HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...South Sudan

# 					2019 Investment Climate Statements: South Sudan			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Trade and investment conditions in South Sudan have slightly improved in the past year, but many challenges remain.  In September 2018, parties to the country’s civil war signed a new peace agreement. While implementation of the agreement is still underway, as of April 2019 hostilities had ceased in most parts of the country.  However the country continues to be plagued by large-scale displacement, widespread food insecurity, severe human-rights abuses, restricted humanitarian access, and harassment of aid workers and journalists.

South Sudan is one of the most oil-dependent economies in the world, but the sector is fraught with corruption.  In March 2018, the United States Department of Commerce added the Ministry of Petroleum, the Ministry of Mining, and state-owned oil company Nilepet to the Entity List, barring export of certain U.S. goods or technologies to them due to their contribution to the conflict.

Humanitarian and development aid is a major source of employment in South Sudan.  Difficulties of changing regulations, multiple layers of taxation, and labor harassment faced in this sector may provide insight to difficulties private investors would face.  Bureaucratic impediments faced by NGOs include recruitment interference, airport obstructions, and duplicate registration and permit issues by different levels of authority.

The government has made efforts to simplify and centralize taxation, with the creation of the National Revenue Authority.  The Bank of South Sudan has launched a website where it posts key financial data. However, the legal system is ineffective, underfunded, overburdened, and subject to executive interference and corruption.  High-level government and military officials are immune from prosecution and parties in contract disputes are sometimes arrested and imprisoned until the party agrees to pay a sum of money, often without going to court and sometimes without formal charges.

Other factors inhibiting investment in South Sudan include limited physical infrastructure and a lack of both skilled and unskilled labor. The World Bank’s 2019 Doing Business report ranked South Sudan 185 out of 190 economies on overall ease of doing business. The legal framework governing investment and private enterprises remained underdeveloped as of April 2019.

The U.S. Department of State maintains a Travel Advisory warning against travel to South Sudan due to critically high risks from crime, kidnapping, and armed conflict.

*Table 1: Key Metrics and Rankings*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

As of April 2019, the government was actively seeking foreign direct investment, but had not undertaken meaningful steps to facilitate it.  Reported unfair practices have included effective expropriation of assets, inconsistent taxation policies, harassment by security services, extortion attempts, and a general perception that foreigners are not afforded fair results in court proceedings or labor disputes.

The country makes few investment facilitation efforts. The South Sudan Investment Authority (SSIA) has been established as has, in theory, a One Stop Shop Investment Center.  However, both organizations are poorly resourced and neither maintains an active web site. There is no business registration website. The ministries that handle company registration include the Ministry of Trade and Industry, Ministry of Finance, and Ministry of Justice. There is no single window registration process, and an investor must visit all the above mentioned agencies to complete the registration of a company.  It is estimated that the registration process could take several months.

In January 2018, South Sudan joined the African Trade and Insurance Agency (ATI), which provides export insurance and other assistance to foreign investors and traders.  Several local lawyers are willing to advise investors and guide them through the registration process, for a fee. The government has held investment conferences and organized an investment roadshow.  There is a private-sector Chamber of Commerce. There is no ombudsman.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity, as well as freely establish, acquire and dispose of interests in business enterprises.  Under the investment law, the government of South Sudan leases land to foreign investors for limited periods of time, generally not to exceed 30-60 years, with the possibility of renewal. In the case of leases for mining or quarrying, the lease shall not exceed the life of the mine or quarry.  Under the 2009 Land Act, non-citizens are not allowed to own land in South Sudan.

For investors who wish to start a business in South Sudan, there is a local shareholder requirement but the foreign investor can usually retain majority control.  For foreign-based companies who wish to establish a subsidiary in South Sudan, the local shareholder requirement does not apply. South Sudanese businesses are given priority in several areas, including micro-enterprises, postal services, car hire and taxi operations, public relations, retail, security services, and the cooperative services.  Exact details, and the extent of enforcement of these requirements, are sometimes unclear.

Subject to the Private Security Companies Rules and Regulations of 2013, registering and setting up a protection services security company in South Sudan requires a South Sudanese citizen to hold at least 51 percent of the company.  Companies in the extractives sector must also have a South Sudanese national as part owner, but the exact percentage of ownership required is not always clear.

According to the Investment Act, foreign investors must apply for an investment certificate from the South Sudan Investment Authority to ensure that the investment will be beneficial to the economy or general benefit of South Sudan.

**Other Investment Policy Reviews**

In the past three years, the government has not undergone any third-party investment policy reviews.

