Business Suits Replace Fatigues - African Business Magazine
Business Suits Replace Fatigues

Business Suits Replace Fatigues

Barely three months ago, the world’s newest state, the Republic of South Sudan, was finally born after a very long and bloody gestation. The citizens of this new country have seen nothing but war and destruction for practically all of their lives since armed violence has been the bizarre ‘normal’ since the independence of Sudan in 1956.) The fervent hope of the people now is for an extended era of peace during which to build the new nation. The task is enormous. Income from oil could be a huge blessing or it could turn into a curse. For the present, however, as business suits replace battle fatigues, so must the people of the country and its leaders make the arduous transition from a military mind-set to a civilian one. We sent Wanjohi Kabukuru to South Sudan to report first-hand on the new country’s first tentative steps in freedom.

The combat fatigues and commando berets are gone. Sharp business suits, sprightly fedoras and other trappings of affluence are now the new uniforms.No one symbolises the change in South Sudan more than President Salva Kiir Mayardit. Since taking power in the world’s youngest nation, President Kiir has shed all traces of the barracks. He encapsulates an aura of a nation at peace with itself and ready to do business. His cowboy hat, appropriate for the scorching Juba heat, is a calm reassurance.

In the capital, Juba, a deliberate effort to alter the country from martial law to civilian rule is all too evident. A brand-new South Sudan Police Service force (SSPS) with their blue and white saloon cars is a common feature – signalling the switch to a civilian government.

In his inaugural pledge to parliament, President Kiir was quick to underscore a commitment to civilian government: “Let us develop the police and as it happens in any country, it is not the army that guards the people. It is the police. So let us develop the police and release the army to go back to the barracks and give them what they need there.”

Juba’s foundation stones are being laid in large measure by government and NGOs. Indeed, of the vehicles one sees in Juba, eight out of 10 belong to NGOs, the UN and the government. Coincidentally, these vehicles are all SUVs. Juba not only has the official tag of ‘the world’s newest capital city’ but it also has the unofficial title of the city with the highest concentration of SUVs within a square mile.

The streets of Juba have undergone a transformation. New roads, new buildings, smart restaurants, brand-new banks, hotels and air-conditioned offices are sprouting almost overnight. Planeloads of contractors and businessmen descend seemingly by the hour. There is a buzz of excitement but also some trepidation as the new country finds itself rushing headlong into what until now has been an alien landscape.

But the city hasn’t attracted only the blue chip corporations. It has also attracted those that have nothing and are looking to the new nation for brighter futures. Small-scale entrepreneurs from Ethiopia, Uganda, Kenya and DRC have all flocked into Juba eager to search out the opportunities on offer.

They are brought here by four daily buses from Nairobi, eight daily interstate buses from Kampala and another one from DRC. This is in addition to the daily flights from Addis Ababa and Nairobi.

Despite the construction frenzy, the government believes that the private sector is still waiting and watching before it commits itself to investing in infrastructure.

“Today if you see a good building in South Sudan, it belongs to either NGOs or government; people with money, especially those with money from the private sector, are sitting and watching,” President Kiir laments.

George Conway, the UNDP Country Representative explains: “To many observers, it was a wait-and-see attitude. Nobody was sure. Nobody expected the South Sudanese to go through the referendum without any hitches. This was, however, not the feeling of the South Sudanese themselves. Deep down they knew they were going to be a new nation and they achieved it.”

Nevertheless, a number of enterprises, mostly from the region itself, do not seem to have had any doubts about the potential of the new country. SABMiller, Petronas, Kenya Commercial Bank, Lundin, Covec, China National Petroleum Company, Equity Bank, Buffalo Commercial Bank, UAP Insurance, Commercial Bank of Ethiopia and a handful of others have already established firstcomer stakes in Juba.

In 2009, SABMiller became the first multinational to venture into South Sudan with the establishment of its $37m South Sudan Beverages Limited in Juba.

At independence, SABMiller invested a further $15m in the Juba facility to boost production capacity and meet increasing local demands. In simple terms, business is good enough to warrant more capital injection.

“Our investment in South Sudan continues to bear fruit due to the country’s improving economic outlook and a continued positive consumer response to our brand portfolio,” Ian Alsworth-Elvey, SSBL Managing Director says. “Increasing our brewing capacity takes the business to the next level, supporting growth in our key mainstream segments and helping us to build market share.”

Talk of the East African Breweries Limited (EABL), a Diageo subsidiary based in Nairobi, establishing a plant in South Sudan is an open secret but no confirmation has yet been made. Should it make this move, EABL will become SSBL’s main competitor. At the moment, the competition is largely in favour of SSBL as EABL has to contend with export procedures for its brews.

