After emerging triumphantly from decades of conflict with Sudan and achieving independence in 2011, South Sudan is the most recent sovereign state or country with widespread recognition as of 2023.
As the world’s youngest country, South Sudan initially looked to oil revenues as the catalyst for its economic growth post-independence. Despite facing challenges such as recurring cycles of corruption that may have undermined its developmental progress, the nation has found itself heavily reliant on oil. This invaluable resource now constitutes the majority of GDP, exports, and government revenue. Consequently, foreign investment has been highly concentrated in the oil sector. However, the government has acknowledged the importance of private sector development and diversification for the future of the country and has begun streamlining the regulatory environment and investment process to facilitate this growth. [1]
Impact capital represents only a small part of the overall investing landscape, with limited evidence of activity to date. Access to conventional capital continues to be a challenge for both local and foreign businesses due to the country’s newly independent financial sector. South Sudan has fewer than 20 banks and just 70 foreign exchange bureaus country wide. Foreign exchange is strictly controlled, with the four largest bureaus controlling almost 70% of the sector’s total assets. In addition, South Sudan’s banks are risk-averse and unwilling to lend to early-stage ventures as the nascent regulatory environment does not offer sufficient protection to lenders. Most banks are centred in urban areas such as Juba and Wau and have limited presence in rural areas; even microfinance Institutions have limited reach due to the country’s poor infrastructure. Investments in the oil sector remain the largest area of investment in the country, with little investment in other sectors.
The government established the One Stop Shop Investment Centre (OSSIC) to act as a central contact point for investors to apply for all required approvals and permits. After years of conflict, the country is in desperate need of infrastructure investments. [2]Plans for infrastructure development had begun to be laid out, but ongoing civil unrest has largely halted these projects.
Investment Protection- South Sudan laws allow for foreign participation or involvement in business in South Sudan. The laws include the Company Act of 2012 and the Investment Promotion Act of 2009
Regulatory Environment
After independence, the government of South Sudan was forced to develop the new country’s regulatory framework while maintaining continuity with previous systems. The country still uses some laws enacted during its period of semi-autonomy from 2005 to 2009, and it has also passed several new Acts; including the 2012 Imports and Exports Act and the 2012 Companies Act. Nevertheless, its regulatory framework remains underdeveloped. Some of the incentives put in place include;
• Repatriation of profits and dividends: South Sudan’s Investment Promotion Act guarantees the right to transfer profits into and out of the country under section 38 of the Investment Promotion Act 2009. According to Section 37 of the Act, Investors shall have an unrestricted right to use their investments and any income lawfully received therefrom for any lawful purpose and all proceeds of the operations of any enterprise may, subject to tax and other lawful obligations, be retained by the business organization, or disposed of in any lawful manner.
• Foreign exchange controls: The Central Bank uses foreign exchange rationing as a monetary instrument, banks are required to report significant foreign exchange transactions to the Central Bank, which caps the supply of foreign currency to businesses and private citizens.
• Land ownership: Under South Sudan’s 2009 Land Act, foreigners may not own land but are permitted to lease land for up to 99 years. Leases for mining or quarrying are limited to the life of the mine or quarry.
• Local ownership requirements: Foreigners are allowed to own or control businesses in any sector, but the Board of Directors of South Sudan’s Investment Authority Board has the authority to enact or change regulations that limit the sectors in which foreigners may invest. Medium and large companies must have at least 31% South Sudanese shareholding, though there is a common misperception that this rule applies to all businesses.
• Foreign Ownership and freedom of investment: Medium and large-size private companies are open to non-South Sudanese investors. Foreign investors may own, or control business organizations in any sector of the economy of South Sudan as domestic business organizations.
•Protections/Guarantees against expropriation and nationalization: According to Section 34(1) of the Investment Promotion Act, no enterprise shall be nationalized or expropriated by the Government, and no person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to cede his or her interest in the capital to any other person. [3]The Act further provides that there shall be no expropriation of any enterprise by the government unless the expropriation is in the national interest for a public purpose, which is the least burdensome means available to satisfy that overriding public purpose, is made on a non-discriminatory basis, in accordance with due process of law, and is under a law which makes provisions for payment of fair and adequate compensation, a right of access to the courts for the determination of the investor’s interest or right and to the amount of compensation to which he or she is entitled.
•Dispute resolution and Recourse to international arbitration: Investment Promotion Act 2009 section 39 provides that. The courts of South Sudan shall have jurisdiction over the resolution of business disputes. Parties to an investment dispute may specify any arbitration or other dispute resolution mechanisms upon which they may agree, within or outside the courts. Where a dispute arises between an investor and the Government in respect of any enterprise, all efforts shall be made to reach an amicable settlement. Any dispute between an investor and government but not amicably settled may be submitted at the option of the aggrieved party to arbitration in accordance with the rules and procedures for arbitration by the International Centre for the settlement of investment dispute, or in case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the government and the country of which the investor is a national, are parties, or in accordance with any other national or international machinery for the settlement of investment disputes, agreed to by the parties.
For more information on investment opportunities in South Sudan, reach out to our team of lawyers and business advisors at Centurion Law Group. We seamlessly guide our clients through Africa’s abundant investment opportunities.
Leon Van der Merwe – leon.vdmerwe@centurionlg.com
Oneyka Cindy Ojogbo – oneyka.ojogbo@centurionlg.com
Author: Rachel Atim Louis Tanda, Senior Associate, Centurion Law Group, South Sudan- Office.