**Business Facilitation**

The Government’s fiscal and economic strategy sees government facilitating investment in economic priority sectors, particularly in agriculture, transport infrastructure, petroleum, mining, and energy, to unlock South Sudan’s economic potential and boost diversified growth.  Investment incentives exist but the exact procedures are somewhat opaque.

There is no business registration website.  The process to register a business is lengthy and complex, and involves visiting multiple offices at the national, state, and local levels.  The Chamber of Commerce recommends hiring a local lawyer to register a business.

**Outward Investment**

The Government of South Sudan does not have a policy for promoting or incentivizing outward investment.  The government does not have a policy restricting domestic investors from investing abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

South Sudan signed a Bilateral Investment Treaty (BIT) with Morocco in 2017 but it is not in force.

In November 2018 a South African government fund signed an agreement with South Sudan pledging USD 1 billion for oil exploration and construction of a refinery.  The agreement was made between two state-owned companies but is not a general BIT.

South Sudan does not have a bilateral taxation treaty with the United States and does not have a tax agreement with any other countries.  Contacts have reported that in practice, business owners can be subject to a range of unexpected taxes from a variety of levels of authority.

							3. Legal Regime					

**Transparency of the Regulatory System**

Bureaucratic procedures for opening a business are long and cumbersome, particularly for foreigners trying to navigate the system without the assistance of a well-connected national.

The private sector is governed by a mix of laws from Sudan, the pre-independence semi-autonomous Government of Southern Sudan, and since 2011, the Government of South Sudan. The Transitional National Legislative Assembly (TNLA) passed laws to improve the transparency of the regulatory system, including the 2012 Companies Act and the 2012 Banking Act, however enforcement regulations are still lacking and there is little transparency. The government does not consult with the public about proposed regulations and information about regulations is not widely published.  Several key pieces of legislation governing customs, imports and exports, leasing and mortgaging, procurement, and labor have not been approved by the government and are needed to improve the business environment in South Sudan.

The oil sector is the major industry that attracts FDI, but transparency in the oil sector is absent, despite it being mandated by South Sudanese law.  The Ministry of Petroleum does not share data at an institutional level with the Bank of South Sudan, and does not release it to the public. The Ministry of Petroleum does not publish oil production data on their website. The contracts process for oil companies that are planning to bid and invest in South Sudan is controlled by the Ministry of Petroleum. This information is not publicly available on the Ministry’s website.

There are no known informal regulatory processes managed by nongovernmental organizations or private sector associations that would affect U.S. investors.  National and state bodies are the main source of regulation, but county and sub-county level officials also impose regulations. In 2018 and 2019, international non-governmental organizations regularly reported that local officials demanded taxes and fees that differed with those set out in national policy.  An opaque Presidential Decree issued in late 2018, for example, resulted in weeks of customs clearance disruptions at the country’s main land border in Nimule. NGOs report regular discrepancies between tax and labor rules issued by the national government and those enforced by local authorities. At some state levels, private contractors moving goods earmarked for humanitarian relief have been prevented entry at state borders.

There are no publicly listed companies.  Government accounting is non-transparent.  In 2018 the legislative assembly held public budget hearings, but in general, most bills and regulations are passed without public comment, and are poorly disseminated.  There is no centralized online location where key regulatory actions are published. There is no ombudsman. Parliament has not been able to provide effective oversight of government ministers. There were no significant corruption cases prosecuted in 2018.

No enforcement reforms have been announced or implemented.  The establishment of the National Revenue Authority may provide a stronger foundation for development and implementation of accounting and regulatory standards.  South Sudan is working to develop sources of non-oil revenue, including more centralized and effective enforcement of personal income tax. If transparently collected and managed, these funds could assist in development of the country’s infrastructure.

South Sudan’s parliament is responsible for developing laws, but bodies such as the National Revenue Authority have also been influential in developing tax procedures, for example.  There is no indication that regulations are informed by quantitative analysis and public comments received by regulators are not made public.

Laws and regulations are randomly enforced and are not well-publicized, creating uncertainty among domestic and foreign investors.  The Ministry of Labor, for example, rarely if ever conducts inspections, but NGOs and foreign investors have reported that employees have colluded with labor inspectors to extort fines from business managers.

South Sudan’s public finances are extremely opaque.  The government released some debt obligation information during budget hearings in 2018 regarding certain infrastructure loans, but to date has not disclosed the amount of forward-sold oil (the country’s main source of revenue).  The Ministry of Petroleum particularly lacks transparency, as does the Ministry of Finance. Allegations of corruption plague both ministries. The state-owned oil company Nilepet has consistently refused public auditing.

