News story: South Sudan embarks on developing local entrepreneurs

Good news for Southern Sudan's entrepreneurs:

November 23, 2008 (JUBA) – An amount of $12 million US dollars has been earmarked by the Government of Southern Sudan towards the development of private business entrepreneurship in the semi-autonomous region.

The Minister of Commerce and Industry, Anthony Lino Makana, had presented to the cabinet his Ministry’s proposed project for next year to support and help develop small and medium size local business entrepreneurs in Southern Sudan.

Read the rest here.

Land and Southern Sudan

Land aquisition in Southern Sudan is a less-than-straightforward affair in Southern Sudan. One of the civil war's many impacts is certainly in the way land is treated, both in a transactional and possessive sense. In short, land ownership and transferral is a mix of old and new, clear and opaque, and local vs. state issues.

There is currently an effort to produce a Land Act from the Southern Assembly, but the process is moving very slowly and the bill may not meet the expectations of all parties (e.g. the government policy makers and the land holders/occupants). We hope to see some movement on the bill in early 2009, but that is still up in the air.

A few rules of thumb I've witnessed is that the closer the land is to an urban area, the more involved the acquisition process is. The more the government is involved (I meant GOSS), the harder the process will be. Individual communities are the occupants of the land and have the most say in its use/disposal. Unoccupied land isn't always unused land; South Sudan's pastoralist and farming cultures hold and utilize lands at different times of year and in different environmental circumstances. You cannot acquire land from a distance, you will have to be there, on site, to negotiate. Final tidbit: get someone who knows the terrain and has experience before embarking on a large land acquisition. It will save time, money and your reputation in dealing with the communities in which you desire to enter.

Finally, a great volume of patience is necessary. Most communities and individuals do not have the experience of having conducted a long term lease transaction or outright sale of land. They often believe their land is much more valuable than outsiders would believe. Negotiation is critical as is dialogue and clarity. Most will not sell or lease land without intimate knowledge of the project you want to use the land for.

Sanctions: What's the deal?

Every multinational company that wants to do business in Southern Sudan has its counsel nagging it about US government sanctions. If you listen to the explanations/intent and deconstruction of the sanctions policy and implementation, it is a lawyer's fantasy; full of caveats, conditions, clearance processes, but thin on the reality of this regions' common standards and practices for business.

Here's a link to a US government page that has updated definitions of the bilateral sanctions regime (that means only the US government applies them to Sudan and for the most part only US citizens/businesses are obliged to observe them). One thing is for certain, read carefully the first sentence:

Are you a U.S. individual, firm, or business entity seeking to do business in Sudan?

If you answer yes, then keep reading. If not, get back to work!

Do I need help in setting up a business in Southern Sudan?

The short answer to that question is Maybe.

Depending on the industry, location of the business, nature of the enterprise and, of course, size the options will vary.

One thing is for certain though, you should communicate with folks that are in the know. At David Raad and Associates we specialize in providing a clear and unambiguous answers.

So, if you have questions, comments or thoughts on the Southern Sudan business arena, get in touch with us. The easiest way is to email us at admin@dra-ltd.com.

Int. Finance Corporation looking to South Sudan’s potential

November 11, 2008 (JUBA) -– A member of the World Bank Group said it will explore investment opportunities in Southern Sudan following successful investment climate reforms. "New opportunities are emerging in such sectors as energy, construction materials, hotels, trade finance, and micro finance," a press release said.

The International Finance Corporation (IFC), one of the World Bank Group members, says that it aims to create opportunity for people to escape poverty and improve their lives. The corporation supports private sector development, mobilizes private capital, and provides advisory and risk mitigation services to businesses and governments.

Read More here

Power solutions in South Sudan

Juba's power supply is, to put it mildly, poor. In its defense, however, the town has been in a shambles for the past 50 years due to neglect from the central government in Khartoum. This administration were simply handed over a shell of a city and expected to make it function. A monumental task for any civilization.

But back to the power situation. Many businesses rely on self generating power supply, mainly in the form of standby diesel generators. Most find that in a very short time, their assumptions about consumption (fuel and service) far exceeds what they planned. Diesel is expensive; it comes by truck from Khartoum and Kampala. Spares are equally expensive -- and often hard to find when you need them most. If businesses plan to use standby diesel power, carefully calculate the costs involved -- and then add 40%.

