Despite such investment, Africa continues to attract adverse publicity because of security risks in several parts of the continent. Civil conflict affects South Sudan and the Central African Republic (CAR), while the piracy threat is switching from the Indian Ocean to the Gulf of Guinea. The threat of Islamic militants has been highlighted by both the Kenyan shopping mall crisis and the activities of Boko Haram in Nigeria.
However, it is worth remembering that the number of armed conflicts is now far lower than 10, 20 or even 30 years ago. Companies should be no more deterred from investing in Namibia or Ghana because of such security problems than they should be from developing projects in Norway or the UK because of the Russo-Ukrainian conflict.
Nevertheless, conflict is continuing to have a huge impact on those countries where it is taking place. Political differences in South Sudan triggered fighting between troops loyal to President Salva Kiir and former Vice-President Riek Machar, which in turn affected the oil sector. Indian firm ONGC Videsh, which holds equity in both the Greater Pioneer Operating Company and SUDD Petroleum Operating Company, reported that “production from the oil fields was completely stopped. Operations will be resumed once the situation is normalised”. The two companies jointly produce about 41,600 barrels a day (b/d) from four blocks.
The conflict could also affect Khartoum’s finances. The Sudanese Finance Minister, Badreldin Mahmoud Abbes says: “Even if the oil production in South Sudan stops, we have prepared first aid arrangements to compensate for the loss. We will deal with this issue without imposing new taxes or increases in prices, but will reduce government spending, and we will take other measures in due time.”
Sudan’s 2014 budget already incorporates a $2.09bn deficit but relies on $1.5bn in oil transit fees and compensation for the loss of oil fields from South Sudan.
Juba has the third biggest oil reserves in sub-Saharan Africa after Angola and Nigeria and should therefore have the potential to become the continent’s third biggest oil producer but transforming a war torn country into a modern African economy was always going to be a complicated and drawn out process. South Sudan and CAR are many decades away from having any entrants in our Top 250 African countries.