**International Regulatory Considerations**

South Sudan is a member of the African Union and the East African Community (since April 2016) and is making progress in adapting its national regulatory system to regional standards.

With the establishment of the National Revenue Authority, South Sudan has begun to implement EAC customs regulations and procedures.  South Sudan is not a member of the WTO.

**Legal System and Judicial Independence**

South’s Sudan’s legal system is a combination of statutory and customary laws.  There are no dedicated commercial courts and no effective arbitration act for handling business disputes. The only official means of settling disputes between private parties in South Sudan is civil court, but enforcement of court decisions is weak or nonexistent.  The lack of official channels for businesses to resolve land or other contractual disagreements has led businesses to seek informal mediation, including through private lawyers, tribal elders, law enforcement officials, and business organizations.

The executive regularly interferes in judiciary matters.  Parties to business disputes have been arrested by state security forces and held at length without charges.  High-level government and military officials are often immune from prosecution in practice, and frequently interfere with court decisions. Parties in contract disputes are sometimes arrested by authorities and imprisoned until the party agrees to pay a sum of money, often without going to court and sometimes without formal charges.

The lack of a unified, formal system encourages ‘forum shopping’ by businesses that are motivated to find the venue in which they can achieve an outcome most favorable to their interests. Many disputes are resolved informally.  U.S. companies seeking to invest in South Sudan face a complex commercial environment with extraordinarily weak enforcement of the law. While major U.S. and multinational companies may have enough leverage to extricate themselves from business disputes, medium-sized enterprises that are more natural counterparts to South Sudan’s fledgling business community will find themselves held to local rules.

**Laws and Regulations on Foreign Direct Investment**

Despite some improvements to the taxation system, the opacity and lack of capacity in the country’s legal system poses high risk to foreign investors.South Sudan’s National Revenue Authority has centralized and standardized collection of Personal Income Tax and customs duties.  A One-Stop Shop Investment Centre (OSSIC) was established in 2012 but there is no website or advertised physical office. In practice, someone who wishes to register a business must rely on a local lawyer to register the business with the registrar at the Ministry of Justice and with other relevant authorities such as tax authorities.

**Competition and Anti-Trust Laws**

South Sudan does not review transactions for competition-related concerns.  There were no significant developments in 2018.

**Expropriation and Compensation**

The Investment Promotion Act of 2009 prohibits nationalization of private enterprises unless the expropriation is in the national interest for a public purpose.  However, the current law does not define the terms “national interest” or “public purpose.” According to the law expropriation must be in accordance with due process and provide for fair and adequate compensation, which is ultimately determined by the local domestic courts.

Government officials have pressured development partners to hand over assets at the end of programs. While some donor agreements call for the government to receive goods at the close-out of a project, assets have been seized by local government officials even in instances where they were not included in a formal agreement.

Although officially denied, credible reports from humanitarian aid agencies indicate that money is routinely extorted at checkpoints manned by both government and opposition forces to allow the delivery of humanitarian aid throughout the country.

In practice, the government has not offered compensation for expropriated property.  For example, in October 2018 the Government expropriated the assets of Kerbino Wol Agok, a high profile prisoner of the National Security Service, with no apparent judicial process.  His companies and their bank accounts were seized and all employees fired.

Due to the insufficiencies in the legal system, investors should not expect to receive due process.  Investors face a complex commercial environment with relatively weak enforcement of the law.

**Dispute Settlement**

*ICSID Convention and New York Convention*

South Sudan signed and ratified the ISCID Convention on April 18, 2012 and it entered into force on May 18, 2012.  Currently South Sudan is not a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

There is no specific domestic legislation that enforces awards under the ICSID convention.

*Investor-State Dispute Settlement*

South Sudan does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States.

In recent years South Sudan has reportedly failed to pay for some services provided to it by private companies. For example, in November 2017 South Sudan stopped issuing and renewing passports and other travel documents after its production system was shut down for two weeks by the country’s German supplier, due to the government’s failure to pay an annual software license fee of around USD 500,000.  In addition, numerous private companies, including at least one U.S. company, claim the government has reneged on or delayed payment for work under contract.

In March 2018, the government suddenly suspended Lebanese-owned cell phone service provider Vivacell, which had previously been South Sudan’s largest telecommunications company with a 51 percent market share and equipment installed throughout the country, due to an alleged failure to pay taxes.

There is a history of extrajudicial action against foreign investors.  Parties in contract disputes are sometimes arrested and imprisoned until the party agrees to pay a sum of money, often without going to court and sometimes without formal charges.

