Tomorrow Is Another Country: The World's Newest State, South Sudan, Will Come into Being Officially on 9th July, Following an Overwhelming Vote for Sessession from the North. but as Richard Seymour and Anver Versi Report, Enormous Challenges Still Lie Ahead
Seymour, Richard, Versi, Anver, African Business
To all intents and purposes, Sudan has been two countries since independence in 1956. An aerial view, taken from space, shows the barren, desert region of the north and the lusher, green landscape to the south. Much has been made about an Arab Muslim North and a black, Christian South but this is ingenuous at best. This vast territory is home to hundreds, if not thousands, of ethnic groups, with some, like the Dinka and the Nuer of the South existing in large numbers. The North is composed of a host of ethnic groups, many of which have mingled over the centuries, held together by a common Arabic language and a Muslim culture.
The division between the two owes much to geography and history. The North had been an important factor in the Anglo-Egyptian Condominium in the 1890s. The Northern Sudanese were provided with good-quality education, allowed to keep their language and customs and encouraged to take up official posts. Christian missionaries, who had descended on Africa in their thousands in the wake of David Livingstone's journeys of exploration, were actively discouraged from the North but allowed to proselytise in the South, which was otherwise neglected. This, according to several historians, led to the bitter animosity between the two halves and spawned the longest-running war in modern history.
At the time of independence in 1956, the difference in terms of institutions, health, education, income, agriculture and living standards between the two regions was glaring. The South, fearful of being marginalised even further, took to the bush in a series of guerrilla wars. Support for the guerrillas came from several sources, including Ethiopia, although the main backers were Western, mainly American, Christian groups. As part of its overarching global policy during the Cold War, the US became deeply embroiled in Sudanese politics and later became the lead broker in the various peace negotiations between the two sides.
However, it was relentless work by the African Union and retired heads of state that finally delivered a peace treaty acceptable to both parties in 2005.
The treaty included provisions for sharing the oil wealth generated mainly in Southern territories but piped through the North, and a referendum that could allow the South to secede from the North and establish its own independent state. The referendum was duly held in January and the results, published a few weeks later, showed that almost 99% of the Southern population wanted independence. Despite alarm in the West that the North would throw a spanner in the works during the referendum, the whole exercise went off remarkably smoothly and the North stuck to the letter of the law in all aspects. The US began the process of delisting Sudan from the list of states sponsoring terrorism and one expects full diplomatic relations to resume in the near future.
The 9th July will see the creation of Africa's newest country. But, for both Sudan and South Sudan, a whole new set of challenges is waiting to be met. The country's economy is already in a very difficult position and not just from years of war. Increasingly, the Sudanese economy has come to rely on the US dollar. The government has come in for criticism for allowing the unofficial and creeping 'dollarisation' of the economy. More and more business owners accept only dollars. When they are willing to receive Sudanese pounds as payment, the exchange rate to the dollar is usually set arbitrarily and bears no relation to international exchange markets.
As a result, prices have spiralled upwards, and large numbers of Sudanese can no longer afford basic goods and services. Moreover, Sudan's own currency has become devalued to the point where there is very little confidence in it, and currency speculation has only further fuelled the problem. If you are lucky enough to live in Sudan and be paid in dollars, you can meet the higher prices in the shops. But for most Sudanese, their currency is rapidly becoming worthless.
The currency situation was exacerbated last November when the Sudanese government devalued it in an effort to destroy the black market by matching its currency value, and to attract more hard cash into the country. But this had limited success. And now the strain is really beginning to tell.
A private Kenyan airline, 748 Air Services, has recently suspended its operations in Sudan. "We are closing down because we were facing a lot of challenges in the market due to high dollar rates," explained branch manager, Malual Tuong, who was unable to say when operations would resume.
Major carriers are also feeling the pinch, with German airline Lufthansa due to decide in April if it will continue to serve the country. They and other airlines are in talks with the government over the currency issue.
Part of the post-secession restructuring for North Sudan in particular is to invest in agriculture, which is currently dependent on imports. The plan is to increase production of commodities such as biofuels, sugar, corn and wheat for export, thus putting the weakness of the Sudanese pound to some use.
The North may get a jump on the South in this regard as it already has a decent infrastructure for transporting goods from rural areas--an infrastructure that will take many years for the South to match. But the South is far better positioned to develop its agribusiness in many other respects. It is estimated that approximately 90% of the South's land is suitable for agriculture, there is no problem with water and the climate is mostly ideal, though war and a near total lack of investment has meant this potential is almost entirely untapped.
