27 September 2012

South Sudan: Sudan Dispute With South 'Not a Big Issue' for Investors

Photo: IRIN
Oil well drilling pits (file photo).

Investor interest in South Sudan is undeterred by dispute, claims Aggrey Tisa Sabuni, presidential adviser on economic affairs for the government of South Sudan.

Just over a year ago, South Sudan officially broke free from the shackles of its northern neighbour, and its prospects appeared bright. The country had two thirds of the region's oil, and boasted an on-paper GDP per capita double that of Kenya. But disputes of oil transit fees through Sudan, including a brief military occupation of a contested region, culminated in a decision by South Sudan's government to shut down its production, estimated at around 350,000 barrels a day. Donors and external advisers predicted calamity. Aggrey Tisa Sabuni, presidential adviser on economic affairs for the government of South Sudan, told This is Africa that investors have cooler heads.

"I wouldn't say the attitude or the concerns of prospective investors is unaffected by the ongoing relationship between Sudan and South Sudan, but this is something everybody knows will sooner or later be addressed," he claims. "Relations between the two countries will be sorted out, to the benefit of both sides. This should not be a big issue."

Yesterday, after three weeks of talks in Addis Ababa and the threat of a UN sanction, Sudanese President Omar Hassan al-Bashir and South Sudan's Salva Kiir are said to have confirmed a border security deal to create a demilitarised buffer zone and resume oil exports. But previous such agreements have later been tossed out, and the two sides have still failed to agree the fate of five border regions, including the contested Abyei.

Money is pouring in anyway. "So far we have operators from Asia, mainly China, Malaysia and India. Total is coming back, and we are talking to the Americans so that Chevron and any other American oil company can come back and get a foothold. And we are identifying more blocks so that as many actors as possible get attracted," he says. The non-oil sector is also drawing interest, especially copper, iron and gold, and arable investment is forthcoming. "We are receiving in Juba prospective investors from Europe, from the US, as well as the Middle East Asia. They are coming from around the globe". Even investors from arch foe Sudan are "waiting in the wings", he said from the sidelines of Growth Week, the annual conference of the International Growth Centre.

Investment may also quicken on the back of South Sudan's expected accession, this November, to the five nation East African Community (EAC), comprising Kenya, Uganda, Tanzania, Rwanda and Burundi. "There will be a lot of demonstration effects, and better technology and innovation will be forthcoming" he predicts. But Mr Sabuni also acknowledges the risks of joining a union which disintegrated once in 1977 in part over perceived inequities in the spoils. Immigration is one hot potato. "Given our low capacity, we may face difficulties in terms of labour," Mr Sabuni notes. Educated entrepreneurs from surrounding countries are keen to access the opportunities of a newly forming state.

Immigration, while potentially raising the skills base and productivity of the economy, "might give rise to complaints internally," he says. The adviser also notes that domestic industries may struggle to compete against "better organised, better established manufacturing enterprises and capacities in members," a common danger of economic unions. But Mr Sabuni notes the upsides. "There is going to be transfer of skills which are badly needed to build the country," he predicts.

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Oil well drilling pits (file photo).

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