Is a Land Grab Looming in South Sudan?

South Sudan is open for business. Despite a restrictive business environment and loose and unpredictable regulations, the untapped potential or the country’s natural resources, as well as the opportunities associated with improving security, governance, infrastructure and livelihoods are attracting many international businesses.

The lure is difficult to resist. 90% of the country’s land is arable for example, yet though only 3% is developed. If productive capacity were to be built, the country could be a bread basket for the region, not to mention tackle its own chronic food insecurity. South Sudan also has considerable reserves of teak and other valuable hardwoods, but exports little. Aside from oil, which is the only significantly developed natural resource sector and fills 98% the government’s coffers, South Sudan also has plentiful, largely unexploited reserves of iron ore, copper, chromium ore, zinc, tungsten, aluminum, mica, silver, gold, and hydropower.

Taking advantage of these opportunities will require huge infrastructure investments, some of which are planned or nearing completion, such as the trade route to Uganda, the development of the Kenyan port at Lamu, and the road that will connect the port to the border with South Sudan. Numerous smaller scale investments to build roads, canals, housing, storage and other facilities and services to support these businesses provide a wealth of secondary opportunities.

Still, many investors held off until South Sudan’s post secession situation was clearer. Now that the independence dust has settled, is this the time to take advantage of the opportunities in the new nation?

Some signs are positive. The country managed to issue a new currency without stalling the economy. Juba is booming. And safe. But perhaps most importantly, now that the government  is receiving 75% of Sudan’s oil revenue and is in a position to sign contracts with potential contractors and investors, opportunities abound for entrepreneurs with an appetite for risk and reward.

The USA, China, India, Norway, Ethiopia, Malaysia, Turkey, Kenya, Uganda and South Africa and their respective private sectors are leading the effort to achieve business concessions in South Sudan and have all opened embassies since independence. Norwegian People’s Aid – a long time servant of development in the region – recently issued a report on land acquisition in South Sudan. The report shows that from 2007 – 2010 foreign interests sought or acquired 2.64 million hectares of land (6.52 million acres) in the agriculture, forestry and biofuel sectors alone – an area larger that the entire country of Rwanda. In a related article on the Dutch Development Agency’s blog, the countries and companies making land investments in particular sectors were detailed, exploding the myth that China has its hands firmly wrapped around the pie.

Yet instability poses a problem. Both the inter-tribal violence that has beset Jonglei and the continuing clashes in Blue Nile and South Kordofan scare away foreign investors. The data for 2011 would be interesting to see. While the independence euphoria and the freedom the government now has to make deals might have precipitated a foreign investment boom, the level of violence in 2011 has actually been higher than 2009.

Graphs showing rising foreign and domestic land investment from 2007 – 2010, with a significant in 2009, when intercommunal violence in South Sudan led to more deaths than Darfur. (Courtesy NPA, 2011)

The conflicts in South Kordofan and Blue Nile pose the biggest threat to stability, foreshadowing a possible return to war with the north. The north has been crippled by economic collapse since secession of the South and has been taking heavy losses in South Kordofan, leading some in the SPLA to suggest that now is the time to overcome their old foe. But while such a strategy might conceivably lead to the type of democratic transformation envisioned by the proponents of the ‘one Sudan’ vision, the vast majority of Southerners would not risk the development of their new nation for a pipe dream that few support. Wise investors will not hold off on these grounds least others get in first. The time is now.