On 9th July, Southern Sudan will become the Republic of South Sudan, the 54th state in Africa. Although it is the cradle of mankind, the country is poor, and has had its infrastructure impaired by 22 years of conflict with the North. Some two million people died and four million were forced from their homes during the south’s war with the north. That said, it is an oil-producing country and its people are collectively more optimistic about the future than they have been for a very long time.
One of the most immediate issues is whether it will keep the Sudanese pound or adopt its own currency. The southern Sudanese government tried to introduce a new currency in 2007, but stopped after it was pointed out that it constituted a breach of the 2005 peace agreement with the North. Silk Invest spoke with a senior member of the African Development Bank on this issue. Although we were not told what the plan is, we were assured that the issue was appreciated and steps would be taken
The Republic of South Sudan’s constitution names English as the new nation’s language of government and education. It will look to East Africa for economic and social integration. South Sudan contains enormous agricultural and natural resources. In few years, Silk invest believes it can rebuild its economic infrastructure and improve its trade relations with neighbouring countries.
Water and oil will become the main issues. The establishment of ties between Republic of South Sudan’s and east African and Nile basin nations will threaten Egypt’s share of the Nile’s river water. These so called basin countries are currently demanding a redistribution of Nile water. Oil is also an topic we will hear more about, as the country produces 500,000 barrels a day. The North and South have been evenly splitting proceeds since 2005. The north owns the refinery and pipeline infrastructure, so perhaps a happy balance can be maintained.
Kenya’s exports to south Sudan have doubled since peace broke out and the country is neighbouring Uganda’s main export market. It is therefore not surprising that the Republic of South Sudan says it wants to join the East African Community trade bloc. Without a stock exchange or any bond issuance, the only way to gain exposure to the market is by private equity or indirectly. In that respect, Kenya Commercial Bank and South Africa’s SABMiller are the most exposed. Kenyan companies, like Equity Bank, are rushing to capture the opportunity.
At Silk Invest, we are extremely pleased to see a problem resolved by the ballot box. The creation of a new country, optimistic and at peace, shows that even the poorest and previously dysfunctional African countries are now coming of age.
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