Southern Sudan Investment And Development Conference
Safari Park Hotel 14-15 March 2006

The conference attracted a diverse and well-represented group of investors. Despite the fact that the President and Vice-President of South Sudan were no able to attend the conference, The Government of South Sudan (GOSS) was represented by Ministers related to the key areas of investor interest. There were also excellent presentations from representatives of the World Bank, the UN, the EU, the Kenyan government and international companies and investors.

The focus of the conference was the future of Southern Sudan in relation to oil, gas, mining, agriculture and infrastructure development.
The keynote address given by Albino A. Akol, Minister of Industry and Mining who stated that although poor to none-existent infrastructure was the main concern, investment laws were currently being revised to suit the situation in Southern Sudan. He also stressed the implementation of CPA and the set-up of a joint technical body that would address issues such as transparency in oil field allocations and demarcations.

Politics and Investment in Southern Sudan

The head of delegation for the Europe Commission in Sudan, Ambassador Kent Degerfelt informed participants of changes by SPLM from a rebel movement into politics as part of the institution building. To this end, the EU and Sudan have normalized relations that have seen €50 million so far disbursed through the Multi Donor Trust Fund (MTDF) for food security and education. This is part of the EU contribution to the development of Sudan of €500 million over 3 years and includes development aid from EU member states.

He also reminded that UNMIS would continue to oversee security arrangements as stipulated in CPA. However, Dr. David Waithaka, Director of Kenya Southern Sudan Liaison Office advised GOSS to invest in several areas that include security, law and order, social services in addition to legal and regulatory framework. This is in part a desire for regional integration and cooperation by East Africans.

The framework for sustainable development as well as investment structures and procedures drew a lot of attention from participants largely due to concerns over information deficiency on what was currently taking place in Southern Sudan. The Minister of Communication, Trade and Supply Anthony L. Makana assured participants that GOSS was striving to provide and ensure an investment climate that was conducive. To this end, GOSS legislative assembly is meeting on 17th March 2006 to discuss and review laws that may be hindering investment.

On a legal perspective, participants were informed of the provisions in the CPA that led to the interim constitution. This serves as a recognized constitution and would be considered in international law. Danielle Beggs, a partner in energy, transport and infrastructure group Denton Wilde Sapte made a presentation on areas investors should pay particular attention to. This particularly would be right to ownership of private property, rule of law, specific foreign investment legislation, tax regime and repatriation of revenues as well as dispute resolution.

The lead economist for World Bank, Sudan and Ethiopia Office Jeni Klugman spoke of the Millennium Development Goals (MDGs) in which issues such as under age of 5 mortality rate, access to water, youth (16-24) literacy and boy-girl ratio were well below acceptable standards. On the contrast, the economy of Sudan remains robust. Despite the investment climate, GOSS had several matters to deal with. These range from agricultural activity to legal and regulatory priorities such as legislation and banking laws.

For this reason, humanitarian assistance continues to be the primary source for service delivery in South Sudan. UN Deputy Resident and Humanitarian Coordinator for Southern Sudan, David Gressly talked of the changes taking place in towns with the development of markets as a result of freedom of movement. For this reason, investment into systems such as these will make government viable and promote the growth of a monetary economy.
As we all know, when it comes to politics and oil management, the topic that is the ‘curse of oil’ is not to far away, Jonathan Bearman, managing director of Clearwater Research Services Ltd reminded. He acknowledged the information deficit on South Sudan. From data, surveys engineering reports, geographical studies, water resource studies to wildlife studies. But, investment potential remains in agriculture through water management and encouraged studies to be conducted in forestry assessments and water management. Noteworthy, was the call for strategic partnerships for technological transfer to build ‘local content’ such as community development like roads and schools.

Also present was the chairman of South Sudan chamber of commerce and industry and agricultural Ngor Ayuel Kacgor. Financing of the development and managing risk associated.
Infrastructure as well as banking systems is still at an infancy stage in South Sudan. Financing of development is largely now being taken in the form of partnerships. Aggrey Idri, Chief Executive Officer of Nile Commercial Bank (NCB), highlighted this point. Local investors with potential to make immediate impact in their communities (IDPs and returnees) have no collateral to provide for loan requests. Thereby, current investment will largely be for infrastructure development. To aid the flow of finance into South Sudan, Nile Commercial Bank has gone in partnership with Stanbic.