*International Commercial Arbitration and Foreign Courts*

There are no official arbitration bodies in South Sudan.  South Sudan lacks any dedicated legal framework for rendering enforceable court judgments from foreign courts.

**Bankruptcy Regulations**

The 2011 Insolvency Act provides for both personal and corporate bankruptcies.  Given the lack of commercial courts, there is little information available about the rights of creditors in practice.  South Sudan is tied for last place in the World Bank’s 2019 Doing Business Report ranking for “resolving insolvency.”

							4. Industrial Policies					

**Investment Incentives**

The Investment Promotion Act provides for various tax incentives, including capital allowances ranging from 20 to 100 percent of eligible expenditures, deductible annual allowances ranging from 20 to 40 percent, and depreciation allowances ranging from 8 to 10 percent.  A foreign tax credit is granted to any resident company paying foreign taxes on income from business activities outside South Sudan. In practice, the exact incentive structure is somewhat unclear.

Applications for fiscal incentives are made to the Ministry of Finance, Commerce, Investment and Economic Planning through the One Stop Shop Investment Centre (OSSIC).  Tax exemptions and concessions on machinery, equipment, capital and net profits are approved for stated periods by the Ministry of Finance, at its discretion. Fiscal incentives also include capital allowances, deductible annual allowances and annual depreciation allowances.

The government has been known to guarantee foreign direct investment projects with oil deliveries.  However, due to a lack of transparency at the Ministry of Petroleum, it is unclear to what extent the country’s oil production has been leveraged and thus it is impossible to ascertain the likelihood of the country being able to honor such commitments.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

South Sudan has not established any free trade zones. On June 22, 2013 the government of South Sudan announced the construction of Juba Specialized Economic Zone (SEZ) near the capital.  It was intended to be an industrial area for business and investment activities but development of the area has not progressed.

**Performance and Data Localization Requirements**

South Sudan’s 2017 Labor Act dictates that 80 percent of staff at all levels of management must be South Sudanese nationals.  Additionally, authorities in some areas of the country have demanded that NGOs employ people local to a specific area, or from a specific ethnic group, although there is no basis for this practice in South Sudanese law.  The law makes no specific mention of senior management and boards of directors. The government requires work permit fees for foreign nationals. These are typically several thousand dollars per employee, but the exact amounts change regularly.  Foreigners are also subject to a variety of registration requirements, which also change regularly and unpredictably.

In consideration of entitlement to an investment certificate, the Investment Act encourages, but does not require, technology transfer, increase in foreign exchange through exports or import substitution, production and use of local raw materials and supplies, and contributions to the local community.  For entitlement to an investment certificate, the Investment Authority is required by law to assess if the investment will create employment for South Sudanese, acquire new skills of technology for South Sudanese, and contribute to tax revenues. The use of domestic content in goods or technology is encouraged, but not required.

The Investment Authority may revoke an investment certificate due to breach of performance requirements, with 30 days notice.  There are no provisions regarding maintenance, increase, or decrease of performance requirements.The Investment Act applies these requirements equally to domestic and foreign investors.

There are no known requirements for foreign IT providers to turn over source code or provide access to encryption.  No measures are known to exist to prevent companies from transferring customer or other business data outside the country.  There are no known rules on maintaining data storage within the country.

							5. Protection of Property Rights					

**Real Property**

There was no progress in 2018 towards comprehensive land reform. Laws on mortgages, valuation, and the registration of titles have not been drafted.  While the 2009 Land Act and the 2009 Investment Promotion Act both state that non-citizens can access land for investment purposes, by leasing the land but not owning it, clear regulations governing how a business acquires land were not available in 2018.

Currently, some businesses lease land from the government, while others lease land directly from local communities and/or individuals. Under the Land Act, investment in land acquired from local communities must contribute economically and socially to the development of the local community.  Businesses will often sign a memorandum of understanding with the local communities in which they agree to employ locals or invest in social services in exchange for use of the land. Land negotiations with communities often require several months or longer to complete. South Sudan ranked 179 out of 185 countries for ease of registering property in the World Bank’s 2019 Doing Business Report.

Ownership of land is often unclear, with communities and government both claiming the same property. In some cases, multiple individuals hold registration certificates demonstrating sole ownership of the same piece of land.

As of April 2019, over 4 million South Sudanese were still displaced from their homes due to conflict.  During the five-year civil war, many of their houses were illegally occupied and likely remain so. Property owners or public authorities may file for an order to evict unauthorized occupants under the Land Act.  While the rightful owners may hold clear land titles, it is unclear if the legal system is equipped to handle their claims and it is likely that land ownership will be regularly disputed throughout large parts of the country in the foreseeable future.

