Kenyan traders tap into booming south Sudan market

Juba may not strike you as modern city as it lacks the lustre of a fast-paced urban life has neither skyscrapers nor a decent physical infrastructure.

But as it emerges out of 21 years of civil unrest, the capital city of Southern Sudan is on a steady path towards regaining its glory.

After the warring parties in the north and south signed the Comprehensive Peace Agreement (CPA) in 2005 and the consequent reopening of Juba-Yei road in 2006, savvy entrepreneurs from the East and Central African region began to stream steadily into the south of Sudan.

Today they can be found in trading centres scattered all over the region.

You come across Kenyan and Ugandan traders in Juba as well as other markets such as Konyokonyo, Gumbo, Rujal-mafi, Hai Game, and Hai Gabat.

Business is brisk and there’s a wide range of products and services on offer and the region is replete with hardware stores, vegetable kiosks, salons, hotels, electronic shops retailers of fast moving consumer goods.

Juba has become a significant market for a variety of imported goods.

That is why southern Sudan has become the new hunting ground for business in the region, attracting not only small and medium enterprises but South Sudan is the new hunting ground for not only attracting small and for large corporations with operations in the region as well, as they seek to increase their geographical reach and make inroads into what appears to be lucrative emerging market.

Kenya’s Cooperative Bank is the latest entrant into the fray.

Other financial institutions that have pitched tent here are UAP Insurance, Kenya Commercial Bank and Equity Bank.

The battle for Juba is fiercer in the aviation industry, with intense competition underway for control of the Juba-Nairobi route.

Marsland Aviation launched a much larger aircraft than has customarily been used on the route with a capacity of 111 passengers.

It is scheduled to make two flights a week.

ALS Also launched its maiden flight to Juba on a 34-seater aircraft on Monday this week, joining Jetlink, Marsland Aviation, East African Safaris and African Express Airways which already ply this route.

“Humanitarian efforts are our major clients. Most of them have ceased operating in Lokichoggio since the peace accord, instead setting base in Juba, and prompting us to now start operations on this route,” said Sharzia Taher, ALS scheduled services supervisor.

Development workers are a prominent fixture in southern Sudan.

The fleets of four-wheel-drive vehicles belonging to various international humanitarian organisations tell it all.

ALS currently flies to Rumbek, another town in south Sudan, but now considers Juba to be more profitable.

Reacting to increased level of competition and growth in demand, Jetlink which commands about 65 per cent of the route has increased its flight frequency to two per day.

Now operating both morning and evenings with a 50-seater aircraft, Jetlink links connecting passengers from other parts of the world and provides a quick connection for local businessmen and women to move seamlessly between the two cities.

Jetlink cannot afford to sit on its laurels, though, because East African Safaris harbours ambitions of dethroning it.

The company has plans to increase flight frequency also.

It currently flies to Juba once a day, seven days a week on 80-seater planes.

“Nairobi-Juba is a very lucrative route because of the massive interest from businesses as south Sudan fast opening up as a lucrative market,” said Emily Murgor, travel consultant, Marsland Aviation.

However, not all players are rejoicing. Fly540 was elbowed out of the route this year due to stiff competition after a year in operation.

Africa Express also says the route is not commercially viable at present but adds that it has plans to increase the frequency of its flights once passenger numbers pick up.

The 90-minute route is dominated by business people and humanitarian personnel. Cargo accounts for almost 75 per cent of the total business on the Nairobi-Juba route.

Astral Aviation cargo airline which has interline agreements with Kenya Airways, Martinair Cargo, Virgin Atlantic, Allied Airlines, Emirates, Qatar Airways, Singapore Airlines, British Airways and Air Mauritius ships between 30-50 tonnes of goods weekly between Nairobi and Juba. This however, represents a drastic drop from the 75 tonnes a week it ferried five years ago.

“We had a monopoly in the cargo business then. Now competition is fierce since passenger flights are also in our turf,” said Charles Simiyu South Sudan Manager, Astral Aviation.

According to Mr Simiyu, business to Juba accounts for 50 per cent of its total revenues on its Intra-African network with the other 50 destinations to which it has operations bringing in the remaining 50 per cent.

The high demand for physical infrastructure and complementary social amenities such as schools and hospitals has bolstered the fortunes of the construction industry in Juba.

As Juba does not currently manufacture any key materials to service this industry, Kenyan goods have typically filled the gap.

Rule of law

Construction material, consumer goods and medical supplier form the bulk of cargo transiting Kenya into southern Sudan.

According to the 2009 economic survey, the total exports to Sudan has increased almost threefold since 2004.

In 2008, total trade with between Kenya and Sudan stood at Sh14.2 billion, with the bulk of it being exports, which amounted to Sh14.1 billion.

Sudan has emerged as the fastest growing market for Kenya against the backdrop of the local companies entrenching their foothold in the oil producing country.

Since the signing of the peace accord, the Sudan market has increased by about 34 per cent, compared to an increase in trade with Uganda of 28 per cent.

“Kenya is looking for new partners and Juba is a virgin market that we can tap into. It lacks a lot of services which makes it a ready market. As a country we have a deep connection with Sudan due to our role in facilitating peace in that region. This bolsters our commercial efforts,” said John Akoten, an analyst with Institute of Policy Analysis and Research.

The government of southern Sudan is also in a race to attract foreign direct investment.

According to Vimal Shah, managing director, Bidco Oil Refineries, the establishment of a taxation act which makes the taxation regime predictable and a land act which makes land ownership rules clear provide a good incentive to investors.

However, since Southern Sudan is still an emerging market, Mr Shah says consumption levels are still low.

“The market is still too small for manufacturers to set up in Juba. Purchasing power is also low. The market is currently good for trade but at the moment, it is not viable for manufacturers,” said Mr Shah.

Electricity is also of major concern in Juba, driving the cost of business through the roof.

However, manufacturers contend that within the next five years, this fast growing African city will be a must for investors looking to diversify their interests in Africa.

Creating a seamless transport system is another key trade facilitator that will open up region.

This would pose the biggest threat to cargo airlines profit from the poor state of the roads that link Kenya to Sudan.

Construction of the planned railway line linking Juba to Mombasa and another to Malaba is expected to quadruple the volume of cargo plying the route from its present 80,000 tonnes at present. Lack of a procurement law is another Achilles heel for the government of South Sudan.

During the East African Procurement forum mid this year, Christopher Lobojo, director general of the procurement policy unit said it would be difficult to enforce discipline and international procurement best practices without procurement law in place. A law is expected to be in place by 2010.

However, rule of law is still a concern that needs to be addressed.

Players are keenly awaiting the 2011 referendum, which will determine which direction South Sudan will take.

“We have seen South Sudan thrive in just four years since the peace accord. If the referendum is successful, Juba will be a force to reckon with,” said Mr Simiyu, the South Sudan manager for Astral Aviation. .