Increasing demand for White Bull and the locally brewed Nile Special Brand has been the main driver of the increase in SSBL production. By November this year, the Juba facility is expected to increase production to 500,000 hectolitres. SSBL has also ventured into non-alcoholic beverages such as soft drinks and bottled water.

The fact that South Sudan is still in its infancy and is a net importer has proved to be a major challenge to investors. Another inhibiting factor is the cost of moving goods. According to data from the Ministry of Commerce and Industry, South Sudan’s largest trading partners are Uganda, Northern Sudan, Kenya and Ethiopia in that order. Uganda’s main export market within the region at present is South Sudan. In 2009, it exported goods worth $184m.

“The cost of doing business in South Sudan is significantly higher than in other places and part of that is the fact that we have exceptionally higher transport costs from Mombasa port in Kenya. To bring a container from Europe to Mombasa by ship costs about $2,000. It then costs you close to $8,000 to move it from Mombasa to Juba,” Alsworth-Elvey says. Despite this, Alsworth-Elvey sees the future offering brighter prospects. “The return on our investment has been successful and we expect to grow. I think the economy of South Sudan has grown and will continue to do so in the next decade. Parliament has passed what I think is the best Investment Promotion Acts in Africa, if not the world. It has boosted this with a Ministry solely dedicated to investments. This demonstrates the commitment in attracting more investments,” he says.

Juba has already legally formalised investor-friendly laws and put up a framework to motivate private sector-led growth. To facilitate infrastructure development and private sector participation, the soon-to-be-launched short-term (three-year) UNDP-supported South Sudan Development Plan (SSDP) places heavy emphasis on economic development, governance, social development and security.
“This plan builds on achievements attained since the signing of the CPA. As the SSDP is being carried out and implemented, the government has also begun drafting the longer-term Vision 2040,” says the UNDP’s George Conway.

Pioneer private-sector players are also using their experience in the field to woo new investors. Equity Bank South Sudan is seeking to make it easier for investors to plunge into business in the new territory. “We are setting up an investors’ desk which will act as a one-stop investment shop to guide interested investors into South Sudan,” Paul Gitahi, executive director of Equity Bank South Sudan, says.

“When we came here we were under no illusions about what to expect from a country that was emerging from conflict. We expected challenges during this transition period and we also knew that we would overcome these challenges with time,” Gitahi says. “The people here are focused and the elite are very well informed. They have great plans and we have been able to see many of them pursuing their plans in building new homes and opening new businesses.”

That Juba needs everything and wants it fast is not in doubt. Banking, health, insurance, education, manufacturing, agriculture, processing, IT, construction, energy, tourism and all development boosters are badly required in South Sudan. As the country emerges from years of combat and seeks to steer itself towards modernity, it is in dire need of major water treatment, water supply and sanitation facilities and skilled manpower in all sectors.

“There is business to be done in South Sudan.” Gitahi says. To many in the business circles in Juba, however, most business in South Sudan revolves around oil. Indeed oil accounts for 98% of South Sudan’s GDP.

China, Sweden, Moldova, India and Malaysia are the five major states that have already invested heavily in oil in South Sudan. All oil companies in South Sudan renegotiated their contracts with Juba after their previous contracts, signed with the Khartoum government, lapsed when South Sudan became an independent state.

NilePet, South Sudan’s oil corporation is seeking to push SudaPet, Khartoum’s petroleum company, aside in the new agreements being drawn up. Malaysian oil giant Petronas, Moldovan oil company Ascom Group, India’s ONGC Videsh, Sweden’s Lundin together with NilePet are all in one oil exploration and exploitation consortium – the White Nile Petroleum Operating Company in Jonglei state.

While there are unresolved issues pertaining to the oil-rich province of Abyei, which have already led to hostilities, there are other potentially divisive issues between Juba and Khartoum still to be resolved.

Juba is keen on building an oil pipeline through Kenya, owing to the prohibitive refinery and transport charges imposed on Juba’s oil passing through Port Sudan. Under the 2005 peace agreement, Khartoum and Juba had a 50-50 share of the 500,000 barrels of oil produced. At the onset of independence, the mathematics changed in favour of Juba which now has the lion’s share of 380,000 barrels as compared to Khartoum’s 120,000 barrels a day.

On the banks of the Nile, massive agricultural projects have taken root and extensive farming is currently taking place. The expectation is that this agricultural input will change the economic course of the country and tilt the trade imbalance favourably in the near future.

A few months ago, it would have been very difficult to imagine such a boom in the sweltering heat of South Sudan and especially at its heart in Juba. A new nation is slowly but surely emerging. South Sudan is composed of 10 states, each of which is crying out for development and a share of the independence spoils.

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Written by African Business Magazine

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