**Intellectual Property Rights**

The legal structure for intellectual property rights (IPR) is weak and enforcement is lax.  Recorded instances of intellectual property theft are rare. While the Investment Act of 2009 includes an article on the protection of IPR, implementing legislation on trademarks, copyrights, and patents has not yet been passed.  To date, the only intellectual property law which has been put forward to the legislature is the Trade Marks Bill of 2013. No new IP-related laws or regulations were enacted in 2018.

South Sudan does not track or seize counterfeit goods.  There has been no known prosecution of IPR violations and there are no estimates available for traffic of counterfeit goods. There was one report of an unauthorized public screening of a U.S. film in 2018.

South Sudan is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

The Investment Act mentions portfolio investment, but South Sudan does not have a functioning market for financial assets.  South Sudan does not have a stock market or related regulatory system. There are no known policies for promotion of investment into product and factor markets.

South Sudan’s formal financial system offers few financial products. It is difficult for foreign investors to get credit on the local market due to the shortage of hard currency, the lack of accurate means of obtaining reliable figures or audited accounts, the absence of a credit reference bureau, and South Sudan’s failure to document land ownership properly.  According to the World Bank, 50 percent of all South Sudanese firms cite access to finance as a constraint.

Banks are often unwilling to lend due to the lack of adequate laws to protect lenders and difficulties related to personal identification.  After the Bank of South Sudan confiscated commercial banks’ reserves on deposit at the central bank in 2015, diverting them to the use of the government, companies and individuals had difficulty accessing their funds.  This made depositors reluctant to trust their funds to the banking system.

The Bank of South Sudan launched treasury bills on August 18, 2016 for purchase by members of the public, companies and commercial banks.  This lasted until April 2017, when people stopped investing in the bills due to high inflation and a lack of a secondary market for them. The bank had previously issued treasury bills in 2012 without success.

**Money and Banking System**

Activity in the banking system grew after independence for a period until it deteriorated in 2014 due to civil conflict and the reduction of oil exports. The economy of South Sudan is cash-based, with limited use of demand deposits. The IMF has categorized South Sudan’s financial sector as small and undeveloped.  South Sudan has recently introduced mobile money. Informal unauthorized transfer services already exist, but mobile money services should allow for greater access to domestic banking services.

There is limited information to assess the health of this sector and figures are unreliable.  The Bank of South Sudan, the country’s central bank, has limited assets. There are a total of nine foreign-owned banks.  There are no known additional regulations for foreign banks. There are no known restrictions on a foreigner’s ability to establish a bank account.

**Foreign Exchange and Remittances**

*Foreign Exchange*

Foreign investors cannot remit funds through the parallel market. They are required by law to remit through banks or foreign exchange bureaus at an exchange rate that is far below the market rate.

The 2009 Investment Promotion Act guarantees unconditional transferability in and out of South Sudan “in freely convertible currency of capital for investment; payments in respect of loan servicing where foreign loans have been obtained; and the remittance of proceeds, net of all taxes and other statutory obligations, in the event of sale or liquidation of the enterprise.” In reality, the ability to exchange local currency for foreign currency is severely restricted.

South Sudan maintained a fixed exchange rate for the South Sudanese Pound until December 2015 when it moved to a managed floating exchange rate regime.  Since then, the local currency has depreciated significantly due to deficit spending by the government, printing of money, and a lack of hard currency. The current official exchange rate can be found from the Bank of South Sudan or from commercial banks in Juba.  There is a large spread between this rate and the unofficial parallel market rate.

*Remittance Policies*

There have been no recent changes to investment remittance policies, and no known waiting periods on remittances.

**Sovereign Wealth Funds**

The Petroleum Revenue Management Act of 2013 created a sovereign wealth fund (SWF) to set aside surplus profits from oil sales.  The law established the Oil Revenue Stabilization Account to act as a buffer against volatility in oil prices and the Future Generations Fund to set aside some funds for future generations.  The SWF is supposed to distribute 10 percent of oil profits into the Oil Revenue Stabilization Account and 15 percent to the Future Generations Fund. To date, however, neither has received any financing.  The Comprehensive Peace Agreement (CPA) that ended the civil war with Sudan set a 2 percent share of oil revenue that is supposed to be given to the oil producing states along with 3 percent revenue allocation to the local communities.  However, in August 2017, the government announced that it would stop giving the 3 percent and 2 percent share to states. The September 2018 peace agreement calls for the accounts to be funded. The SWF does not follow any good practices and being unfunded, does not invest domestically (although it is intended to).

