Big oil-producing countries have faced a double-hit in recent months: the sudden drop in prices of oil and the economic impact of the global pandemic. In the case of Angola, which entered both crises with an already weakened economy, how are its prospects looking? The Africa Report speaks to Sergio Pugliese, the Executive President for the African Energy Chamber (AEC), to find out.
South Sudan: Open for business
Tensions are still high between Juba and Khartoum, but the creation of the new state of South Sudan on 9 July means vast business opportunities for foreign and local investors
From the air above Southern Sudan, the land looks mostly untouched. All the way to the horizon, the landscape is scorched plains and scrub brush. Occasionally, a thatch-roofed hut, a small village or town will come into view. From this vantage point, the rest is open land cut only by meandering dirt roads.
There are no equatorial jungles or impassable mountain ranges hindering settlement. Instead, almost 50 years of war with the government in Khartoum and a larger history of neglect brings Southern Sudan to its 9 July independence – when it is expected to take the name Republic of South Sudan – as one of the least developed places on earth.
Very little has been done to begin extracting the gold, diamonds, oil, uranium and who-knows-what-else the soil of this largely untouched region holds. Now the government is struggling to face the task of creating the public institutions and private sector that are needed in order to see the tangible benefits that peace and independence are expected to bring.
The French giant Total, the Malaysian state-owned Petronas and the China National Petroleum Corporation (CNPC) all have offices in Juba but little new exploration has begun. Petronas and CNPC have contracts with the northern government, contracts that the south has promised to honour.
Once the south’s state-owned oil company, Nile Petroleum, takes over from its northern counterpart Sudapet, the south will have the chance to provide the personnel to work its oilfields. But a move in April by the government in Unity State to expel all the northern workers from its oilfields demonstrated the oil companies’ reliance on the north for skilled labour. “Production will stop, the whole thing will stop,” says George Odyoro, Petronas’ liaison officer in Juba. “It will hurt both sides, both governments.”?
The only large investor that has come into Southern Sudan and started production since the peace agreement is a subsidiary of SABMiller, the giant South African beer producer. Seen as a symbol of freedom from decades under sharia law imposed by the north, the beer maker’s local branch, Southern Sudan Beverages Limited (SSBL), arrived in the capital, Juba, shortly after the two governments signed the Comprehensive Peace Agreement (CPA).
“I don’t think it was a hard choice. I think the fact that we came then has given us a huge advantage, in particular in getting our brands established,” says Ian Alsworth-Elvey, managing director of SSBL.
Alsworth-Elvey negotiated a profit-sharing deal with the community around the brewery in 2007 and started production in 2009. He works in a fenced-in compound on the edge of town, with two silver tanks looming over the offices and living quarters that were among the first permanent, non-government buildings constructed in Juba. SSBL employs more than 300 Sudanese and 11 international staff. “We’re not planning on going anywhere, we’re here for the long term,” says Alsworth-Elvey.
According to the Doing Business report released by the World Bank and International Finance Corporation in May, South Sudan has “substantial economic potential” with “vast oil reserves and swathes of fertile agricultural land” waiting to be developed.
Since the war ended with the signing of the CPA in 2005, Southern Sudan has been largely autonomous. The government has had six years to start the development process, yet paved roads do not extend beyond Juba, and it continues to import all of its food from neighboring countries like Uganda and Kenya.
“How is it that six years later we still import everything on this plate?” asked Peter Lasu Ladu, head of the independent coordinating body, South Sudan NGO Forum, as he poked at a plate of chips and salad. “Anybody with any sense can see there is something wrong with this.” For Ladu, and many other observers in Juba, the lack of a private sector is a sure sign of official corruption.
Southern Sudan’s government has been receiving half of the oil proceeds from the government in the north since 2006. At independence, it will take control of about 75% of Sudan’s estimated 490,000 barrel-per-day oil industry. No one is quite sure how much money has come to the south’s coffers through the revenue-sharing arrangement. A 2009 report by Global Witness estimated the oil revenue sent southward between 2005 and 2009 at about $6bn.
The south does have an anti-corruption commission. But it has no power to prosecute and there have been no high-profile officials tried or publicly denounced for corruption as a result of the commission’s investigations.
According to the World Bank’s report, it is a lack of infrastructure, laws and institutions that has stymied business development. For those companies looking to invest, it is still not clear what the rules will be after independence. The report says that since 2005, 19 business and investment laws have been drafted in the south, but only nine have passed the legislature. It ranks Southern Sudan 159th out of 183 economies in terms of the ease of doing business.
