Friday, February 5, 2010

Recent economist article on South Sudan

Ouch! Tough piece!

Here's the link:

The reporter allowed me to advance an explanation and table further thoughts and I am grateful that at least the counter message got out there. Despite my disagreement on the story line, at least the story is out there and can be discussed some more.

So, what's the problem?

Alright. For those of you interested in business in South Sudan DO NOT do what KK Security did. Although the story does not mention it, I can list the probable shortcomings:

A failure to do the due diligence investigation of the people they allowed into their management/ownership circle.

A failure by the board to oversee and enforce management plans.

Pinning their businesses success to a relationship with a political actor (I see this a lot and I discourage it)

Assuming basic market principles and standard business practices are not applicable in this pre-emerging market.

Failure to fight for their legal rights in the local courts.

Shortcuts, shortcuts, shortcuts. These will sting a business every time.

Now, what was not mentioned in the story? Most don't know this, but there are a number of legal and administrative processes one must go through to establish a company. There are competent lawyers that can guide litigants/complainants. There are laws, courts and arbitration processes that let investors and businesses protect their interests. They somewhat arcane, but they are based on English common law and they work.

For every KK Security, there are dozens (hundreds?) of enterprises thriving and turning a profit. They do so because they didn't pin their hopes to a political player, or invite his cronies into their management apparatus, or ignore the board oversight process, or take their lack of business acumen to the Economist if they get stung and blame it on Southern Sudan.

For what it is worth, I have helped one of KK's competitors, Warrior Security, enter the market more than a year ago. This was when KK dominated the market. Since then, the competitor I "landed" in South Sudan has come to own the majority market share and they provide the product their customers want and expect. Why did they beat out the established market leader in such short time? Because they run their business like a business. They didn't bother with political connections. They played straight ball and did what they came to do.

So, back to the article. In my opinnion KK probably took shortcuts in their entry into the market; they traded the expediency of political connections for the normal due diligence and board oversight. Since they pinned their hopes on a political player's role, they are restricted in exploring a legal solution (the politician wont support his name being dragged into the courts). They feel properly stung and they shopped their act of revenge in the form of a hit piece to the Economist and the Financial Times (story forthcoming). A tragedy in 3 scenes.

What's this Southern Sudan place all about?

There's a lot out there about Southern Sudan. Lots of opinions, lots of emotions, lots of pessimism and lots of optimism. Just to save new readers the time in going through older posts, this blog skews (careens?) toward the optimistic side of the country's future.

It comes from being involved here for almost a decade in official, political and economic roles. I know the people, the place and the history. I've seen more than the UN reports or the NGO commentary on this place; I've seen the very essence of this environment, both in the big and the intangible pieces that make up the story.

The all-is-terrible-in-South-Sudan cliche is tiresome. The script is the same: massive (insert hunger, fighting, disease, capacity building, NGO buzzword du jour) prevails, we need more money to help. The problem is, the folks who tell the world this place is horrible have an interest it the place being seen as horrible. Don't take this as some conspiracy theory (I feel comfortable in saying the aid community couldn't conspire their way out of a wet food-aid bag). It's a chance to let readers perhaps see the story behind the story. I guess that's what blogs do.

Anyway, comments are always open, no opinions are left out. Feel free to post thoughts or further discussion. If you have a business question or want to know more about entering the Southern Sudan market, send an email to me at david at dra-ltd dot com.