							7. State-Owned Enterprises					

The national oil company – Nile Petroleum Corporation, or Nilepet – remains the primary fully State-owned enterprise (SOE) in South Sudan.  The government owns stakes in construction and trade companies and in several banks. Limited data is available on number, total income, and employment figures of SOEs.There is no published list of SOEs.

Nilepet is the technical and operational branch of the Ministry of Petroleum. Nilepet took over Sudan’s national oil company’s shares in six exploration and petroleum sharing agreements in South Sudan at the time of the country’s independence in 2011.  Nilepet also distributes petroleum products in South Sudan. The government, through Nilepet, holds minority stakes in other oil companies operating in South Sudan

The Petroleum Revenue Management Bill, which governs how Nilepet’s profits are invested, was enacted into law in 2013; however, the company has yet to release any information on its activities, even though the law states that comprehensive, audited reports on the company’s finances must be made publicly available.

The government is not transparent about how it exercises ownership or control of Nilepet.  Its director reports to the Minister of Petroleum and Mining. Nilepet’s revenues and expenditures are not disclosed in the central government budget.  No audited accounts of Nilepet are publicly available. After the January 2012 oil production shutdown, oil production recovered to more than 235,000 barrels per day at end of 2013, only to fall to about 160,000 barrels per day in early 2014 as a result of the conflict that started in December 2013. The ongoing conflict has reduced daily oil production currently to about 140,000 barrels per day (bpd) as of April 2019, and the collapse of international oil prices plus the drop in oil production has cut state revenues.

In March 2018, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce amended the Export Administration Regulations (EAR) to add Nilepet and several related companies to the Entity List, along with the Ministry of Petroleum and the Ministry of Mining, due to their role in worsening the conflict in South Sudan.

The Entity List identifies entities, including corporations, private or government organizations, and natural persons, and other persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.

The U.S. Government assesses the 15 entities BIS has added to the Entity List as contributing to the ongoing crisis in South Sudan because they are a source of substantial revenue that, through public corruption, is used to fund the purchase of weapons and other material that undermine the peace, security, and stability of South Sudan rather than support the welfare of the South Sudanese people. Adding these entities to the Entity List is intended to ensure that items subject to the EAR are not used to generate revenue to finance the continuing violence in South Sudan.

The following 15 entities are the first South Sudanese entities added to the Entity List: Ascom Sudd Operating Company; Dar Petroleum Operating Company; DietsmannNile; Greater Pioneer Operating Co. Ltd; Juba Petrotech Technical Services Ltd; Nile Delta Petroleum Company; Nile Drilling and Services Company; Nile Petroleum Corporation; Nyakek and Sons; Oranto Petroleum; Safinat Group; SIPET Engineering and Consultancy Services; South Sudan Ministry of Mining; South Sudan Ministry of Petroleum; and Sudd Petroleum Operating Co.

These 15 entities are subject to a license requirement for all exports and reexports destined for any of the entities and transfers (in-country) to them of all items subject to the EAR with a licensing review policy of a presumption of denial. This license requirement also applies to any transaction involving any of these entities in which such entities act as a purchaser, intermediate consignee, ultimate consignee or end-user.  Additionally, no license exceptions are available to these entities.

If any person participates in a transaction described above involving any of these 15 entities without first obtaining the required license from BIS, that person would be in violation of the EAR and could be subject to civil or criminal enforcement proceedings. Civil enforcement could result in the imposition of monetary penalties or the denial of the person’s export privileges. Additionally, a person’s supplying or procuring items subject to the EAR or engaging in other activity involving an entity on the Entity List could result in a determination to add that person to the Entity List consistent with the procedures set forth in the EAR.

The regulation can be viewed on the Federal Register at https://www.gpo.gov/fdsys/pkg/FR-2018-03-22/pdf/2018-05789.pdf .

The country does not adhere to the OECD Guidelines on Corporate Governance for SOEs.

**Privatization Program**

South Sudan does not have a privatization program. So far, the government has no plans for privatization, and there are few government-owned entities that provide services to individuals.

							8. Responsible Business Conduct					

The idea of responsible business conduct is new in South Sudan, and there is little awareness of standards in this area.  The few large international firms operating in South Sudan sometimes offer some basic benefits to local communities, but on an irregular basis. The 2009 Land Act requires investment activities carried out on land acquired from local communities to “reflect an important interest for the community or people living in the locality,” and to contribute economically and socially. There are complaints in the media about the number of foreign-owned companies and the lack of hiring of South Sudanese employees.  International observers have argued that many of the oil producing companies do not practice responsible behavior in regard to environmental damage in the oil fields.