Banking and telecoms companies, especially, are anxious to see what new regulations will bring. Mobile phone companies VivaCell and Gemtel are focused solely on the south, while Zain, MTN and Sudani operate in both north and south. Meanwhile, East African banks, especially Kenya’s Equity Bank and KCB, have been keenest to set up operations in Southern Sudan. The country is landlocked, so moving goods across borders is of key importance. In this category in the World Bank report, Southern Sudan is ranked 181st, ahead of only Afghanistan and the Central African Republic.
“Using the port of Mombasa in Kenya, it takes an entrepreneur in Juba 11 documents, 60 days and $9,420 to import a standardised container of cargo, and nine documents, 52 days and $5,025 to export it,” states the report. Juba is absolutely reliant on trade with the outside world.?
“We are not producing anything, so we rely on imports from our neighbours,” said Kuot Madhor, director for external trade at Southern Sudan’s ministry of industry and commerce. Madhor’s ministry works to attract foreign traders. Most of those coming in so far are small-scale investors from Eritrea, Uganda, Kenya and Ethiopia. The government has tried to make investment attractive.
“We already have our own trade policies. They can import heavy equipment tax-free, they don’t have to pay taxes before they’ve had time to make back their initial investment and there are no restrictions on capital leaving the country,” says Madhor.
Yet big investors are staying away, most citing doubts about security, he says. According to the United Nations, there are at least seven militias fighting the government. About 1,500 people have died in violent clashes in the south this year, and the May takeover of the disputed border area of Abyei by the northern army has raised fears of a return to war.
South Sudan’s government will most likely continue to fund itself through oil revenues for years to come, but the border area, where most of the insecurity is centred, also happens to be the likely site of future oil finds. Still, backed by donor countries and international investors, the government has talked about ambitious plans to build new roads, rail lines and dams to build up the country’s infrastructure network (see map).
Besides SSBL, there are no other large foreign investors establishing a noticeable presence in Juba. But a different kind of investor, smaller and with an understanding of how things work, is setting up shop around the capital.
Frank Cawkwell left his job with the World Food Programme a few years ago to get into business in Juba. He runs one of the region’s few grocery stores and is working to build a massive residential development, attached to a yet-to-be-built Nile River port, called Luri River Waterfront.
His first rule on investing here is to find a local who can help navigate the culture. “You need to find yourself a Sudanese partner,” he says. “It’s not compulsory, but it’s wise.” His partners include Benjamin Bol, head of the south’s chamber of commerce, who is also a son of the south’s vice president Riek Machar. Still, the process that they went through to get the land, based on a traditional system of land tenure, was “quite tedious,” New Zealand-born Cawkwell says.
“We brought four of the community leaders down from Khartoum, negotiated to lease the land from the community, and then we made them partners in the project,” says Cawkwell.
The south has a land ownership law designed to keep the land in the hands of Sudanese people. But a survey published in March by Norwegian People’s Aid found that Southern Sudan is seeing large swathes of land being bought by foreign organisations. The biggest of these is the 2.3m ha in Eastern Equatoria State that Emirates-based Al Ain Wildlife purchased from the ministry of wildlife. It contains the whole of Boma National Park. Besides purchases for tourism, foreign organisations have either bought or are in the process of buying 2.64m ha of land in Southern Sudan between 2007 and 2010: that is a larger area than all of Rwanda.
The survey of land purchases highlighted one of the complications of doing business in Southern Sudan. Some of the land bought was in agreement with the central government in Juba, while some was acquired through ministries at the state level. The survey noted a few large land purchases that overlapped with already-owned land and deals where it was unclear which government body approved the transfer. Some of the deals include a large teak forest in Western Equatoria, bought through agreements with the forestry and agriculture ministry, and an agricultural land deal by a US-based company in Central Equatoria State through the state ministry of physical infrastructure.
Most of the purchases identified in NPA’s survey are for large-scale agricultural projects. Developing food production in the south is a top priority of the transitional constitution that takes effect on 9 July. The region’s southern half has the potential to produce enough food for export to African neighbours and beyond.
It is, however, not clear that the investors coming to check on opportunities in the south have much interest in becoming farmers. As one western businessman who has come to the south to expand his business put it, “Most everybody I see coming in right now is just here to make a quick dollar and then get out.”?
About 2 million Sudanese people have come back from East Africa, Khartoum and overseas since 2005. Every day in hotels and restaurants around Juba there are meetings among young men and women discussing different ways to invest. To most people with an eye for business, the possibilities in the nascent Republic of South Sudan are practically endless.