Transparency of the Regulatory System
Opening a business can be especially challenging for foreigners trying to navigate the bureaucratic system without the assistance of a well-connected national.
The private sector is governed by a mix of legacy pre-independence laws from Sudan and post-independence South Sudan laws. South Sudan has no securities exchange or publicly listed companies. Post-independence, the national legislature passed laws to improve the transparency of the regulatory system, including the 2012 Companies Act and the 2012 Banking Act. However, enforcement regulations remain lacking and there is little transparency.
The national legislature historically passed most bills and regulations without public comment or quantitative analysis. It did not adequately disseminate finalized laws publicly. This trend continues with the Transnational Legislative Assembly (TNLA). The TNLA formed several committees in late 2021 and early 2022, a development that may improve capacity and transparency. Most government ministries and agencies do not hold notice and comment periods before finalizing regulations. There is no centralized online platform for publishing regulatory actions similar to the U.S. Federal Register. A notable exception is the Bank of South Sudan , which lists banking regulations on its website.
South Sudan’s 2011 Public Finance and Accountability Act requires budget documents to comply with International Public Sector Accounting Standards; however, published documents often do not comply and therefore are difficult to decipher. There have not been public budget hearings since 2019. The legislature failed to pass a budget for fiscal year 2020/2021, which began in July 2020, and did not table the fiscal year 2021/2022 budget until February 2022, even though the fiscal year began in July 2021.
The oil sector attracts the most FDI, but transparency is absent, despite statutory reporting requirements. The Ministry of Finance and Planning does not share foreign debt data at an institutional level and does not release it to the public.
The government occasionally releases limited debt obligation information about certain infrastructure loans, but to date has not disclosed the amount of oil it has committed to pay for infrastructure projects. This makes it difficult for analysts to determine how much money the government has available to service debt and pay for public services.
The contract process for oil companies that are planning to bid and invest in South Sudan is controlled by the Ministry of Petroleum, but paragraph 11 of the 2012 Petroleum Act says the National Petroleum and Gas Commission is empowered to approve all petroleum agreements on behalf of the government and ensure that they are consistent with the Act. Bidding and tender information is not publicly available.
There are no known informal regulatory processes managed by NGOs 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. NGOs regularly report discrepancies between tax, labor, and import rules issued by the national government and those enforced by local authorities. Humanitarian service providers moving goods earmarked for humanitarian relief claim state officials have, at times, barred them entry at state borders. Tax collection and enforcement at the state level is limited, uneven, and unpredictable. The Ministry of Labor has not conducted labor inspections since March 2020 due to the COVID-19 pandemic, but when it did NGOs and foreign investors reported employees colluded with labor inspectors to extort fines from business managers.
Nationally non-oil tax revenue increased dramatically in 2021 as South Sudan improved its collection methods for personal income tax and customs revenue. Some months saw a 100 percent year-over-year increase suggesting prior revenue collection efforts were corrupt, inept, or both. Much of this improvement is due to public financial management (PFM) reforms aimed at strengthening the National Revenue Authority.
Despite significant PFM reforms, the government did not announce or implement new enforcement reforms in 2021. The legislative body does not provide effective administrative compliance oversight of government ministers nor do ministries or agencies adequately regulate one another. There were no significant corruption prosecutions in 2021. Media reported in February 2022 that President, Salva Kiir Mayardit, blocked the investigation of former Minister of Petroleum Ezekiel Lol Gatkuoth for allegedly stealing millions of dollars in oil revenues between 2016 and 2017.
International Regulatory Considerations
South Sudan is not a WTO member but joined the African Union in 2012 and the East African Community (EAC) in April 2016. It is currently behind in membership payments to both and has its voting rights suspended. The Ministry of East African Community Affairs is responsible for integration into the EAC. South Sudan is adapting its national regulatory system to regional standards. It joined the customs union of the EAC but is behind in implementing regulations, prompting the EAC in February 2022 to urge the government to fully implement the EAC’s Single Customs Territory to boost intra-regional trade. The National Revenue Authority assists in implementing EAC customs regulations and procedures.
