EAC 

Monday, January 13, 2014 

Cooler heads must prevail in S. Sudan

Kenya and Uganda have been prominent in seeking for a solution to the South Sudan crisis and it is very understandable why.

Among the five East African Community countries (EAC), the two have the most to lose if things go totally out of hand in Africa’s youngest independent state.

Both President Yoweri Museveni and President Uhuru Kenyatta were the first to jump on their planes in a bid to at least avert further bloodshed. 

What is at stake is not only the unity of South Sudan, but also the concept of economic integration itself. South Sudan was widely expected to join the EAC before the end of this year. Indeed, the EAC’s fortunes as a driving economic force also relies on having a peaceful neighbourhood.

For several years, Kenya has been investing heavily in and around Juba, especially in the financial services and some light industry. Several Kenyan banks have become household names in Juba, the South Sudan capital. Kenya also provides many expatriates acting as technical assistance through third party international organisations. 

In terms of bricks on the ground, Kenya has been the biggest investor in South Sudan. And why not? The Lamu Port South Sudan Ethiopia Transport (LAPSSET) corridor project hinges on a stable region or no one with any sense is going to invest in this ambitious venture.

LAPSSET is a project that is based on South Sudan exporting its oil through Lamu. With a capacity of 500,000 b/d, representing South Sudan production, the  new $2 billion export pipeline would be 1,260 kilometres long to connect Nakodok in South Sudan to Port of Lamu in Kenya.

 With 120,000 b/d capacity, the proposed Lamu Refinery is estimated to cost $2.8 billion capital expenditure. Then the refined products pipelines system is designed to carry back the refined products from the Lamu refinery to the center of Kenya and to supply Ethiopia.

Uganda has also benefited from its trade links with South Sudan. It supplies the most fresh produce and has helped to steadily build the South Sudan supply chain for fast moving  consumer goods. Trade with South Sudan at its best topped $300 million annually.

The backlash of the instability now affecting that country has hit Ugandan traders and several manufacturers pretty hard.

International investment is mostly about perception. It does not matter if you are sitting on a pile of gold. The idea of turning that gold into profits with the least effort or mental strain is what drives major investors. 

When hostilities broke out in South Sudan last month, international money markets stirred uneasily. No investor likes uncertainty.

In the first quarter of this year, Kenya was expected to issue a Eurobond of between $1.5 billion and $2 billion to pay for major infrastructure projects. These include part of the new standard gauge railway.

Investor demand for the Kenya bond may not be as high as, say two months ago because of the present situation in South Sudan. Uganda’s plans for issuing its own bond will also depend largely on the Kenyan outcome.

Cooler heads must prevail in South Sudan. The African story in the 1960s and 1970s of ceaseless mayhem and wayward politics is becoming boring, old fashion and very bad for business. 


By Editor, Monday, January 13th, 2014