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South Sudan: Land of opportunity, if you don’t mind risk

South Sudan: Land of opportunity, if you don’t mind risk

Entrepreneurs eye farming, banking and telecoms; Hurdles to business include lack of roads, laws; Oil still dominates war-ravaged economy

December 10, 2011 12:24 by

Entrepreneurs eye farming, banking and telecoms; Hurdles to business include lack of roads, laws; Oil still dominates war-ravaged economy

Ugandan motorbike taxis weave through rutted streets. A Kuwaiti telecoms firm prepares to lay fiber-optic cable. Chinese and European delegations file down the oil ministry’s scruffy halls.

An influx of adventurous entrepreneurs has helped fuel a small business boom in the world’s youngest country, South Sudan, which declared independence in July under a 2005 peace deal that ended decades of civil war with the north.

They’ve been drawn to one of the ultimate “frontier markets” by demand for practically everything — from roads and banks to office furniture and private security — despite the snags posed by a dearth of infrastructure and clear regulations.

“It’s the only place in the world today where there’s an opportunity to start from scratch, from zero,” said Tamir Gal, an Israeli businessman, as he greeted clients and officials at an agricultural trade fair. “If you start from zero, you have 100 percent to grow.”

The effects of new money are plain in Juba, the ramshackle capital. Billboards hawking insurance, mobile phones, beer and prefabricated housing line roads clogged with shiny 4x4s and Indian and Chinese motorbikes. A handful of upscale restaurants buzz with expatriate workers.

Permanent concrete structures are rising, albeit slowly, amid the tents, prefabs and cargo containers that often serve as offices and homes. Juba’s sprawling Konya Konya market bustles with vendors peddling vegetables, shoes and phone cards.

The former rebels now running the country have so far welcomed investors and say they want more to help build an economy ravaged by Sudan’s civil war, which killed an estimated 2 million people, and wean it off its dependence on oil.

There is plenty to do. The nation roughly the size of France has just about 100 km (60 miles) of paved roads, and hospitals and schools are still scarce. Oil accounts for some 98 percent of government revenues.

That means opportunities for risk-tolerant investors, but it also can mean frustration. A World Bank report this year ranked Juba 159th out of 183 economies on the ease of doing business, noting “several fundamental laws and institutions are still missing.”

Convoluted bureaucracy and a lack of clear laws are among the most immediate challenges, businessmen and officials say.

The fear that ownership titles could be challenged in a nebulous legal system dissuades many businesses from building factories or making other long-term investments, they say. It also makes it harder for banks to find collateral for loans.

“Right now the laws are sketchy, and sometimes that’s why banks are a little bit cautious” about lending large amounts, said Petro Maduk Deng, corporate relationship manager at the Juba office of Kenya Commercial Bank (KCB), which set up in the southern capital the year after the peace deal.

“There are companies that can borrow a substantial amount of money, but what happens if there is a dispute? That is not clear. The government has to come up with something to resolve these disputes.”

Authorities, while keen to lure foreign capital, are often inexperienced. Shifting or hazy administrative hierarchies can be confusing. Businessmen stress that patience and strong relationships with the right officials are vital.

Many also complain that corruption — whether it is soldiers demanding bribes at checkpoints or officials taking their cuts from deals — can impede the free flow of commerce. The government says it is cracking down on graft.

“It’s the classic thing where you’re trying to build a plane while you’re flying the plane,” one Western businessman said. “That’s what they’re trying to do here, but they don’t even know how to build the plane because they’ve never done it before.”

The country’s meagre infrastructure can also prove daunting. Recurrent power outages mean many businesses use costly diesel generators to keep the lights on. Internet connections are often slow and depend on satellite links. (CONTINUED TO NEXT PAGE)

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