Review of South Sudan investment deals and contracts

By
Steve Paterno

February 27, 2011 — Since the signing of Sudanese Comprehensive Peace Agreement (CPA) in 2005, which ushered in the glimpse of peace, South Sudan has since then presented great deal of investments opportunities in almost every market sector and segment. Foreign investors as well as the locals, flocked into the region to ripoff the benefits. With the South now gearing up for a full independence, the chances for investments are going to increase exponentially, presenting even more greater opportunities.

However, it is critically important that some of the investment deals struck or contracts signed thus far, which show shadowy characteristics—with long term implications on the livelihood of the general public—be either renegotiated or canceled. In instances where laws are found to be broken, the culprits must be prosecuted in courts of law.

Some of these investment deals or contracts, which require immediate renegotiation, cancellation or prosecutions are worthy of highlighting. These range from bogus contracts, questionable investment ventures, and shady large-scale land leases, amounting in billions of dollars, with long term implications on both environment and general populations.

Grain Graft in South Sudan

The grain graft, dubbed as grain-gate scandal by South Sudanese is among the biggest corruption scandals the nascent nation of South Sudan is facing. In 2008, at the height of food shortage, the ministry of finance was ordered to purchase grains to all the ten states of South Sudan, where the grains could be sold at subsidized price. However, in a subsequent investigation, the ministry of finance is discovered to have dished out grain contracts worth of 6.2 billion Sudanese pounds (equivalent of 2.7 billion US dollars) to over 700 contractors. This is considering that the entire annual budget of South Sudan is only in range of 2 billion US dollars. Of the 2.7 billion dollars issued in the alleged contracts, only 200 million dollars out of the total amount is supposedly paid to the delivery of the products and services.

However, further investigation could not confirm as to who were those contractors that the 200 million dollars were paid too. There are still hundreds of those contractors out there demanding for payments. Even though some of those contractors were genuine and delivered grains, not all did, since some of them were merely individuals who signed off as contractors, but have no capital, assets, or even any equipment to deliver grains. In the words of the minister of finance, David Deng Athorbei, “some staff in the states actually were involved in a racket,” contributing to the scandal.

This case is considered as intended corruption as well as gross mismanagement throughout the entire contracting process. At least in its part, the ministry of finance initiated the investigations and blocked any further payments to the alleged contractors, pending the conclusion of investigation. The government vows prosecutions against those who will be found guilty of wrong doing.

For the South Sudan to start on a good footing as an independent state, its government must make good on its promise by concluding this investigation and prosecute those responsible. Future contracting opportunities must take into considerations the right bidding procedures in vetting out contractors who can actually deliver satisfactory products and services.

The Contracting of Boma National Park to UAE Company

In 2007, an aerial survey conducted by Wildlife Conservation Society, revealed spectacular existence of wildlife, which are thriving in numbers along the South Sudan Savannah and sudland. It is concluded that the presence of the wildlife in the area rivals those of Tanzania’s Serengeti plains. This revelation came at the time when it was feared that all the South Sudanese wildlife were either killed or driven away during the devastating two decades civil war.

Ever since this new discovery, the interest in South Sudan wildlife has increased worldwide. Several media from around the world picked on the story of this amazing wildlife discovery in a region ravaged by war for over 20 years. This has also heightened conservation efforts and has drawn in investors to the region to capitalize on the opportunities these animals offer. This has become a treasure trove for the potential nation of South Sudan.

Nevertheless, the world become surprised, when large chunk of this wilderness was leased by the government of South Sudan to Al Ain National Wildlife, a company that belongs to United Arab Emirates (UAE). Under the agreement, Al Ain National Wildlife company will build high class hotels and tented camps within the park. The concession on the deal is reported to award the government of South Sudan as low stake as only 35%. There has never been public consultations or the involvement of the local communities on the deal. This seems to be worrisome as the locals fear their fates in their own homeland; both short and long term. There are reports that “Al Ain is apparently already able to fly aircraft from the UAE in and out of South Sudan with no restriction or inspection.”

Given the distrust by the majority of South Sudanese toward Arabs, many of the South Sudanese are wondering whether such an operation by an Arab company will not bring security forces from Khartoum with their weapons in the area to infiltrate the South. Some within the conservationist community are also concerned that the park will be used for high-end hunting activities. To add to the already genuine concerns, some of the conservationists allege that the Arabs generally have bad reputation in some of the areas they already operate in, such as in Serengeti, because of their urge for hunting spree and the way they treat the locals.

This contract, which is questionable and with a long term implications and security risk to South Sudan integrity, must be canceled immediately by all means possible; whether by a presidential decree or through an act of South Sudan parliament. The South Sudanese people and their posterity stand to gain from their wilderness and the beast which inhabit them. The independent South Sudan must integrate into its nation building process, a conservation approach, sustainable management of natural resources and environmentally friendly ecotourism to ensure the prosperity of the nation.

The Leasing of Tindilo Payam to Norwegian Company

The government of Central Equatoria State (CES) in South Sudan decided to lease a 179,000 hectares of land in Tindilo Payam (Terekeka County) to TreeFarms Sudan Ltd for the period of 99 years. TreeFarms Sudan Ltd is a Norwegian company. It intents to acquire virtually the entire land of Tindilo Payam, with the exception of small area left for the inhabitants of the Payam. The company proposes to use the land for timber plantation and forest conservations for carbon credit.

This is one of the large scale land contracts in South Sudan, which received a lot of scrutiny from international experts. The analyses of this contract appeared in many reputable publications from around the world that include the Center for Human Rights and Global Justice (CHRGJ) at New York University School of Law and International Institute for Environment and Development, among other international publications. This contract becomes a case study on how foreign investors secure large-scale land deals in African nations—deals that favored the investors and show little benefits for the locals. Such deals often ignore environmental safeguards, both short and long term.

The CES Ministry of Agriculture and Forestry negotiated on behalf of the state in securing this deal. However, clear conflict of interest immediately emerges, because a former employee at the Ministry, became the TreeFarms Sudan Plantation Manager, while Director General of Forestry is a board member with TreeFarms. Beside this discrepancies, the negotiation on the deal is conducted under backdrop of ambiguous legal framework, where most of the provisions of Land Act legislation are not reflected on the agreement, since the negotiation started much earlier, before the passage of South Sudan land legislation.

The TreeFarms deal requires a renegotiation within the context of an independent South Sudan, where there will be legal framework and regulatory institutions set in place so as to address some of the loopholes contained in the current agreement and also for the implementation process to move on smoothly.

The cases highlighted above clearly show a disturbing trend on how investment deals and contracts are poorly executed in South Sudan, during the interim period. As a result, the potentials for exploitations and corruption, with a long term effects become the norm. The problem is largely due to lack of legal framework and regulatory institutions as well as the absence of South Sudanese expertise in contract negotiations. An independent South Sudan will greatly benefit from effective and newly enacted legislations and regulations, which pertain to an independent state. Nevertheless, laws alone are not good enough to safeguard the interest of South Sudanese people who may become prey to unscrupulous investment deals. These laws must be implemented, accordingly. Therefore, the emphasis should also be in establishment of effective regulatory institutions to enforce the laws. There is also great need for South Sudan government to invest in capacity building by tapping into the skills and expertise needed in contract negotiations.