South Sudan-Ethiopia road opens up trade route - African Business Magazine
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South Sudan-Ethiopia road opens up trade route

South Sudan-Ethiopia road opens up trade route

The government of South Sudan has confirmed that two new roads are planned between its country and Ethiopia.

The roads will provide access for South Sudan to the Port of Djibouti and allow it to export oil or fuel by tanker to Ethiopia. One road will run from Boma, in central South Sudan, through Bor and Dima to Raad, in southern Ethiopia. The other, more northerly road will connect Pagak, in western Ethiopia, to Gamebella and Palouge, in northern South Sudan.

The construction of the two roads was agreed at a more general meeting between Ethiopian Prime Minister Hailemariam Desalegn and South Sudan’s President Salva Kiir on 24 February. It has been reported in South Sudan that work has already been completed on sections of the two roads inside Ethiopia, which could also be used to bring food aid into the country.

Given its economic and security difficulties, it seems unlikely that Juba will be able to finance the two projects. It could rely on international support but Desalegn has suggested that Ethiopia could fund the work. Following his meeting with Kiir, he said: “When they get the peace back and the economy gets stronger, they will pay us back.”

Landlocked South Sudan is still closely tied to rump Sudan in terms of its links with the rest of the world. It relies on an oil export pipeline through Sudan to Port Sudan as its only export route, paying high transit fees to Khartoum for the privilege.

Kiir’s government hopes to oversee the construction of a new pipeline to the planned new Kenyan port of Lamu but a final agreement on the project has not yet been secured. Financing is difficult at a time of low oil prices, while South Sudan’s ongoing civil conflict raises security problems.

Juba is also keen to oversee the construction of a new highway to the Kenyan coast to encourage broader trade with the rest of the world. The South Sudanese and Kenyan governments have agreed that his road should run to Lamu.

Again, however, development has been slower than anticipated, partly because the Lamu scheme has so many elements to it, including road, rail and pipeline links with Ethiopia. In the meantime, Juba is keen to export oil by the Pagak-Gamebella-Palouge road to Ethiopia to provide an alternative outlet.

Rather than exporting crude oil to Ethiopia, South Sudan is keen to sell refined petroleum products to its neighbour. A spokesperson for the South Sudanese government told Bloomberg in late February that unnamed Swiss and US companies are to develop the oil refinery in Upper Nile Province that has been under discussion for several years. He said: “We want to deliver this refined fuel at very decent prices. We want to access some hard currency through these refined products.”

The government wants the plant to have refining capacity of 100,000 barrels per day (b/d) but a similarly ambitious scheme in Uganda has been greatly downgraded, so it will be interesting to see whether Juba can secure development on this scale. At independence in 2011, the government set a target of boosting output to 400,000 b/d within five years but it has actually fallen to 120,000 b/d, partly because of the lack of upstream investment but also because of the civil war.

Power potential

The two leaders also signed preliminary agreements on trade, communications and energy. Ethiopia could export electricity to South Sudan from the raft of large hydro schemes that are under development in the country but it seems likely that any cross-border transmission line is a long way off being sanctioned.

Financing will be needed for both the line and transmission and distribution networks inside South Sudan, while the latter’s limited development will make it difficult for customers to pay for the electricity supplied. The most likely option for early construction would be some form of fuel for power deal.

The IMF forecasts falls in South Sudan’s GDP of 13.1% last year and 6.1% for 2017. Greater trade, including with Ethiopia, is likely to be the best method of promoting long term development and calming the internal tensions that have driven the conflict inside South Sudan.

Neil Ford

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