South Sudan currently has nine members in the EAC parliament.
Legal System and Judicial Independence
U.S. companies seeking to invest in South Sudan face a complex commercial environment with weak legal enforcement mechanisms. Large U.S. and multinational companies may have enough leverage to extricate themselves from business disputes, but medium-sized enterprises (the more natural counterparts to South Sudan’s fledgling business community) do not.
South’s Sudan’s legal system is a combination of statutory and customary laws. There are no dedicated commercial courts and no effective arbitration bodies to handle business disputes. The only official means of settling disputes between private parties is civil court. Enforcement of judgements and awards is weak or nonexistent, leading businesses to seek informal mediation, including through private lawyers, tribal elders, law enforcement officials, and business organizations. Corrupt practices are widespread and undermine pending cases. The lack of a unified, formal judicial system encourages “forum shopping” by businesses motivated to find the venue in which they can achieve the most favorable outcome.
As an East African Community (EAC) member, South Sudan is subject to the jurisdiction of the East African Court of Justice (EACJ). The EAC treaty gives the EACJ broad jurisdiction including trade disputes and human rights violations. However, the court only reviews 40 cases annually and results for the South Sudanese legal community have been inconclusive. Hope for Humanity Africa, an advocacy group, sued the government in the EACJ in June 2021 over oil waste mismanagement that allegedly caused health and environmental damage. The EACJ allowed the government to resolve the case through mediation, although there have not been any published results of the mediation.
The executive branch regularly interferes with the work of the judicial branch. State security forces arrest and detain parties to business disputes without charging them with a crime. Security forces continue detaining the person until they agree to make a payment as directed to “resolve” the case. High-level government and military officials are immune from prosecution in practice and frequently interfere with court decisions.
Laws and Regulations on Foreign Direct Investment
Foreign investors face a lack of transparency and capacity in South Sudan’s legal system as well as inconsistent laws and regulations. Most foreign direct investment rules can be found in the 2009 Land Act, the 2009 Investment Promotion Act, and the 2012 Companies Act. The relevant ministries do not have implementing regulations or they do not publish them for public review. The Ministry of Justice has a business registration website, but a foreign investor may still need local counsel to register the business and obtain an investment certificate.
Competition and Antitrust Laws
South Sudan does not review transactions for competition-related concerns. There were no significant developments in 2021.
Expropriation and Compensation
Investors should be prepared to face a complex commercial environment with a weak civil justice system in which contract disputes are common and often resolved without due process.
The 2009 Investment Promotion Act prohibits nationalization of private enterprises unless the expropriation is in the national interest for a public purpose. The Act does not define the terms “national interest” or “public purpose.” According to the Act, expropriation must be in accordance with due process and provide fair and adequate compensation, which is ultimately determined by local domestic courts.
While some donor agreements call for the government to receive goods at the conclusion of a project, local government officials have seized assets even without a formal agreement and did not offer compensation for the expropriated property.
Although officially denied, credible reports from humanitarian aid agencies indicate both government and opposition forces routinely extort money at checkpoints throughout the country before allowing the delivery of humanitarian aid, amongst several other bureaucratic access impediments.
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. 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 is not a signatory to a treaty or investment agreement that recognizes binding international arbitration.
South Sudan does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with the United States.
Numerous private companies, including at least one U.S. company, claim the government has reneged on or delayed payment for work under contract in recent years.
South Sudan was unable to procure passports for most of 2021 due to a payment-related contractual dispute with its German printer.
International Commercial Arbitration and Foreign Courts
There are no official arbitration bodies in South Sudan.
South Sudan lacks any dedicated legal framework to enforce foreign judgments, including arbitral awards. South Sudan is subject to the jurisdiction of the East African Court of Justice (EACJ), which can hear trade disputes, but the impact of judgments on South Sudanese law have been inconclusive.
When state-owned entities are involved in contract disputes, foreign litigants complain of harassment and arbitrary treatment from law enforcement and judicial officials.
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.