The government has taken no steps towards RBC.  The recently signed peace agreement and some national laws (such as the Petroleum Act) contain RBC provisions but they are unenforced.  The environmental and human rights impact of oil pollution has been severe but the government has not responded to widespread damage to the environment and displacement of people.  The government has demonstrated little capacity or will to enforce laws on human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impact.  The government has not put in place corporate governance, accounting, and executive compensation standards to protect shareholders.

NGOs have promoted RBC, particularly in the environmental domain, but activists and reporters in this field have reported that they are subject to government harassment.

The government does not encourage adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, and there are no functioning domestic measures related to such due diligence.  South Sudan is a source of minerals originating from conflict-affected areas and there is little oversight to the extractive industries such as gold.

The government does not participate in the Extractive Industries Transparency Initiative (EITI) and while the law requires the disclosure of payments made to the government in regard to oil sales, in reality disclosure is weak or nonexistent.

							9. Corruption					

South Sudan has laws, regulations, and penalties to combat corruption, but there is a near total lack of enforcement and considerable gaps exist in legislation.  As a result, corruption is pervasive.

Companies are reportedly asked to pay extralegal taxes and fees.  Security officials have been reported to impose business conditions including payment of fees, salaries, and logistical support to their operations.  In practice, politically connected people are immune to prosecution. There are no laws that prevent conflict of interest in government procurement.

The government does not encourage or require private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.  There is no indication that private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

The South Sudan Anti-Corruption Committee (SSACC) was established in accordance with the 2005 Constitution and the 2009 SSACC Act. The five commission members and chairperson are appointed by the President with approval by a simple majority in the parliament. The commission is tasked with protecting public property, investigating corruption, and submitting evidence to the Ministry of Justice for necessary action.  In addition, the commission is tasked with combatting administrative malpractice in public institutions, such as nepotism, favoritism, tribalism, sectionalism, gender discrimination, bribery, embezzlement, and sexual harassment.

In reality, the SSACC lacks the resources or political capital to investigate corruption.  It has no capacity to address state corruption as it can only relay its findings to the Ministry of Justice for prosecution.  There were no significant anti-corruption cases investigated or prosecuted in 2018.

South Sudan acceded to the United Nations Convention against Corruption on January 23, 2015 but has not yet ratified it.  The country is not a party to the OECD Anti-Bribery Convention and is not reported to be a participant in regional anti-corruption initiatives.

The country provides no protection to NGOs involved in investigating corruption.  NGOs of all types are routinely subject to government harassment.

All major sectors including the extractive sector, hotels, airlines, banking, and security sectors are subject to interference from the security sector including recruitment interference, and payment of fees and salaries.

Corruption appears to be pervasive at all levels of government and society. The regulatory system is poor or non-existent, and dispute settlement is weak and subject to influence.

*Resources to Report Corruption*

National Audit ChamberP.O. Box 210Juba, South SudanTel: +211 (0) 955 481 021info@auditchamber-ss.org

Honorable Ngor Kulong NgorChairpersonSouth Sudan Anti-Corruption CommissionP.O Box 312Juba, South Sudananticorruptioncommission@yahoo.co.uk

Honorable Awad Masha ZigizoCommissionerSouth Sudan Anti-Corruption CommissionP.O Box 312Juba, South Sudananticorruptioncommission@yahoo.co.uk

Contact at “watchdog” organizations:

UN Panel of Experts on South SudanMr. David Biggs (Senior Committee Secretary)Tel: (212) 963-5598sc-2206-committee@un.org

Transparency InternationalAlt-Moabit 9610559 BerlinGermanyTelephone: +49 30 3438 200Fax: +49 30 3470 3912ti@transparency.org

The Sentryc/o The Enough Project1420 K Street, NW, Suite 200Washington, DC 20005info@thesentry.org

							10. Political and Security Environment					

There is a long history of politically motivated violence in South Sudan.  The warring parties concluded a peace agreement in September 2018 to stop the civil war that has wrought the country since 2013.  Limited fighting continues in some parts of the country as of April 2019, but in general, the ceasefire has held. The effects of the war on the economy and investment will be evident for some time.

Previous violence during conflict with Sudan resulted in damage to installations in one of the major oil producing areas in the country, shutting down production in that region.  Repairs to these facilities began in 2018, allowing for an increase in oil production.

