Sudan tension sparks investment fears

The tension between north and southern Sudan may mark the country as a high-risk investment destination, leading to a slowdown in investments that had started gaining pace, analysts say.

The build up of tension has reached a peak, with the government of south Sudan now calling on IGAD member states to intervene to save the peace deal agreed between the two parties in 2005. The current rift revolves around the impending referendum planned for early next year in which southerners will decide if they want to secede or if they prefer unity with the north. President Omar El Bashir has allegedly refused to sign into law a Bill passed by parliament that would create an independent commission to oversee the plebiscite.

The upcoming presidential election has also kicked up a storm, with Sudan People’s Liberation Movement (SPLM) accusing the Khartoum government of blocking an SPLM candidate from running against the incumbent from the National Congress Party.

IGAD refers to the Intergovernmental Authority on Development, a regional organisation created to foster peace, security and development. Member states include Djibouti, Ethiopia, Kenya, Somalia, Sudan and Uganda.

Unsettled issues

Mr Gerishon Ikiara, a senior economics lecturer at the Institute of International Relations, University of Nairobi, said Sudan needed to settle its high stakes politics to assure investors. “When a country has a number of unsettled political issues, it loses some of its potential investors,” he said, adding that those who have already set up shop in Sudan are unlikely to leave. He added that the effect of the ongoing tension among investors was a wait-and-see attitude. “Most of the investments are small, with entrepreneurs basically gaining a foothold. If the outcome of the referendum is clean, they are likely to step up their investments,” he said.

His views were shared by Mr Chris Abong’o, a foreign policy expert who said the current situation will “definitely cause a stall in investments which may only pick up after the presidential election (in April) and the referendum next year.” According to the International Country Risk Guide (ICRG), Sudan’s global political risk ranking has risen steadily from 132 in 2006 to 134 last year. Political Risk Services (PRS), on the other hand, has consistently ranked Sudan at 140 in the five years to 2009.

Mr John Duku, the head of mission at the Government of South Sudan office in Nairobi, however, downplayed investor anxiety saying the country remains an attractive investment destination for long-term capital.

“There are risks involved in any investment. For investors looking at the longer term, south Sudan offers unique advantages. South Sudan, for instance, has a number of natural resources, including reliable food supplies which continues to elude many countries in the region,” he said.

Mr Ikiara said the country has a lot of potential and how it concludes the peace agreement, seen as a watershed in its history, will define its future economic prospects.

Sudan’s regional trade has risen ever since the Comprehensive Peace Agreement was signed in 2005, which put an end to a bloody civil war that had raged for decades, claiming over two million lives. Kenya and Uganda are among the country’s major trade partners. According to the 2009 economic survey, total exports to Sudan have increased almost threefold since 2004.