Can southern Sudan become a serious business destination?

“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.

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.