South Sudan: A Tricky Sell In NYC

Courtesy of The Financial Times, a report on South Sudan:

It’s not easy convincing investors that your brand-new country is worth backing. Last July, Riek Machar, South Sudan’s vice president, was in New York to mark his newly-independent country’s admission to the United Nations. As he did so as the oil wealth that provides 98 per cent of state revenue was flowing fast.

Today that oil flow is frozen due to a dispute with its neighbours in Sudan. So to reduce its vulnerability to such troubles Machar has been back to New York to fire up South Sudan’s search for American investment. But did anyone bite?

In an interview with beyondbrics, Machar said his country wanted to recruit US companies to search for new oil fields, build a refinery, kick-start the development of commercial agriculture and – brace yourself – start a wildlife tourism industry.

He also said South Sudan – whose poverty, isolation and lack of infrastructure are extreme – wanted to launch an international bond issue worth at least 5bn Sudanese pounds, or roughly $1.8bn.

This is all highly ambitious at best, utterly implausible at worst. South Sudanese officials have a habit of citing plans and numbers that sound encouraging but dissolve under scrutiny. But there’s nothing wrong with aiming high.

“We want the private sector to be the driving force of our economy,” Machar said at a New York hotel last Friday.

The problem is – who’s listening? During his US visit he did not see any of the US’s big bond investors, giant agro-businesses, or oil majors, but he did meet JNK Securities, a small broker dealer, and Ventech Engineers, a refinery developer from Texas.

He was being escorted by Americans from the United States-South Sudan Business Council, a freshly-minted trade association founded by a group of lobbyists, corporate executives, former government officials and legislators who say they are all about setting up more such meetings. It was Chevron that first discovered oil in the region in the 1970s.

Meeting Ventech, he said, was a means of checking out some of the stories South Sudan has heard from middlemen who have rushed to Juba, the capital, promising world-beating refineries. Due to the tricky, waxy nature of the region’s oil, the message from Ventech itself was: “In the short-term they can’t help us; in the long-term yes they would.”

The oil industry straddles the two Sudans and is currently dominated by China’s CNPC, which is not happy the south has shut off its 350,000 barrel per day production due to a dispute between the countries over pipeline fees and revenue sharing.

Machar said China’s ambassador to the UN had told him China would like to see the shutdown end sooner rather than later. Negotiators for the two sides are convening in the Ethiopian capital Addis Ababa for the third time this year to thrash out issues that include the fees the north wants to charge the south for using its pipelines – which is what prompted outraged southerners to halt production – as well as borders and citizenship.

Juba is famed among diplomats and aid workers in Africa for its hotels: a few years ago most of the rooms were tents; now many are converted shipping containers; concrete structures remain rare.

Machar recalled meeting Susan Rice, the US’s ambassador at the UN, on his trip last year. “Her advice to me was: ‘Make sure you have a hotel and a good airport’. We took that seriously. So we are [telling] investors this could be a lucrative business.” A few more trips to New York may well be needed.

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