Peace agreement sparks huge investment in southern Sudan
Mar 23, 2006 (NAIROBI) — Foreign firms are laying strategies to take advantage of economic opportunities unlocked by the signing of a landmark peace agreement which ended the 21-year- old civil war in southern Sudan.
The foreign investors seeking a share of Sudan’s multi-million- dollar oil industry flocked to a business conference in Nairobi last week hoping that peace in the war-ravaged south would unlock huge potential investments.
The well-attended conference was organized by Bread of Life in Africa (BOLA), which has branches in Sudan, Kenya and other Horn of Africa countries, in partnership with the United Kingdom-based CWC Group and Al-Bader International Development Company of Kuwait, to give foreign investors a chance to learn about the potentials for trade and investments in the vast region.
During the conference which was held on March 14-15, the southern Sudan government, led by former rebels, acknowledged it had a lot to prove to investors wary of financial risk and sporadic ruptures of insecurity in the region.
“There is a rush for business in southern Sudan now. The conference was a huge success and very soon, there would be a ‘ tsunami’ … the foreign investors who attended the meeting would start scrambling for opportunities in the oil, gas, power, infrastructure and agriculture sub-sectors,” Malei Nthiwa, BOLA’s program director, said by telephone on Thursday.
Nthiwa said the conference sought ways of tapping immense business opportunities in the region, created by last year’s signing of the landmark peace agreement between Khartoum government and the former southern rebels.
“We had to organize the conference because investors were anxious to learn about investment and trade opportunities arising out of southern Sudan but had very little information by which they can rationally assess risks and opportunities,” he said.
He predicted that after last week’s conference, oil and gas companies will rush in to expand Sudan’s oil production from the 500,000 barrels a day recorded last year.
The country has proven reserves of 635 million barrels, much of which could not be accessed during the war because of fighting.
Under a 2005 deal that ended more than two decades of civil war pitting the former southern rebels against the Khartoum government, oil revenues are split roughly 50-50 between the north and south.
Nthiwa said South African companies, many with experience working in countries emerging from conflicts such as Mozambique, Angola and Congo, are aggressively moving into Sudan.
“Southern Sudan is going to be number one in Africa and the world for investment because it’s a large country and the infrastructure is zero. People need buildings, power, highways, hospitals — they need everything,” Nthiwa said.
“From an export point of view, machinery and equipment supply, recreating the concrete industry and rehabilitating industries that already exist, and taking advantage of the agri-industry side, will present significant opportunities,” he added.
His comments were backed by some investors with South Africa- based companies who also attended the two-day parley.
“We have seen a lot of investors in the past one year. We have been opening up letters of credit, mainly for emergency infrastructure projects,” said Victoria Otieno, a senior official with South Africa-based Stanbic Bank.
“What is very important is that the peace will hold,” he added.
The vast south, devastated by what was Africa’s longest-running civil war, desperately needs money to rebuild a region lacking schools, hospitals, roads and water.
Aid workers warn that the anticipated return of up to four million southerners who fled the fighting will strain already flimsy facilities in towns and villages.
Although the south has complained it has yet to receive its oil cut, but the World Bank’s lead economist for Sudan, Jeni Klugman, said it was projected to receive up to 1.3 billion U.S. dollars in oil money this year.
Up to 500,000 barrels of crude oil is produced every day, mainly from fields in the south with output forecast to rise by 150,000 barrels per day this year.
“A region that has just come out of war cannot immediately inspire confidence from investors,” John Luk Jok, southern Sudan’s minister for youth, culture and sports, told reporters.
“We have to answer the questions the investors are raising. We don’t want them to fear investing in our country,” Jok said last week.
The minister however said lingering concerns over business licensing and the operations of private businesses in the largely under-developed region dominated deliberations.
“We attended the conference to ensure there is an enabling environment conducive for investments. The government of southern Sudan is ready and is encouraging investments in every aspect, roads and other infrastructure installations,” said Jok.
He said the semi-autonomous government was rapidly transforming itself from a rebel movement to a government capable of restoring unity and confidence in the people of southern Sudan.
“These are the things we have fought for in years,” he told journalists.
Investors attending the international investment parley, dubbed Southern Sudan International Investment and Development Conference, expressed fears over the availability of trained manpower in the country and the transparency in the oil industry.
Southern Sudan’s Minister for Industry and Mines Albino Akol said the transparency in the management of the oil resources in the country, especially in the management of oil fields in the south was a key concern the government is addressing.
