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Ratio Blog: Business as Usual in Southern Sudan? Print E-mail
Wednesday, 26 January 2011
It was an impressive moment, reminiscent of religious iconography: On the podium, Riek Machar opened his arms wide, looking upwards and fluttering his eyelashes (really, he did!), and proclaimed: ‘You come. You just come!’ He wasn’t in church: The passionate ‘You come!’ had been in response to a question about security in Southern Sudan. And, as it turns out, it was also the response to a question about land titles – and a couple of other issues. Southern Sudan was finally going to throw off the north’s dominance and begin to decide about its own affairs. There was a lot of goodwill in the audience about this new beginning, and also a lot of business interest, never mind Machar's vagueness on finer details of the audience questions. Still, Southern Sudan setting out on its own was a milestone, and many business people were keen to hear what investment opportunities the new south would have to offer.

Referendum enthusiasm? Not quite, not yet: This was actually at a Southern Sudan investment conference five years ago, just shortly after the Comprehensive Peace Agreement (CPA) had been signed. But it does sound similar to some of the talk of the past couple of days, doesn’t it?

It’s a given that the south will vote for a secession. Sudan as a country is a colonial creation, and not one that turned out well. The south’s history with the north has been torturous, and the decision for a new country is full of hope for better government. But once the heady patriotic celebrations are over (a party where the organising government, i.e. the new, independent Southern Sudan, might be slightly less keen to invite Omar al Bashir), we will probably find that things won't change that much.    

I generally don’t care what pop stars have to say on political issues in Africa, but I thought that a Southern Sudanese singer cited in one of the dailies actually hit the nail on the head when he described the referendum on the secession as just ‘doing the paper work’. Because it is the formalisation of a process started in 2005 when the CPA that gave south Sudan semi-autonomous status was signed. This meant inclusion in the joint national government, but also, more importantly, the creation of the GOSS – not the General Ordinance Supplies and Security, as Alfred Mutua, bless his heart for being ever funny, would have us believe, but Government of South Sudan. The GOSS had, and will continue to have after the secession, a challenging task: build a country almost from scratch.

According to the CPA, some of the elements of the legal framework that would continue to apply on the national level, and some that would be developed afresh for the south. But the south has often simply pushed ahead to create facts on the ground, for example by establishing a Western banking system, whereas the north has always insisted on Islamic banking. Were telecoms licenses granted for the entire territory of Sudan still valid? The south decided to team up with Uganda and use their country code in order to wrest some control over this sector from the north. The dispute over oil blocks held by Total and then reallocated to White Nile was another case: Did the South have to respect existing contracts, or could they rightly argue that these decisions had been taken without them and against their interest? Should they therefore be able to renegotiate the allocation of such strategic assets?
 
With a formal secession, there is a bit more clarity as the south can simply create whatever regulations they prefer, but this still leaves the question of how to deal with existing contractual obligations, never mind the enormous task of having to develop a full legal framework for the country in the first place. But this is a process that has already started years ago, so I expect continuity here. And for investors, it is just as important to know that what is says on paper is of course not always what really happens. Secession or not, the investment perspectives and the country’s risk profile won’t change fundamentally in the short to medium term.  

Southern Sudan offers immense opportunities. But it was, and will continue to be, a high-risk, high-reward environment: an emerging legal framework, lack of enforcement and rule of law, a very limited institutional and physical infrastructure, a very small pool of qualified human resources. None of this is easy to change, and typically people who have fought in the bush for years have a slighty different skill set from what is required in running a civilian government. Security and renewed fighting will remain a headache: Less so because the north would openly declare war, but because it simply needs to exploit existing divisions in the south, as it has done in the past. The status of the disputed boundary areas – crucial for their oil reserves – has not been resolved, and for the foreseeable future, the south will be tied to the north as the oil infrastructure leads through northern Sudan. Building a new pipeline is an expensive, lengthy undertaking and won’t be achieved over night. The secession will make Southern Sudan independent on paper and that's something to celebrate – but I anticipate that it will largely be business as usual.



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