An alternative, until the power grid is improved, is solar. My office and house are all powered by solar alone. 24-7 power, clean and really service free. Start up costs are about 2-3 times that of a diesel genset, but the break even point (the point at which the cumulative fuel and service costs equal that of the solar set up costs) is about 5-6 months (depending on the size and quality of the genset). Worry free, environmentally sound and cost savings. It's even better for businesses in remote locations where diesel, spares and service are even more expensive.

Start up costs are about $7-10000 for the first KVA, about $1000 for every KVA thereafter. Check with your local solar expert for more details.

Banking service providers in Southern Sudan

In the past year we've seen the retail banking sector expand in Southern Sudan. Nile Commercial Bank, the first in the market, has seen competition from KCB from Kenya and Buffalo Commercial Bank, an indigenous operation.

Juba's retail banking scene is pretty well covered. All three banks have several points of service throughout the town, with their primary sales points in "Old Town" Juba.

Outside of Juba, the difference are evident. Nile Commercial Bank has, I understand, about 15 total branches, or about one in each major town in South Sudan and even a branch in Khartoum.

Commercial banking services are pretty limited. KCB does service the commercial lending market, but with a risk premium many would balk at. Nile Commercial Bank has slowed their lending operations, and the state of Buffalo's commercial lending is nil, as I am told by some of its shareholders. This leaves a serious opportunity for a banking service provider to fill.

Others are planning to enter the market, including Crane Bank, of Uganda, and Equity Bank of Kenya. Both, I understand are principally focused on retail banking, and will probably land their operations in Juba.

4 Simple Steps to Reducing Business Risk in Southern Sudan

So, there's obviously risk. How do I minimize it?

Keeping the risk factor at the lowest possible level is industry specific. The bottom line, however, is planning. Businesses that are most successful follow these simple rules:

1. Keep to a simple plan. This environment is tough enough even with simple business concepts. Market needs are basic and most businesses don't need to have complex processes or services to be successful.
   
2. Stay within your areas of expertise. Entrepreneurs come to Southern Sudan and see opportunity in every direction. Temptation often takes over and they find themselves under planning, over extending on cash demands, and venturing into industries they are trying to master as they go along.
   
3. Keep cash flows under control. Basic cash flow management is a critical skill here. Banking is expensive and time consuming.
   
4. Pay debts as agreed. reputation is everything in a market like South Sudan's. A small business environment means everyone knows your reputation as a businessman, whether they've done business with you or not. One bad transaction, missed or late payment can seriously limit your ability to succeed and take quite some time to recover from.
   

What does it take to enter the Southern Sudanese market?

Without a doubt, unless you're already running a going concern here, South Sudan is a bit of an enigma. This is a place where entrepreneurs need to be smart, flexible, resilient, and willing to work harder than in other environments.

So why come?

A number of reasons: the margins in this environment are higher. Consequently, the return on investment is faster and there is ample room for competition in even the most saturated industries.

So what's the downside?

This is what can best be described as a pre-emerging market. there's little usable information available on the whole market, and what is available is dated.

The laws of Southern Sudan are still being finalized. The basic rules of the road for banking, corporate governance, land acquisition and other business-related code is either absent or driven by guidelines written by the Sudan People's Liberation Movement during the civil war in 2003-2004. While most of these laws are in use today, a lot of the government structures and regulatory bodies they refer to are no longer relevant.

Still here?

Good. There's a huge caveat to this gloomy message: everyone wants you here. If honest businessmen have a product or service the market needs, the people, the government and your fellow entrepreneurs want you in South Sudan.

Yes, the rules are still being detailed, but the government's policy is to shape them according to the realities that exist, not on dated concepts (like those in Kenya's business environment). The policymakers keep an open mind to businessmen in making the environment fair for everyone. And while yes, there are challenges in the way the market functions, a strong and deep fairness principal is very much adhered to.

Welcome!

This blog is started in the interest of sharing business information and experiences in the Southern Sudan market. It is designed to shed some light on this new environment its challenges and its many opportunities. Enjoy!