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Sunday, 29 May 2011 20:49

South Sudan Yet To Create Good Business Climate

By Jeremiah Kiplang'at

NAIROBI, Kenya, May 29, 2011 (East African) - As it prepares itself for sovereignty in two months, South Sudan still has a huge task ahead in establishing a business friendly territory currently soiled by regulatory hurdles.

 

Enforcing business contracts between the government and interested investors, or investors themselves, for example, remains a major problem. One has to go through 46 legal procedures before getting a solution. On top of this is the difficulty in identifying the set of laws to apply when enforcing such agreements.

 

If businessmen do not have any contractual issues, then they are faced by other challenges: inadequate security, poor infrastructure and lack of basic utilities such as water and inconsistent supply of electricity.

 

Challenges facing the presently semi-autonomous region are reflected in a new report, Doing Business in Juba 2011 which despite painting a picture of a promising state favourable to businesses, points out an array of challenges the country has to overcome in order to compete for key investors within the region.

 

Kenya Commercial Bank already has 18 branches in the nation set to receive full independence in July. A top official with the Bank said the country was facing a security challenge not new to a fledgling country.

 

He added that despite the difficulties the company was pressing on. "Investors should be encouraged to go there (South Sudan) The government of South Sudan is very supportive."

 

The South Sudan government could be supportive to KCB but the prominent hardships mentioned in the report could prove a stumbling block to its efforts to attract more investors.

 

Nakumatt Holdings said they were interested in expanding their business into the region, but they were still looking into perennial problems such as insecurity.

 

"We are planning to establish branches there but we are still studying the environment to ascertain if it is conducive," said Nakumatt's Managing Director Atul Shah.

 

These difficulties expected to welcome any businessperson are outlined in the report by the International Finance Corporation and the World Bank. First are the bureaucratic procedures, 11 according to the report, an entrepreneur has to fulfil to get a nod to establish an enterprise.

 

The 11 procedures are far more than the two required in Rwanda, one of the other rising business hubs in the region. These procedures entail, registration, licensing and fulfilling other compulsory legal requirements.

 

Despite drafting a total of 19 business related laws since the signing of the Comprehensive Peace Agreement in 2005, the country reported to be mulling over the possibility of joining the East African Community, would have to fully enforce these laws when it is officially recognised as independent if it has to widen its doors to more investors. Enforcement of laws guarding businesses, the report says, seems to have been weakened by the existence of three set of laws.

 

Apparently, the laws of Sudan passed by the National Assembly based in Khartoum are still applicable, the laws of the new Sudan enacted by the Sudan People Liberation Movement before 2005 and the laws of Southern Sudan which came into force immediately after the peace agreement and enacted by the Legislative Assembly of Southern Sudan.

 

These rules overlap confusing many entrepreneurs, especially on the right law to follow. A case in point is where judges apply different laws to solve a commercial disagreement.

 

"To solve a dispute some judges apply Khartoum's Companies Act of 1925 while others apply the "New Sudan" Companies Act of 2003" says the report.

 

After the CPA took effect six years ago, the Government of South Sudan disqualified all the companies initially registered in Khartoum. It instead set up its business registry in 2006 and started registering companies based in the region. The report indicates that there are approximately 9000 active businesses.

 

The procedures demanded of companies when they expand to South Sudan are well captured by Equity Bank's operations' manager Michael Gathura. He says that it is "hard to meet the requirements but possible." Equity Bank has three branches in Southern Sudan.

 

The report said establishing a business in Juba costs $3,077. This is a high figure when compared to the costs of starting a business in neighbouring countries like Kenya at slightly over $200. (END)

 

 
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