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Why Sudan?

 
 

Introduction to Southern Sudan

Described as the last unexplored region in the world, South Sudan is trough-like shaped by highlands, mountains and hills at its eastern, southern and western borders. Covering an area of just over 330,000 sq. miles (over 660,000 sq. km), or about one third the size of Western Europe, it has numerous streams, seasonal and all-season rivers flowing into the central trough from the bordering mountains, hills and from the forests of the Congo-water divide that disappear under a canopy of greenery and the expansive vegetation of the Sudd, the largest grass swamp in the world.

Significantly, is the White Nile, which enters South Sudan at Sudan-Uganda border town of Nimule, thundering through forested hillsides, rocks and cataracts before slowing down as it approaches to the South’s main city of Juba, Central Equatoria state.

At the town of Bor, Jonglei State it branches out and practically disappears under the Sudd to re-emerge just before flowing past the provincial city of Malakal. It flows out into the open grassland and scattered woodland, across the border into Northern Sudan, where it joins the Blue Nile at Khartoum to form the River Nile that flows on to Egypt and into the Mediterranean.

In spite of the Sudd and floating vegetation, the White Nile is navigable throughout the year from Juba to Kosti in Northern Sudan.

The Peace Process and Political Situation

The Comprehensive Peace Agreement (CPA) signed in Nairobi, Kenya, on 9th January 2005 ended the 21 year old civil war that pitied South Sudan against North Sudan.

The CPA allowed for the Constitution of the Sudan for the Interim Period. The Government of National Unity (GONU) and an appointed National Assembly was set up in Khartoum. In addition, the Interim Constitution for South Sudan was passed by an appointed Assembly of South Sudan.

The Government of Southern Sudan (GOSS) is established in Juba, Central Equatoria State, along with the Assembly of Southern Sudan. The governments of the ten southern states and their parliaments are also established in the capitals of their individual states.

To date, refugees and internally displaced populations are streaming back to non-existent homes in the south while the local and international communities are doing their best to accommodate the returnees. The first official repatriation carried out by the United Nations High Commission for Refugees, UNHCR, out of Kenya took place in December 2005.

SPLA troops have withdrawn from the North while most of the Northern troops have also bee redeployed in the North.

Equal numbers from SPLA and the Northern troops have been integrated to form a national armed force; and while most of these joint integrated units (JUI) are based in the South, some of them are based in the North, mostly in Khartoum.

Landmines have been removed from the main roads linking Juba to East Africa. However, de-mining is on going around other towns and roads.

Economic Prospects & Risk Assessment

Sudan’s long-term economic prospects have improved markedly in recent months. Marketresearch.com have revised upwards the estimate for real GDP Growth in 2009 to 4.3% from 3.2% previously, primarily to the broad uptrend in oil prices and sustained period of global risk appetite seen over March-September 2009. Growth is expected to come in at 6.1%in 2010, and average 5.1% annually over 2011-2014.

There were significant levels of political uncertainty surrounding the April 2010 national elections which ran relatively smoothly and without incident.  This has enabled South Sudan to continue its state building efforts and has provided some degree of security for both investors and donors.

The ex-rebel SPLM’s newly united front with other opposition factions in Sudan increases its bargaining power with the ruling National Congress Party (NCP) and may ultimately bolster its prospects for securing a successful pro-secession vote in oil-rich South Sudan in 2011.

Things are looking more positive for foreign relations. President al-Bashir’s ruling NCP appears to be reaping benefits from an amelioration in the situation in Darfur, in terms of its relationship with Washington and consequent bargaining power with existing rebel groups and South Sudan’s ex-rebels.

On the economic front, growth outlook has brightened significantly thanks to improved prospects for oil production. Previously the sector was expected to begin contracting in 2010, BMI’s oil and gas analysts are now forecasting a continued expansion of output over 2009-2014, thanks to enhanced oil recovery programmes, which are achieving some degree of success with mature fields, the discovery of new reserves, and ongoing investment, especially from Asian companies.

