Investment Climate of South Sudan

Economy

According to African Development Bank Group, the drop in oil revenues following the collapse of international oil prices   caused a significant negative impact on the South Sudan’s economy; the level of GDP fell by more than 5% in 2015, and the government net oil-revenue forecast for the 2015/16 fiscal year was only 17% of the previous year. With the drop in oil revenue, the government budget has faced a huge shortfall. The impact is more pronounced South Sudan the most oil-dependent countries in the world. Oil revenue accounts for almost the totality of exports and over 95% of the government revenues in previous fiscal years. The drop in oil revenues has led to a sharp reduction in the government’s revenues hence preventing investment in developmental activities. Government net oil-revenue forecast for the 2015/16 fiscal year is only 17% of the previous year. GDP growth has been very erratic, driven by conflict and fluctuations in oil prices. By the African Development Bank estimates, after experiencing a 15.9% increase in 2014, growth is expected to experience a decline of -5.3% in 2015. The predictions are a small recovery in 2016 with 0.7% growth rate, and a revival in 2017 with 8.8% growth rate. However, the realisation of the forecast will very much depend on the recovery of oil prices and the implementation of the peace agreement.

Why invest in South Sudan?

  • Agriculture, abundant land and water with huge local and regional demand in all areas of agriculture, 30 million hectares of arable land with less than 5% under cultivation
  • Mining, gold, uranium, iron, copper, and diamonds deposits
  • Petroleum, the country is endowed with oil reserves which presents new opportunities for exploration
  • Infrastructure, there is high demand to rebuild and construct over 2,500 km of roads with opportunities for private toll operators
  • Energy, there are multiple power generation opportunities from Nile River.
  • Domestic market of over 13 million with a large international diaspora community interested in returning for new economic opportunities
  • Investment Promotion Act of 2009 provides investor protections including guarantees against expropriation, protection for intellectual property rights and mechanisms for dispute resolution
  • South Sudan provides long-term leases for agricultural projects
  • Preferential access to the U.S. market via African Growth and Opportunity Act (AGOA)
  • Plan to develop public-private partnerships to facilitate investment in key sectors
  • Better returns in the investment

Political

Since independence in 2011, the Republic of South Sudan has continued to be preoccupied by both internal and external threats to sustainable peace and stability. The key internal peace threat has been caused by the disagreement between the President and his Vice President. The East African leaders have been at the forefront of establishing a stable transitional government but have not yet been quite successful.  The government has objected to the mandate of The UN Security Council regional protection force. Deployment can only be effected after securing consent for deployment.

Population

The last census carried out in 2008 by Sudanese Government showed the population as 8.3 million people.  South Sudan attained its independence in 2011 after a long civil war. The new nation has therefore not yet carried out a population census. However according to World Population Review South Sudan has an estimated population of 13 million with a growth rate of 2.58%.

Urbanisation

According to CIA World Factbook 18.8% of total population of South Sudan lived in urban areas in  2015 and the urbanisation rate was growing at 5.05% annual rate of change for period from 2010 to 2015.

Doing business in South Sudan

The highlights of World Bank score of doing business in South Sudan is summarised as follows;

Topic World Bank 2017 rank World Bank 2016 rank Change
Overall 186 187 1
Starting a business 181 180 -1
Dealing with Construction Permits 178 176 -2
Getting electricity 188 188  
Registering property 181 181  
Getting credit 175 174 -1
Protecting Minority Investors 179 181 -2
Paying taxes 68 66 -2
Trading across the boarders 177 177  
Enforcing contracts 73 73  
Resolving insolvency 169 169  

The country is still in war situation and it is therefore quite difficult to do business in the country despite the good returns on investment.

Credit Rating

Not rated because of a number of challenges the country is currently facing.

Remittances

South Sudan is experiencing challenges of lack of adequate foreign currency reserves resulting from the civil war, over reliance on crude oil exports and volatile foreign exchange rate. The key challenge has been the falling of crude oil prices that has negatively impacted on the revenue from crude oil exports.  It is therefore extremely difficult to remit money in foreign currency from South Sudan.

Arbitration

Although the country is committed to judicial reform, the existing legal system is ineffective as it is subject to a lot of interferences. Therefore commercial agreement for businesses in the Republic of South Sudan should provide for international arbitration.

Key development challenges

  • Inadequate legal framework governing investment and private enterprises is inadequate
  • Ensuring adequate security
  • Access to land for investment is quite cumbersome
  • Inadequate enforcement of the existing laws
  • The legal framework is quite difficult to understand
  • Lack of skilled manpower
  • Inadequate infrastructure
  • Developing a broad-based economic.

Corruption

According to Transparency International South Sudan is perceived to be among the most corrupt countries in the world. South Sudan has a score of 11 and ranks number 175 out of 176 in the global rank.

Security

The security situation in the country is quite volatile and you therefore need to monitor the security situation in order to keep safe. If you travelling  outside of Juba City  you need a minimum of two vehicles and appropriate recovery and medical equipment in case of mechanical failure or other emergency.

Unemployment and skilled labour

The unemployment remains unacceptably high in South Sudan due to the absence of a vibrant private sector. Over 90% of the youth that constitute an overwhelming majority of the country’s population are without formal employment.

Attitude to investors

The country has inconsistent policy towards foreign workers that are brought into the country to support the investment both in public and private sectors.  The government has an idea of replacing foreign workers despite the fact the country suffers from a major shortage of skilled workers.  The idea of replacing of the foreign workers will make South Sudan less attractive as an investment destination.

Restrictions on Foreign investment

The Republic of South Sudan welcomes foreign direct investment in all sectors of the economy. Government is making special effort to encourage investment in non-oil sectors in order to reduce the risk of over dependent on only oil exports. Foreign investors are free to own or control business organizations in any sector subject to the limiting factors published by South Sudan’s Investment Authority as approved by its Board of Directors.  Other limiting factors include lack of adequate physical infrastructure including roads and power plants. According to the 2008 census, 94 percent of young person’s enter the labour market with no qualifications and the country’s literacy rate is quite low.

Intellectual Property (IP) Rights

The government is committed to judicial reform as the existing legal system is quite ineffective. The rule of law is not yet quite entrenched in the country. It may be quite cumbersome if not impossible to enforce intellectual property rights in the country

Natural Resources

The key natural resources include national parks, River Nile, iron ore, copper, chromium ore, zinc, tungsten, mica, silver, gold, oil reserves and hydropower.

 

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