Welcoming Southern Sudan to the EAC

UPDATE: A related article on Uganda’s influence in the soon to be independent South Sudan can be found in the New York Times.

In three days the East African Community will celebrate the independence of its next newest member. Because of SPLM connections in Kenya, among other East African nations, the Southern Sudanese economy will most likely orient itself southwards.

Kenya’s Vision 2030 development plan, for instance, will link Southern Sudan to the Indian Ocean coast via a pipeline and railway line. Oil from South Sudan is currently exported through Port Sudan, 3,000 kilometres away. The planned link to Lamu would reduce that distance to 1,700 kilometres.

For Southern Sudan, economic ties with its southern neighbors will not only grant it access to much needed capital and skilled labor but also implicitly guarantee it security against its menacing neighbor to the north.

I doubt that Kenya, Ethiopia and Uganda will sit on their hands if the north decides to bomb local offices of Equity Bank, Ethiopian Airlines or Ugandan retail outlets in Juba (Remember the “Kenyan” tanks fiasco?). It also helps that IGAD has suddenly woken up to the security challenges posed by proxy wars among its member states. Kenya’s president, and current head of IGAD, recently chastised Eritrea for its ties with militant groups in the region.

IGAD will provide yet another forum for the region to put pressure on Khartoum to honor the CPA and not resort to war.

Several Kenyan companies have already set up shop in Juba. About 70,000 Kenyans live and work in Southern Sudan. According to the Business Daily:

Although several major Kenyan companies like Equity Bank, KCB, UAP Insurance and many small enterprises operate in South Sudan, the independence declaration on July 9 is expected to trigger another wave of corporate movement there.

Bidco Refineries that has a dealership in South Sudan, for example, is expected to consider having a physical presence there, said the company’s CEO Vimal Shah in an earlier interview. Kenyan manufacturers are, however, discouraged by low consumption levels and shortage of power, water and sewerage systems.

Co-operative Bank of Kenya is also expected to start setting up its banking infrastructure with a new venture that will be 30 per cent owned by the Government of South Sudan.

The new bank is expected to benefit from government business as it will process salaries of government employees and enjoy business arising from the government’s shareholding in the venture. The peaceful aftermath of the January 9 referendum that voted for secession from the North has helped to improve the country’s risk profile.

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