S. Sudan development promises to yield lucrative contracts

By Edmund Sanders, The Los Angeles Times

RUMBEK, Sudan, July 21, 2005 — There’s a new breed of adventurer invading this remote African village. They pour in every day at the red-dirt airstrip, camping in tents at a makeshift hotel and venturing out to inspect the bush, interact with locals and, with luck, bag what they most covet.

A southern Sudanese crew repairs roads in the provisional capital of Rumbek. Reparing infrastructure is a priority of Sudan People’s Liberation Movement. (AFP).

The prize they seek isn’t a black rhinoceros or a white-eared kob. These are investment safarists, and their prey here is a lucrative construction contract, an oil deal or any piece of the multibillion-dollar pie about to be handed out among investors in southern Sudan.

With a new peace deal between southern rebels and Khartoum and the July 9 inauguration of a coalition government, international donors are preparing to pump more than $2 billion into southern Sudan, a bleak, underdeveloped region still largely devoid of asphalt roads, running water and electricity.

A new semiautonomous southern government, led by the formerly rebel Sudan People’s Liberation Movement, plans to spend $1.5 billion more annually on construction, courtesy of an oil-revenue-sharing agreement with the north.

The giant development plan – one of the most ambitious in the world outside Iraq – is drawing an army of would-be investors, speculators and contractors, who are rushing to the designated southern capital, Rumbek, in search of opportunity.

“If you want to do work in south Sudan, now is the time to be here,” said Kibiro Wagaca, a Kenyan builder who sees a niche in constructing homes for the scores of foreign aid workers coming to Rumbek.

During a recent visit to the city, Wagaca roamed the dirt roads, a tape measure and cellphone clipped to his belt. He was searching for suitable land and willing sellers, and trying to woo local officials.

“This is going to be a very profitable place,” he said.

One of the biggest investment prizes may have already been claimed. The first new southern oil concession was granted recently to a tiny, previously unknown firm, led by a former English cricketer with little experience in oil exploration.

The controversial deal between Phil Edmonds’ White Nile Ltd. and the SPLM surprised investors and angered officials in Khartoum, which had already sold rights to the same tract to a consortium led by the French oil group Total. At stake is an unexplored parcel that officials say could hold up to 5 billion barrels of oil.

Though everyone agrees that southern Sudan is long overdue for development, some worry that the flood of investment dollars and building fever will make the region vulnerable to opportunists, fraud and corruption, particularly given the inexperience of the newly minted southern government.

“It’s turning into a world of cowboy contractors looking to make a quick buck,” said a Western diplomat with years of experience in southern Sudan, who asked not be identified by name.

Aid workers in Rumbek, while eager to see sorely needed investment, urge caution.

“Simply releasing $2 billion will just cause chaos,” said Viggo Aalbaek, south Sudan manager for the Norwegian Refugee Council, a Norway-based international humanitarian organization. “It has to be controlled.”

Former rebels now in charge of the southern government acknowledge that they are already overwhelmed.

“I have to turn off my cellphone to get any sleep,” said Costello Garang Ring Lual, a member of the SPLM executive committee who has been busy in Nairobi, Kenya, dealing with potential oil investors. “The interest is bigger than the readiness.”

In Rumbek, only a handful of government offices are open to oversee the development. This month, the SPLM’s parliament had to convene in a small building behind an auto parts garage because no other facility was large enough.

After more than two decades of fighting, the south lacks a trained, educated workforce. Wagaca, the Kenyan homebuilder, predicts that he’ll have to import laborers.

The absence of investment law, courts and property records have muddied matters such as who owns what and who is authorized to make deals. Such confusion will only worsen as thousands of refugees begin returning to the south, reclaiming land they fled during the 22-year struggle.

Ordinary citizens in Rumbek are racing to cash in on the development craze, throwing up fences around their modest huts and staking claims to once-worthless land.

“These are the dividends of the peace,” said Ma Bior, an elderly vendor who makes his living selling nuts and bubble gum along Rumbek’s main market road. “People are developing now, not destroying.”

Along with the nascent boom have come allegations of corruption and mismanagement. In Rumbek, some grumble that the local land commission director recently started driving around in a new Toyota Land Cruiser.

“From whose account did they get this money?” one Rumbek man asked in a letter to a news website about southern Sudan. “Where will the citizens of the diaspora go when they return home and find that their homes have been sold?”

Local officials in Rumbek insist that they are taking steps to prevent fraud and corruption.

“We are very much aware of this issue,” said Obede Kudu, an SPLM information officer. “We are not going to deal in petty trade and fast money.”

Would-be investors and contractors will be required to submit written five-year proposals, including proof of financial backing, to a board that will review bids and select winners, Kudu said.

So far, most large foreign firms are going slow, waiting to see whether the peace agreement holds. But many, including international security firms, Kenyan fuel providers and a hotel developer, have dispatched representatives to discreetly scout opportunities.

Oil giants including Chevron Corp., Royal Dutch/Shell Group, China National Petroleum Corp., Petronas of Malaysia and India’s Oil & Natural Gas Corp. have all had preliminary talks with SPLM officials, said one official in the organization.

Under the peace accord, the north and south will divide oil revenues equally, and new exploration will be approved by a joint commission. Sudan currently earns about $3 billion a year from oil production, which is expected to reach 500,000 barrels a day by year’s end.

It’s little wonder that one of the first disputes in the new coalition government is the White Nile deal, which took even some SPLM leaders by surprise.

Leaders in the north, joined by executives at Total, dismiss the contract as illegal, saying the people’s movement had no right to award a new oil concession because that is the responsibility of the yet-to-be-formed joint commission. Total, which halted work in Sudan in 1985 because of the hostilities, renewed its 1980 exploration contract with Khartoum in December.

But Lual, noting that the contract was signed last fall, said the White Nile deal was valid because the peace agreement states that contracts signed before January 2005 shall be honored. White Nile is 50% owned by the SPLM and 50% by private investors, including Edmonds, a company statement says. White Nile officials did not return phone calls.

Faced with poverty and suffering in the south, southern leaders say, they have no choice but to move aggressively and independently to start rebuilding.

“It’s an experiment, but we need to start doing things for ourselves,” Lual said. “How are we ever going to put up a petrochemical industry in the south if we can’t even build a refinery or negotiate a contract on our own?”

But the White Nile deal – apparently signed in secret without competitive bidding – has raised eyebrows among diplomats, aid workers and international bankers, who worry that the boom in southern Sudan is off to a shaky start.