To calm the investors’ nerves due to their cautious nature in approaching South Sudan, Sebastian Willis-Fleming of Control Risks provided an insight into how investors should and can go about managing risk in South Sudan evolving climate. As investors have different risk appetites, they can manage risk by ensuring they know and understand the situation, audit at all levels and take responsibility to the corporate level. Furthermore, if community relations are applied correctly from the start, then labour relations will be easier to handle. This in turn will provide for physical security of personnel and investors.

The 2nd day was set for the oil and gas agenda

John Luk Jok, Minister for Culture and Youth Affairs and also member of the National Petroleum Commission (NPC) spoke of huge potential, as many parts of South Sudan are yet to be explored despite extraordinary large areas being previously allocated to oil companies during the war. The CPA addresses that the oil sector should be sustainable and thus reiterated the involvement of South Sudanese in all matters related to development and production of oil and gas. On a different perspective, Henry Obwocha, acting Kenyan Energy minister, highlighted the current heightened interest in East Africa for oil and gas. This has resulted in several areas being currently explored for potential.

Continuing on the oil and gas investment in South Sudan was a presentation on the responsibilities of government, business and civil society in the development of Sudan’s oil sector by European Coalition on Oil in Sudan (ECOS). Egbert Wesselink reminded participants, particularly oil investors that they have a moral responsibility in their business case for peace and justice, in light of the oil sector’s unsettling legacy. He highlighted the need for financial transparency and for environmental impact considerations in the development of the oil industry. This, in other words, forms part of corporate responsibility.

For this purpose, oil and gas companies will have to closely scrutinize the legal and contractual requirements to foster development. J .Jay Park, a partner in the international energy group of Macleod Dixon LLP presented an insight into what oil companies initially look out before venturing to invest. Thus, they consider petroleum specific legalities, which determine rights to explore and produce, and ownership of the production. He commented that South Sudan seemed to be opting for single window regulation in which bids and interests are considered through one channel. In this case, NPC and CPA Chapter III provide the guiding principles on oil development.

To underline the change in which the oil industry operates in is the Extractive Industries Transparency Initiative (EITI). Harry Hagan, senior economic adviser Sudan Unit from the Department for International Development (DFID) asked how relevant EITI was to the Sudanese context. The initiative aims at increasing transparency of payments of oil, gas and mining companies to government as well as transparency of revenue received by government. In case of Sudan, CPA states that the wealth of Sudan shall be shared equitably. In addition SPLM is guaranteed access to existing oil contracts and there is a 50-50 oil revenue sharing.

Although EITI is not compulsory, it has now become an international standard and governments follow a member of steps before signing up to EITI in which the issue of local content is addressed. Under strategies for investment in Sudan’s mining sector, the minister for Industry and Mining, Albino A. Akol stated that South Sudan was also about mineral exploration. To address this, the ministry was involved in institutional capacity building that includes enactment of laws such as Mines and Quarries act. The Act will provide salient points to mineral concessions that range from dispute resolution procedures to exporting of samples assay without custom duty. He however noted that South Sudan remains the least surveyed geographical area.

The case for requirements and opportunities in infrastructure and agriculture

This was strongly put by the minister for Agriculture and Forestry, Dr. Martin Elia Lomuro in his presentation on the state, potential and strategy for development of agricultural and forestry sectors. He informed participants of recent field studies and research into the potential of agriculture as the mission to MAF included to develop prioritized policies in the drive to secure food security. These are large diversity of crops that can be cultivated and harvested however forestry is a potential economic vehicle. He stated that this was degradation of forestry in areas around Yei but areas like Imatong Mountains remained viable. He was supported by H. Schar of Volunteers for Economic Growth Alliance (VEGA) in his presentation on agricultural market and enterprises development for Southern Sudan.

The question and answer sessions allowed participants to interact with the speakers, but the highlight and much anticipated session was the special oil and gas panel discussion in which the oil company representatives found themselves in a defensive position over their past track record. Of particular target was Marc Jozan of Total as was Stacey Kivel, vice president Business Development and Legal Affairs for Equator Exploration Ltd.

On the other hand Philip Bongani, Head of Government Relations for PetroSA trumpeted the benefits of 100% government ownership of a petroleum company and insisted that South Sudan had nothing to fear in taking on such an approach towards the oil sector. In this call for local content, Phil Ward from White Nile Ltd yet again urged for change in approach in oil business.
In summary, the Southern Sudan Investment and Development Conference brought together different players to the reconstruction and development of South Sudan. It highlighted the different facets to development such as legality and corporate responsibility. Although the theme was focus on the future, there was a general feeling that the viability and potential of investing in South Sudan was large and to a great extent unknown.

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