Main drivers of the economic growth:

In addition to oil exploration initiatives, Southern Sudan’s larger cities Juba, Wau, Rumbek and Malakal are  experiencing unprecedented, economic growth primarily in construction, hospitality, telecommunications and commercial trade.

Oil Exploration & New Oil Production:

Sudan is the third largest oil producer in sub-Saharan Africa after Nigeria and Angola.  Oil remains the main driver of growth although agriculture still accounts for more than one third of GDP and nearly two-thirds of employment.  Oil accounted for 22% of GDP in 2008 and oil revenue has contributed greatly to the reconstruction of the economy in the aftermath of the civil war, especially in enabling the government to develop the road and energy infrastructure. 

Southern Sudan already produces 70% of Sudan’s 490,000 barrels of crude per day in 2009, slightly higher than the 475 000 bpd in 2008 and it is expected to reach 600 000 bpd in 2011.

Sudan’s oil exploration prospects are positive based on a high success rate of 58 productive wells out of 400 drilled so far. As new concessions are awarded, exploration companies are expected to invest tens of millions of dollars on seismic studies, well drilling, establishing new fields and installing the infrastructure required to move the oil from the producing areas. These labour & capital intensive activities will feed significant amounts of money into the South Sudanese economy.

Reconstruction Finance:

The largest funding mechanism in Southern Sudan is the Multi Donor Trust Fund (MDTF), administered by the World Bank. 14 donors have pledged $650 million to the fund. Mandated by the CPA, the MDTF allocates funds against priority national programmes, implementation of which is contracted out to the government and UN actors, the private sector and NGOs. Monies provided are matched by government contributions.

The UN is responsible for a range of funding mechanisms in Southern Sudan, including the Common Humanitarian Fund (CHF), a pooled fund worth around $150m a year, and the Sudan Recovery Fund (SRF), both administered by UNDP.

Bridging and recovery funds such as DFID’s Basic Services Fund (BSF) and the European Union (EU)’s Recovery and Rehabilitation Programme (RRP), a three-year, €50m livelihoods initiative administered by UNDP, have made important contributions to supporting service delivery through NGOs. Acting on the recommendations of NGOs and others, DFID decided in late 2008 to strengthen and expand the BSF into a new multi-donor fund with greater GoSS involvement. In Phase II (January 2009–June 2010), the governments of the UK, Norway, Canada and the Netherlands are providing a total of £28m, with a greater focus on building local government capacity.

The EU is also considering doubling its allocation to the RRP by providing an additional €50m, extending its timeframe and programmatic scope, inviting contributions from other donors and making UNDP compete for the management tender.

Returning Refugees:

Many of the refugees that left South Sudan during the war have acquired commercial skills and capital in their host countries and will apply these assets to developing businesses in South Sudan.

Foreign Investment:

Oil production and to some extent the service sector remain the main drivers of growth in Sudan. There has been significant business growth and development as investment interest has grown since the signing of the CPA and a number of new players have entered the market place.

Active Oil companies:

White Nile, Total, Shell / BP, Petronas, Talisman Energy Inc, Lundin petroleum, China National Petroleum Corporation (CNPC), Sudan National Petroleum Corporation (Sudapet), Greater Nile Petroleum Operating Company (GNPOC), PetroSA, Petrodar Operating Company Limited (PDOC), Advanced Petroleum Company (APCO), Higleig Petroleum Services and Investment Group (HPSIG), ONGC Videsh Limited (OVI), Greater Nile Oil Project (GNOP).

Airlines:

Astral Aviation, Ethiopian Airlines, Kenya Airways, Sudan Airways, Egypt Air, Bellview Airlines, Southern Sudan Airlines, East African, Fly 540, African Express, Southern Sudan Air Connection (SSAC), ALS Limited, Eagle Air, Marsland, Dairo Air and Jetlink.

