South Sudan presents a mixed bag for businessWednesday July 06 2011
Kenyan businesses setting up shop in South Sudan expect to reap a huge dividend from Nairobi’s assistance to the country’s leaders since the war with the North broke out.
Kenya has been a key ally of South Sudan, playing mediation role in the peace process that led to a deal in 2005. It has also trained 2,000 South Sudan civil servants, people who will be in charge of administration.
“We have been strategic in winning influence in South Sudan and the private sector should take advantage of these achievements by taking up business opportunities,” said Elijah Matibo, the director at the Presidency and Cabinet Affairs Office in charge of Kenya Southern Sudan Liaison Office.
For example, all of the country’s under secretaries, equivalent in role to Kenya’s permanent secretaries have been mentored in respective ministries in Kenya. The country’s judiciary, education, co-operatives are among the sectors being set up by Kenyans seconded to the new independent nation’s government.
Matibo, formerly the head of the Kenya military intelligence, said the private sector should take advantage of independence to exploit the goodwill that Kenya has in Juba.
“We are continuing to identify and isolate areas of our strategic interest. It’s a continuous process to maintain the achievements made,” he said in an interview.
Although several major Kenyan companies like Equity Bank, KCB, UAP Insurance and many small enterprises operate in South Sudan, the independence declaration on July 9 is expected to trigger another wave of corporate movement there.
Bidco Refineries that has a dealership in South Sudan, for example, is expected to consider having a physical presence there, said the company’s CEO Vimal Shah in an earlier interview. Kenyan manufacturers are, however, discouraged by low consumption levels and shortage of power, water and sewerage systems.
Co-operative Bank of Kenya is also expected to start setting up its banking infrastructure with a new venture that will be 30 per cent owned by the Government of South Sudan.
The new bank is expected to benefit from government business as it will process salaries of government employees and enjoy business arising from the government’s shareholding in the venture. The peaceful aftermath of the January 9 referendum that voted for secession from the North has helped to improve the country’s risk profile.
Despite sporadic fighting in isolated areas, the support of the independence declaration by the North has made the new country more attractive to investments.
Companies setting up in South Sudan will find improved business environment with 15 days being taken to register a business compared to Kenya’s 39, said an International Finance Corporation (IFC) survey in May.
“The start-up time for a business in Juba is comparable to the average 13.8 days in developed economies of the Organisation of Economic Co-operation and Development.”
Juba has also improved its capability to enforce contracts but government services and access to credit remain areas of improvement, said the report Doing Business in Juba 2011.
Business licensing regime has improved, said Dobuol Luslweng Wuol, the South Sudan’s Undersecretary in the Ministry of Housing & Physical Planning.
“One condition is that an investor must partner with a local at a shareholding ratio of 40 per cent for local to 60 per cent for foreign investor,” said Mr Wuol.
Some of the immediate opportunities that Kenyan companies can take up are in the public sector consultancy as the government there embarks on establishing and strengthening institutions.
South Sudan is expected to issue its own currency, which has already been printed in Kenya. The financial independence will require it to set up a Central Bank and undertake daily economic management tasks that require expertise that may not be readily available.
The South Sudan government will release its three-year medium-term development plan that is aimed at enhancing the inflow of development grants.
Acting World Bank Country Director for Sudan Ian Bannon said the assistance was not being fully used because of lack of checks and balances. The World Bank has been managing the Multilateral Donor Trust Fund for South Sudan that has been criticised for its low absorption.