“The oil industry is governed by the provisions of the Comprehensive Peace Accord (CPA) through the National Petroleum Commission. We need to demarcate borders of oil fields in the south to ensure transparency because sharing of the profits is based on the proceeds of the oil in the south,” Akol told the investors.
Kenya was also among the first countries to declare interests in investing in southern Sudan with initial plans to build two free ports in its northern town of Lokichoggio, a relief supplies center used for flights into southern Sudan and another port in Lamu.
Kenyan officials said the East African country is planning to set up a Summit of the Heads of State in the region to spearhead development initiatives beneficial to the government of Southern Sudan.
Daudi Waithaka, the Director of Kenya’s newly established Southern Sudan Liaison Unit, a semi-diplomatic office set up to oversee facilitation for local investors into the southern Sudan, said plans are underway to undertake a full feasibility study on a multi-billion infrastructure project to boost Sudan’s suitability as an investment destination.
The projects include rail, free ports and a hydro-electricity project along River Nile, which Kenya says could help southern Sudan produce 6,000 megawatts of power, which it could also export to the neighboring regions.
Waithaka said a regional Heads of State Summit would be convened to discuss the opportunities and appoint a management board to oversee the project implementation.
Addressing the two-day forum, Kenya’s Energy Minister Henry Obwocha said the east African nation has signed an agreement with Sudan to facilitate the sharing of information on oil exploration in the region, whose oil discoveries augur well for Kenya.
“I am glad to note than a Memorandum of Understanding to this effect already exists between the governments of the Republic of Sudan and Kenya and what remains is to put in place modalities for its implementation,” Obwocha told investors.
He said the discovery of oil in the Sudan alongside the discoveries of gas in Mozambique and Tanzania has helped to upgrade the petroleum prospects for the East African region.
The minister said the increased interest in Africa’s oil deposits has seen international oil firms acquiring exploration acreage throughout the continent.
“This desirable situation calls for joint efforts by the regions’ governments to fully explore, promote and exchange data on the regions oil and gas potential,” the minister said.
The more than two decades of war restricted appraisal of Sudan’s oil fields but experts estimate there are at least hundreds of millions of barrels of recoverable reserves in the south.
International donors have pledged an estimated 4.5 million dollars in aid for the vast region over the next three years, but are threatening to withhold development funds pending the resolution of the conflict in Darfur.
Southern Sudan, ravaged by many years of civil war and neglected by the central government in Khartoum is looking towards the reconstruction of institutions and delivery of essential services.
Nthiwa, whose organization organized the conference, says Kenyans have more to gain from the reconstruction exercise in southern Sudan than any other country in the region.
“We have a comparative advantage in providing education, business and civil service training to the new administration in southern Sudan. Kenya is well positioned to supply teachers, nurses, engineers, civil servants and managerial experts as well as train the new public service, police and army,” said Nthiwa.
“We can no longer ignore a neighboring economy (Sudan) with a 21 billion U.S. dollars GDP growing at a 6.5 percent annual rate. It has a potential market for Kenyan investments, goods and services. Although we have done so much in conflict resolution, Kenya is not among the 15 top trading partners with Sudan,” said Nthiwa.
Nthiwa said Kenya, which has been the center of relief operations to Southern Sudan, was likely to witness a shift from relief-oriented to actual growth-oriented business.
But apart from opening up investment opportunities, peace in Sudan will also boost security in the region, said an export manager of a Kenya based multinational.
“For an area like southern Sudan that has been ravaged by war for more than two decades, I am confident that with the newly signed peace pact, there is bound to be a great demand for industrial goods and building materials once people start resettling. I can tell you most manufacturers in the region have eyes set on the Sudanese market,” said manager who sought anonymity.
He said Kenyan manufacturers of steel, cement, household and industrial goods will be the immediate beneficiaries of the new market as Southern Sudan begins its reconstruction.
Reconstruction of the southern Sudan will have to be preceded by the building of roads to enable relief supplies reach the intended people residing in hard-to-reach pockets.
According to southern Sudan’s Information Minister Samson Kwaje, the vast region would also require investors in agriculture, tourism, livestock, mining, hospitality, housing, water and transport.
“There are also investment opportunities in private schools, universities and technical institutions, not only in oil and gas,” Kwaje said.
However, despite the success of the conference some regional experts predict uncertainties and difficulties ahead. Southern Sudan has seen virtually no development since the 1950s. The peace accord allows the southern Sudanese to hold a referendum on independence in six years, setting up the possibility of more conflict with the north, analysts say.
Xinhua