By Dr Amitava Chaudhuri*
Question: Which trade and industry related sectors in South Sudan are the most attractive for Foreign Direct Investment(FDI)?
The natural resources sector is generally the most attractive if one considers Africa as a whole. In South Sudan this is more so, as other sectors that are there in many other African countries, are yet to fully take shape here. So for immediate gains in sizable investments, this is the sector to concentrate on.
The next attractive area in South Sudan, as is the case in all post conflict countries, is the infrastructure sector. Though open mostly to larger enterprises, this sector, involving the construction of roads, bridges, auditoria, malls, amusement parks, warehouses, ports and terminals, is a major one, and has the potential for significant returns. Currently there is strong competition for contracts in this sector.
The area of housing construction, however, is a little different. It is more dispersed and open to smaller enterprises.
Wildlife tourism is the next sector. It has remained largely untapped so far since it is only now that dependable surveys have been conducted by the Wildlife Conservation Society. These surveys have revealed that despite the prolonged conflict, South Sudan still has huge wildlife resources spread over great areas in Jonglei and Eastern Equatoria with an estimated 1.2 million migratory animals and many large bodied mammals.
In the Sudd, which is the wetlands between Malakal and Bor, there are an estimated 4,000 elephants. This is a great resource and represents a very big opportunity for South Sudan.
Next in attractiveness is the services sector. Hotels, restaurants, communications, transport – river and road, wholesale and retail trade, travel, business and legal services, hairstyling salons and public transport are in demand. These areas have been active for some time now and at present many of them are experiencing very strong competition. Making significant profits in this sector at present by enterprises – large and small - have become difficult.
For the consumer, however, this is a good development. Costs, on the whole, are on a downward trend in some areas. For example, it is now possible to get basic accommodation in Juba near the Airport for around $50 per night, which was unthinkable a few months ago.
The manufacturing sector follows. This sector has suffered all over Africa largely on account of inadequate growth in capacity building, lack of home grown enterprises, and the generally slow rate of improvement in social and environmental issues.
In South Sudan too, there are many challenges in the manufacturing sector. Neighbouring countries like Kenya and Uganda are relatively strong in the region, more skilled and competitive. A surfeit of middlemen and constraints in supply chains, lack of availability of local skills, lack of exposure to structured entrepreneurship and the overall high costs of doing business - all contribute towards making this sector more uncertain than others.
However, it must be said here that despite this multitude of hurdles, South Sudan already has a beverage plant, several water bottling plants, roofing tile manufacturing, steel fabrication units, brick and block making units and a growing poultry and agriculture sector.
Furthermore, there are several proposals in the pipeline. Admittedly this is not high level industry, but it is an excellent beginning for a country with such a troubled history.
Question: Under the present conditions what steps should be taken to maximize benefits?
While the overriding priority placed on agriculture is in order, some of the steps that can be considered in these sectors are as follows:
Natural Resources: First, the concept of natural resources needs to be expanded to cover solar and wind energy resources and water resources and not be restricted to petroleum, minerals and gases. The newly discovered wildlife reserves can also be treated as a natural resource.
In the petroleum sector it is logical to go in for a refinery and subsequently a chemical industries hub associated with it. What is to be kept in mind is that there must necessarily be a local market to consume the output of the refinery. This can govern the size of the refinery.
Also, the transportation of liquid products in a land locked country over long distances through pipelines involves substantial expenditure in infrastructure as well as the continuing goodwill of other countries. Uganda’s recently discovered petroleum reserves are encountering such considerations.
Other opportunities in the natural resources sector, including a possible variety of minerals and natural gas, need to be charted and initiated at the appropriate time keeping regional issues and compulsions in mind. In areas such as the use of alternative energy and wildlife tourism, the sooner plans are implemented, the better.
What is often overlooked in such situations is that in an attempt to speed up matters, many areas in this sector are labeled as too specialized, resulting in almost all work being done by external organizations. It needs to be recognized that though these are indeed specialized fields, developing technical and commercial skills in them are not beyond the capabilities of citizens of South Sudan.
Those with technical backgrounds, supported by a little assistance from international technical institutions, friendly countries and commercial organizations, are well in a position to acquire these skills.
Besides, there is time in hand. Thus if selected citizens are sent early for education and training in areas such as prospecting, exploration, extraction, refining, use, transportation, value addition and management of selected products in this sector, there will soon be a pool of local skills available which commercial organizations and the government can use.
