98% of South Sudan’s revenue is from oil, which has historically been transported through Port Sudan in Sudan (North). As this document is being prepared (03/28/2012), South Sudan has not been selling any oil after shutting down its 329 operational oil wells on January 20, 2012, due to a disagreement with the North on tariffs per barrel of oil exported through Port Sudan.
The result is that there are no Foreign Exchange earnings from exports, and the government has effectively halted the selling of dollars on the market to hold on to its reserves. South Sudan employs a fixed exchange rate and the legal currency is the South Sudanese Pound (SSP), currently trading at an unofficial rate of 4.5 to the Dollar, well above the official rate of 2.95 SSP. South Sudan could suffer without revenue until a new oil pipeline is built, which could take at least four years, and may exhaust its currency reserves, estimated at USD 1-2 billion, before the end of 2012. The primary impact on the economy has been the resulting lack of dollars to procure goods and services, which are primarily imported. It also implies that the government, which in many countries is the number one ‘consumer’, has no money to spend. For foreign businesses, lack of dollars in the market makes it difficult to get paid in a currency that is easy to trade on the global market.
The population of South Sudan is estimated at 10.6 Million (July 2012 projection), with a large majority involved in agriculture. The majority (53.3%) is between 16-64 years old, with an urban population of 22% (2009 Estimate).
As the capital, Juba is one of the busiest cities in South Sudan, serving as a key entry point into the region through Juba International Airport. Juba is in the Central Equatorial State (CE), one of ten states in South Sudan. Other major cities include Yei (“yay”), which is a key trading hub and transit point for goods coming in from Uganda and Democratic Republic of Congo, City of Wau (“wow”) that is in the upper Mid-West region, and Malakal which is in the North East region. The Green Belt that consists of the East, Central and Western Equatorial states is largely considered trouble free.
Public Private Partnerships (PPPs) are acceptable ways of doing business in South Sudan, especially Juba. The government and local council are open to discussing PPP’s in priority areas such as energy, roads, housing and services. There are many factories including cement and sugar factories that were destroyed during the war, and have capacity to be revived. These would be the low hanging fruit in terms commercial opportunities.
Land: Much of the vast land available is owned by the communities that live there. While there is no streamlined means of registering land and entitlement, it is still possible to engage the community and get consent to operate, farm, or build on a given piece of land. This has caused many people to construct temporary or semi-permanent facilities over time, owing to the fact that they have never really gained title to the land, despite permission from the local community. Banks and financial institutions are willing to finance investments and local businesses; however, land title remains a challenge and is not effective collateral. The positive side is that as long as the community has provided consent, there is significant comfort that one can continue to operate.
Laws: There is a backlog of laws that need to be passed despite the fact that the Business Community has managed to get up to 17 laws passed last year, through the South Sudan Chamber of Commerce Industry and Agriculture (SSCIA), and is pushing for another 17 laws to be passed this year (2012) for land, investment, and limited companies, among others that are considered critical to improve the investment and business environment. The sanctity of contracts is still a challenge.
Labor: The feeling on the ground is that to succeed in business in South Sudan, you need to roll up your sleeves, get on the ground and do it yourself. Local sources explain that because Sudan is a war torn country that has spent years in conflict, much of the population has not had a chance to work or to develop a work ethic. Consequently, although the people are warm, friendly, and very welcoming, it may be a challenge for U.S. investors to find and develop pro-active local staff to run their local offices in South Sudan. The executive teams driving the economy and government (ministers, government staff, and some of the prominent business people) are mostly ex-military, who have travelled or studied abroad (East Africa, South Africa, America, Europe), and have returned to South Sudan to rebuild their nation.
Infrastructure: With an estimated 60KM of paved road, most of which is one long stretch cutting across Juba, road infrastructure is badly needed. Arterial roads within the cities are made of compacted murram with similar surfaces as the roads that lead to the regions and towns outside of the cities. This hinders commercial farming especially when it rains (6-8 month rain season), as the roads become impassable. Running water is scarce, and electricity is diesel generated and inconsistent. Most businesses run on generators for most of the day.
Equipment: With vast tracts of arable fertile land (90% of the land), agricultural equipment will be necessary to speed up clearing, plowing, and harrow the land to prepare it for planting. The cost per acre for small scale farmers is SSP 300 (USD 100) to clear shrubs and trees, SSP 150 (USD 50) to plough, and SSP 120 (USD 40) to harrow. These costs are steep for the average South Sudanese; however, manual labor would take too long to achieve the same results as mechanized farming.
Best prospects and growth sectors:
Agriculture: This is a top priority sector and is expected to become one of the key growth sectors for South Sudan. South Sudan has an abundance of land 90% of which is fertile and arable. The Green Belt covers Eastern, Central and Western Equatorial states, which have adequate rainfall, and vast untouched swaths of land. The Nile River meanders along the landscape furnishing bountiful opportunities for irrigation schemes. Moreover, South Sudan has a long rainy season that lasts 6-8 months, and provides adequate rainfall for rain fed agriculture. Due to past experience with chemical inputs leeching into the water table, much of the agriculture in the region is organic. Opportunities include agricultural equipment, certified high quality seed, and organic inputs. Training is also required as the government is not offering extension services to assist farmers. In November 2011, the United States Agency for International Development (USAID) supported the first agricultural trade fair in Juba, South Sudan. National and international entrepreneurs gathered to learn about opportunities in agriculture, fisheries, livestock, and forestry.
Telecommunications: South Sudan has had scattered telecommunications services for a long time, beginning with satellite phones and VSAT services, and now has around three mobile networks in operation. The mobile services are not very reliable, likely due to a small foot print that the mobile providers have. The majority of government staff relies on free-mail services to access the Internet. Foreign and aid missions have always relied on VSAT services to access internet and communication.