Banking and insurance companies:  

Kenya Commercial Bank, Nile Commercial Bank, Ivory Bank, Omdurman National Bank, Faisal Islamic Bank, Buffalo Commercial Bank, Sudan Microfinance Institution, Finance Sudan, Renaissance Insurance Company South Sudan, National Insurance Company, UAP Insurance Sudan

KCB (Kenya Commercial Bank) has signed a $ 452 Million Contract with GOSS to build housing units for civil servants.  A KCB mortgage subsidiary, S&L, will construct some 1750 housing units. The project is being constructed in the State of Central Equatoria which has given the land for the project. 

Ivory Bank moved its headquarters from Khartoum to Juba following a pledge of USD 11 million in financing from the government.

Brewery and Soft Drink Manufacturing:

SAB Miller have established a $ 40 million brewery on the outskirts of Juba and more recently, together with the World bank have expanded, having developed a $ 20 Million soft drink plant.  Both are currently operating at full capacity.

Mobile Telecommunications:  

Lebanon’s Fattouch Investment group, launched Vivacell Mobile Network in February 2009.  They join the stable of mobile offerings from Kuwait’s Zain, South Africa’s MTN and Sudan’s Mobitel and Uganda’s Gemtel network offerings.

Agricultural Opportunities:  

High food prices have triggered a renewed interest in the investment opportunities in commercial agriculture, and for all its infrastructural and political challenges.   Southern Sudan does have potential for large-scale agricultural production and pilot sorghum, maize and abattoir projects are already underway.  It is encouraging to note that GOSS have launched a special agricultural investment programme to attract investors, including 8 to 32-year renewable land leases, tax-free imports of tractors, seeds and other farming materials.

Recent Article in Indian Ocean Newsletter:

The American Senator John Kerry has tabled a bill to facilitate US aid and investment in South Sudan. We focus here on the several firms that have anticipated it.

As the date of the South Sudan self-determination referendum in January 2011 draws closer, the number of American companies inching in has risen. Phil Harris, the CEO of Ayr Logistic, is a kind of precursor, as he has already been to Juba several times, when he met with President Salva Kiir and his ministers. His company has been mandated to find funding for the railway line between Juba and Tororo, Uganda. After his company's unhappy experiences with an aborted projected in Iraq, John Infantino, the CEO of Federal Africa Development, went to Juba at the beginning of 2010 to propose an ambitious plan to build housing.

Through a five year contract it won in 2006 from the US Agency for International Development (USAID), the Louis Berger Group has the upper hand on studies concerning transport in South Sudan. For his part, Kenneth Hynes, the head of the Massachusetts based OTF Group, has been advising the Juba government for several years and his company has just won the contract for a study on the expansion of private agriculture in South Sudan.

Two experts from the Washington based International Foundation for Electoral Systems (IFES) - the Frenchman Jérôme Leyraud and the American Darren S. Nance - will participate in the organisation of the South Sudan self-determination referendum. On the lobbying side, Independent Diplomat, a consulting firm created in New York by the former British diplomat Carne Ross, is on the ball. It has a representative in Juba in the person of Philip Winter, a former advisor to the United Nations Organization Mission in the Democratic Republic of the Congo (MONUC).

If it is passed by the US Congress, the Sudan Peace and Stability Act of 2010 defended by the chairman of the US Senate Committee on Foreign Relations, John Kerry, will open new fields for American companies. To be sure, this bi-partisan bill proposes to authorise aid to security forces, civil aviation and the Juba police and also to lift the sanctions on oil transport in South Sudan.

 
 

 
Map of Oil and Gas Concession Holders

 
   
   
 
  
  Sources:

  www.jubapost.com
  www.sudantribune.com
  www.ratio-magazine.com
  www.gurtong.net
  www.africaneconomicoutlook.org
  www.marketresearch.com