Then in a few years’ time local companies will spring up in these areas and they will be in a position to operate largely independently. This will give South Sudan a good chance to retain control over the natural resources sector, which is certain to be the principal economic sector of the country in the foreseeable future.
Infrastructure: It is a somewhat similar situation for the infrastructure sector. Though not on as indefinite a basis as the natural resources sector, this sector will be active in Southern Sudan for many years. As excellent roads and other infrastructure come up in South Sudan, it is necessary to view this activity as a vast learning opportunity.
It will be of benefit to the country to seize this opportunity to develop local expertise in the best practices of competitive bidding processes, local and international procurement, materials management, costing, construction processes and project implementation.
Thus if 50 bright young persons with basic education in technology can undergo crash courses abroad in the various areas of design, tendering, materials selection and construction, they can be made available quickly to the infrastructure builders. These people, fairly soon, will be able to take up projects themselves, set up their own companies and in future form the nuclei of all infrastructure and construction work in South Sudan.
Wildlife Tourism: The newly identified wildlife tourism sector needs to be taken up in earnest. This too is a specialized area which will take 7-10 years to start bearing fruit, but the time to start working on it is now. Gathering of knowledge in preserving the environment, avoiding conflict with local communities and the development of park infrastructure - all need intelligent and dedicated local participation. It must be remembered that it is possible for South Sudan to earn as much from this sector and generate as many employment opportunities as those from the Serengeti.
Services: The bustling services sector needs oversight. The government has taken an essential step in this direction by asking all businesses to register themselves.
The requirement of providing guarantees for all manufactured goods in the market including items of daily use such as mobile phones, needs to be considered.
Insistence on adherence to certain basic standards for all merchandise is essential. If South Sudan standards for all goods are not yet in place, in the interim the range of acceptable standards of neighbouring countries can be employed as is being done in some cases. This can be suitably clarified and communicated to all.
A consumer protection and awareness initiative needs to be started with associated legislation. Also, the basic laws of competition need to be formulated and enforced. This will provide a wider choice of quality goods at the best terms to consumers, improve overall health and safety for the citizens and the competitiveness of the economy.
Manufacturing: Despite all the difficulties of the manufacturing sector, certain areas where there are local skills and raw materials available, have intrinsic potential for attracting domestic investments and FDI.
When the environment becomes more conducive to such investments within the next 2-3 years or sooner, the areas of interest are likely to be: art and crafts, hides and skins, ethnic jewelry, finished leather and leather products, meat and meat products, agricultural produce, fishery and garments.
Those who are contemplating entering into manufacturing will need to start making plans now. For them it will be useful to look at South Sudan as part of a greater market comprising parts of Uganda and Kenya.
It will be useful to proceed further on setting up an industrial zone. The current excellent road building work needs to be extended there and infrastructure like basic sheds put on offer. Once again, these are required to be in place soon to seize investment proposals as they are received. The zone will also be an effective advertisement for South Sudan for inviting potential foreign investors at investment seminars.
Question: Is it very difficult for South Sudan to make quick and significant progress in these areas?
South Sudan has already made significant progress and many of the steps proposed are already being taken. A lot remains of course, and nobody doubts that the road ahead is long, uncertain and arduous. But in some ways it can be fairly uncomplicated. Starting from the beginning or near the beginning in anything has many advantages. Thus all options are open to South Sudan which has the luxury of choosing the road it wishes to travel on and to make its own way forward in a pathless land.
Since everything cannot be done all at once, the most important requirement is to prioritize and begin with the end in mind. Also, it must be recognized that no one can hand over ‘progress’ to South Sudan, except South Sudan itself; that the government cannot make progress alone but needs the contribution of every individual; that technical knowhow has its place but nothing beats a nation’s conviction in itself, its common sense, its willingness to work hard and to save time and resources.
And that real progress is much more than cars, roads and buildings; it is the transformation of a mindset, a process which begins at home and at school.
Also that economic progress and social progress are two sides of the same coin: one cannot be achieved without the other. These thoughts, a sense of pride and self esteem are the keys to success.
*(Dr Amitava Chaudhuri has been with Government of India's Trade and Industry organisations for 29 years. He has also been associated with the EU in Brussels, the World Bank/UN in Central Asia, the UN in South Asia and South Africa and the Commonwealth Secretariat in the Caribbean. He was also the Economic Adviser to the Government of Botswana. Currently he is the Chief Technical Adviser to UNIDO in Juba. However, the views expressed here are purely his personal and not necessarily those of UNIDO or the Government of South Sudan.)