complain about foreigners having dominated some sectors of business. The Ethiopians/Eritreans dominate restaurant and hotel businesses on the one and Somalis in oil and building material enterprises. The Nile water tank business which does not need a large outlay of capital is also a preserve of the Ethiopian groups. In the process the nationals are left waiting on end for salvation from their government.
In this world of cutthroat competition, it doesn’t matter whether it is nationals who are the most industrious or the foreigners. It comes down to hard work and ambition. South Sudanese can benefit from foreign investors if they pay attention to methods of doing business. Time cannot wait for them indefinitely.
Immediately after signing of CPA, observers of this country before, and during the war agreed that any investor cannot go wrong if they invest in any business here. This is true because the country lacks everything since Adam and Eve.
Look around and you will see virgin land, green forests, abundant wildlife, plenty of fish in the Sudd, innumerable cattle and the list is long. What is even perplexing is the size of the population compared the vast land. According to the last census, the total population of south Sudan was put at 8 million. If the land size is about 600,000 km2 then it is thirteen (13) people per square kilometre. Kenya, Ethiopia and Uganda population density are 67/km2, 82/km2 and 137/km2 respectively.
You can see that our neighbours have overcrowded their motherlands. The Ugandans and Kenyans are close to forty and fifty million respectively. The Ethiopians are over 90 million. Somalis have been displaced by wars. Therefore, south Sudan can absorb the spillover from those countries.
The above-mentioned early investors have proved that south Sudan is a viable investment destination in the world. It can take less than seven days to register your business. The foreign currency e.g. the US Dollar is not a big issue since the country exports petroleum. The investors have a choice either to bring manpower from their countries of origin or get local labour. Many Ethiopian/Eritrean businesses bring their countrymen as work force. Although this cause uproar, it is convenient to the investor.
South Sudan image within and abroad
South Sudan is ranked among the most failed states in the world. It ranked 4th as the most failed state after a number of other countries all in Africa (Fund for Peace) The country is not doing any better on corruption perception index. It ranked number 173 out of 177 countries on that index (Transparency International). It was unranked in 2012 maybe because of difficulty ascertaining information just after independence.
A failed state is regarded as having no control over its territory, erosion of legitimate authority to make decisions, inability to provide services to the citizens and finally inability to interact with other states as part of international community. South Sudan is doing fine on many of these points. It has gained membership in many international organisations such as the UN, AU and is seeking membership in East African Community. This is for the sole purpose of interacting with other states economically, culturally and diplomatically. It provides services to citizens in the whole country. It has established public sector and governmental institution for service delivery.
Service delivery is the new mantra in the government vocabulary today. The presidency is driving it.
You can reach the author, Malith Alier, through his E-mail : alierabe21@yahoo.com.au
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