The infrastructure necessary for making the most of this opportunity is all but nonexistent. A lack of good roads and railways hampers the transportation of goods from rural areas. The industry is further hampered by a paucity of modern equipment and skilled workers who have the knowledge to turn potential into profit.
There is a well-known story that in the 19th century, two shoe manufacturers sent senior employees to Africa to investigate the market potential for their product. The first reported back that the situation was hopeless as no one wore shoes; whereas the other returned excited with the message that the opportunities for them were limitless as the locals did not yet have any shoes.
And so it is with South Sudan's agriculture. There are opportunities, rare today, for investors to not only find a place for themselves somewhere in the value chain but to set up an entire chain themselves. Where there is a dearth of mechanisation, transportation, storage, exportation, marketing and retailing, there lies potential for growth in each of those areas for those willing to take on the challenge. It may be decades before an opportunity of such scale comes up again.
There is speculation that the South, when it secedes, will take most of the oil with it, thus depriving the North of revenue from that valuable commodity. However, while the oil itself lies mainly in the South, the operations and the contracts with producers are all in the North. In addition, pipelines carrying that oil to Red Sea ports pass through the North, and it is from this transit that the North will continue to profit. The South, which has been autonomous since 2005, has already received around $10bn as its share of oil revenues. It is unlikely to try and rock the boat at this early stage despite discussions about another pipeline directly from the South to Mombasa or Lamu on the Kenya coast. There is also the outstanding issue of Abyie to be resolved. The population in this area, which lies at the heart of the oilfields, will have a separate referendum of its own to decide whether to join up with the North or the South.
The South will have its hands full setting up a new state and creating all the institutions to run it. There is an acute shortage of capacity and experience, so tough times lie ahead. It will be best for the South to allocate its share of the oil revenue to priority areas and get the country on the move before embarking on more ambitious schemes.
With petrodollars swirling around, there will be no shortage of carpetbaggers coming to call. The Southern government must treat them with a high degree of scepticism. As we have seen elsewhere in Africa, suited and booted conmen brandishing their credentials are likely to swarm over the country like bees around honey.
Last year, quixotic plans were drawn up to relocate and rebuild the South's cities in the shape of animals and fruits. At an estimated $10bn, the scheme would see the capital, Juba, moved and constructed in the shape of a rhinoceros with the government's offices built in place of the eye. The capital of Western Bahr-el-Ghazal state, Wau, will be shaped as a giraffe with--and showing remarkable attention to detail--the sewage works located beneath the 'tail'.
There are still several issues to be resolved following the birth of the new nation. Among these will be the fate of the Sudanese pound. The North has made noises that it might scrap the pound altogether. If that happens, the South has said it will scrap the pound, too, but the process would not be a simple matter, nor without considerable expense.
There will doubtless also be disagreement on how to split the national debt, which currently stands at around $38bn. Most of the money borrowed was invested in the North, so the South would naturally be reluctant to take on loans it had not benefited from. However, if the North accepts a share of the debt based on that principle, it will be so great as to seriously undermine its economy. It is likely that the issue of debt and of how to share the oil wealth will become inextricably linked.
There must also be discussions on the exact position of the border between the two countries, including the oil-rich area of Abyei. Fighting in this region has claimed scores of lives and the matter is so contentious as to put in jeopardy any chance of genuine stability.
For these reasons and more, the next 10 years will be difficult for both the North and the South. While potential for huge returns for investors are clear, they do come with an attendant risk. If the matter of Abyei can be settled sooner rather than later and agreement on debt and oil revenue sharing can be agreed in the near future, then there is certainly every reason to hope that both countries, with their shared resources and common needs, can begin to take their proper places on the world stage.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Tomorrow Is Another Country: The World's Newest State, South Sudan, Will Come into Being Officially on 9th July, Following an Overwhelming Vote for Sessession from the North. but as Richard Seymour and Anver Versi Report, Enormous Challenges Still Lie Ahead. Contributors: Seymour, Richard - Author, Versi, Anver - Author. Magazine title: African Business. Issue: 373 Publication date: March 2011. Page number: 19+. © 2009 IC Publications Ltd. COPYRIGHT 2011 Gale Group.
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