World’s contractors eye opportunity in South Sudan

Less than two weeks old, infrastructure needs are enormous, but infant nation has oil and aid to pay for it.

By DAVID ROSENBERG / THE MEDIA LINE
South Sudan flag_311 (photo credit: Reuters)
South Sudan flag_311
(photo credit: Reuters)
If one wants to get a sense of the challenges and the opportunities facing South Sudan, the world’s newest country, take a ride down the 190-kilometer (120-mile) Juba- Nimule Road.
The route is one of the country’s most heavily traveled, connecting the capital with a dusty border town that serves as a gateway into and out of Uganda. But it is unpaved and years of civil war had left it strewn with mines that had to be removed by a Swiss company. Today, it takes eight hours to make the journey.
RELATED:Potential to make money in South Sudan is ‘enormous’South Sudan becomes the 193rd UN member stateLouis Berger Group, an American company, is now paving the road for the first time ever, thanks to funding from USAID. When the $225 million project is complete in 2012, travel time will be a mere two hours. The new route could cut the cost of delivering goods and encourage new businesses to develop to serve travelers and take advantage of easy transportation.
Less than two weeks old, South Sudan is one of the world’s least developed countries and still suffering the aftershocks of a long civil war with Sudan. But as a new country hopeful about its prospects, home to considerable oil reserves and, for now at least, enjoying the attention of the world’s aid community, South Sudan also spells an enormous opportunity for contractors.
“All of South Sudan has about 50 kilometers of paved roads. That shows the lack of infrastructure. Electricity, water supply, communications, roads all need to be built. That creates opportunities for companies,” Petrus de Kock, a researcher at South African Institute of International Affairs, told The Media Line.
A country the size of France, South Sudan has just 4,000 kilometers of roads compared with one million for France. Its rail system consists of 250 kilometers of a single narrow-gauge track. Just 15% of the population has a telephone and almost 40% has to walk a half an hour or more to get drinking water. Schools would be crowded at 129 pupils per classroom, but only about a third of its eight million people have ever attended school.
Moreover, the war that officially ended in 2005 is still simmering as the two sides contend for disputed territory and over how to split the proceeds of the petroleum that is now on the South Sudan side of the new international border. Fighting in the disputed, oil-rich Southern Kordofan state has forced more than 73,000 people to flee their homes since June 5, according to the United Nations.
But South Sudan produces about 375,000 barrels of oil per day, making it among Africa’s biggest oil patches and generating considerable revenues for the government as it tries to build the country almost from scratch. It also means that the country is strategically significant, enabling it to keep the attentions of resource-hungry China. Sudan was China’s sixth-largest source of oil imports in 2010.
The infant state’s fertile White Nile valley includes some of the richest agricultural land in Africa. Large wildlife herds could be exploited to attract eco-tourists. Furthermore, the White Nile has sufficient flow to generate large quantities of hydroelectricity.
All that holds out promise for the future, but South Sudan is also attracting foreign aid – which it needs.
Oil brought earned some $1.5 billion in revenue last year for South Sudan, noted a report issued last week by the Save the Children non-governmental organization (NGO). The World Bank estimates that developing a comprehensive road system will cost over $7 billion, and that electrification of the country will be as much as $13 billion.
“South Sudan’s resource needs are massive and cannot be met by oil revenues alone,” Save the Children said.
The international aid largess is substantial. Fourteen international donors disbursed $188 million dollars in 2010 and as of July this year had made available some $440 million out of $548 million promised, about half going to infrastructure projects such as construction of a liquid waste treatment plant, 25 new school buildings and 513 kilometers of new roads.
According to the US Central Intelligence Agency, South Sudan has received more than $4 billion in foreign aid since 2005.
With the money from aid and oil flowing in, South Sudan’s capital of Juba has turned into a boomtown. It population has more than doubled in the past six years to approximately 375,000, swelled by refugees as well as by opportunity.
Businesses have come as well, mainly from neighboring African countries such Uganda, Ethiopia and Sudan itself. China National Overseas Engineering Corporation is also active. Others are looking to join. Besides roads and schools, other opportunities for business include helping foreign oil companies move their facilities from Sudan to South Sudan and building a new capital.
“The country has to be built from scratch, that's why we must seize opportunity and find our place in South Sudan's economy as soon as possible, with far-reaching intentions," Russian President Dmitry Medvedev's special envoy to Africa, Mikhail Margelov, said last week.
Besides continued violence, the big challenge facing South Sudan will be managing all the aid money and the private sector organizations that are now tripping over themselves to fund and manage projects, said de Kock of South Africa.
For instance in education, there are no uniform rules and non-governmental organizations (NGOs) teach curricula based on varying standards. South Sudan doesn’t have laws governing public financial management procurements or auditing, noted the Save the Children report. There is a big risk that money will be squandered or stolen.
“There is a bit of chaos right now. A huge complaint in South Sudan is corruption. There aren’t any set out procedures -- if you want to provide a service to the government, or bid for contract from government, this is how you do it,” said de Kock “This has to be developed now.”