The environment remains insecure but hopes of peace have been rekindled with signing of a new peace agreement in September 2018.  The parties, however, remain behind in implementation as of April 2019.

There were 1.9 million Internally Displaced Persons (IDPs) in South Sudan, and an additional 2.3 million South Sudanese refugees in neighboring countries as of April 2019.  The government has not yet developed the conditions that would allow the IDPs and refugees to safely return home. Political opposition leaders faced illegal detention and travel restrictions in 2018.  The government has temporarily shut down several newspapers and detained journalists it accused of printing articles opposing policies or actions undertaken by the government.

The conflict severely disrupted trade, markets, and agricultural activities, claimed thousands of lives and spurred one of the world’s most serious humanitarian crises. The conflict was marked by grave human rights abuses, especially pervasive gender-based violence.  Out of a population of approximately 12 million, some 6.5 million people are in need of food assistance in South Sudan. During 2018, the bulk of U.S. and the international community’s support efforts were directed at the immediate needs of the ongoing humanitarian crisis brought on by the civil conflict.  Other development assistance has been significantly reduced.

NGOs complain of harassment, and aid convoys have come under attack in 2018.  South Sudan was named the most dangerous country in the world for aid workers in 2018.  Armed cattle raids claimed hundreds of lives in 2018, and several ambushes and kidnappings have taken place on the country’s main highway, the Juba-Nimule road.  The Department of State currently warns against travel to South Sudan due to the critically high risk of crime, kidnapping, and armed conflict.

							11. Labor Policies and Practices					

South Sudan has a shortage of both skilled and unskilled workers across most areas in the formal sector.  According to the 2008 census, 84 percent of those employed are in non-wage work. Unskilled labor in the service and construction sectors is often performed by immigrants from neighboring countries.  This is in large part due to a lack of basic skills training. South Sudan has one of the worst adult literacy rates in the world: about 27 percent.

The five-year civil war has resulted in large swaths of people displaced from their homes (over 4 million are displaced or refugees as of April 2019) and has devastated the economy.

Government enforcement of existing labor laws has been absent. Most small South Sudanese businesses operate in the informal economy, where labor laws and regulations are widely ignored.

The Labor Act of 2017 requires that 80 percent of staff hired by foreign employers at all levels of management be nationals of South Sudan.  Government security offices have been reported to interfere with hiring in some cases. The Ministry of Labor thoroughly reviews all work permit applications in an attempt to determine whether a position could be filled by a South Sudanese national.  Some foreign-owned companies reported long delays in receiving work permits for expatriate staff, and many expatriates are issued work permits for just one to three months, rather than the standard one year. State and local authorities have also been reported to charge additional fees and attempt to restrict employment to people from a certain place or of a certain ethnic group.

The Labor Act establishes an “employment exchange” scheme for unemployed people that reserves vending, hawking, driving, office support staffing and other manual labor for nationals only.  No social safety net programs exist in practice. The Labor Act allows for Termination for Redundancy “due to changes in the operational requirements of the employer” with certain conditions, and requires severance pay.  The law differentiates between this and several other forms of termination.

There are no special labor provisions in order to attract or retain investment.  No formal functioning collective bargaining systems exist. Disputes are handled by the Ministry of Labor, by courts, and informally/extrajudicially.  Foreign employers have reported being at a significant disadvantage in such disputes.

In July 2018, a mob of hundreds described as local youths attacked NGO facilities causing millions of dollars in damages in Maban.  The government was slow to respond or investigate, and ultimately released the attack’s ringleaders shortly after arresting them. In 2018, some international organizations reported labor strikes from day wage-earners.  Some international organizations reported strikes or blockages where locals protested against the employment of South Sudanese from different ethnic groups perceived to be receiving favored treatment.

Child labor is rampant and the government does not enforce child labor laws through inspections or fines.

The most recent change to labor law was the Labor Act signed by the South Sudanese President in December 2017.

							12. OPIC and Other Investment Insurance Programs					

There is a potential for successful OPIC operations in South Sudan if the security environment continues to improve.  The Overseas Private Investment Corporation (OPIC) has been open to business in South Sudan since 2012. South Sudan ratified its Investment Incentive Agreement (IIA) with OPIC in 2013.  South Sudan is a member country of the Multilateral Investment Guarantee Agency.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

 

*Table 3: Sources and Destination of FDI*

Data not available.

*Table 4: Sources of Portfolio Investment*

Data not available.

							14. Contact for More Information					

Economic/Commercial OfficerU.S. Embassy, Kololo Road, Juba, South Sudan(U.S.) +1 (202) 216-6279, ext 215jubacommercial@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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