Quest to create a new Sudan bread basket

Financial Times | January 9 2009

By William Wallis, Javier Blas and Barney Jopson

There are few regions in Africa as remote and undeveloped as southern Sudan. Unity state, where Philippe Heilberg, a US businessman, says he has secured a huge tract of arable land, is inaccessible even by south Sudan’s standards.

Apart from AK-47 assault rifles, it was deprived of most of the trappings of the modern world. Even a road network that has been under construction since 2005, when a peace agreement ended the long civil war between the predominately Muslim north and the Christian and animist south of the country, has yet to reach it.

But Unity state does border the White Nile and its flat, arable land could, with billions of dollars of investment in irrigation and roads, be transformed into a world-class bread basket.

As commodity prices spiked last year and food riots erupted across the developing world, Gulf countries poured hundreds of millions of dollars into securing land in the fertile Nile valley farther north to grow food crops for exporting home. Saudi Arabian investors, for example, acquired 25,000 hectares of land north of Khartoum for $95m (€70m, £63m) last year.

Mr Heilberg is convinced that demand for land is now gravitating south. Other experts say investors are scouting out opportunities in the south, albeit on a far less ambitious scale. That is despite imprecise land laws and the risk of a new civil war should the oil-rich south vote for independence in a planned referendum in 2011.

Mr Heilberg has experience in commodities markets on Wall Street and in Asia. To help him as he looks for opportunities in Africa, he has pulled together a board at Jarch Capital, his US-based investment vehicle, which includes Middle East, Africa and security experts with years of experience at the Pentagon, CIA, White House and state department.

He is of a resurgent class of western businessman drawn to the potential of Africa’s remaining frontiers, who have been energised by Asia’s, and in particular China’s, appetite for the continent’s natural resources.

Sudan experts familiar with his business strategy liken him to buccaneering capitalists such as Sweden’s late Adolph Lundin, who acquired mining and oil concessions in Congo and Sudan when civil wars were still raging and turned huge profits when they sold them on.

In both countries, however, legal wrangling has often prevented mineral concessions from becoming productive. Mr Heilberg has experience of this problem after being embroiled in a dispute with the south Sudan government over oil exploration rights also claimed by other companies.

Some experts on Sudan believe his 400,000 hectares will face a similar fate and that his ultimate strategy is to trade whatever claim he can sustain over the land to investors with a greater capacity to develop it. He says the land has great potential for biofuels and food crops and is looking for joint venture partners with the expertise to help him develop it.

He insists the law is less important to his deal than the clout he has bought into by associating the venture with a former warlord, Paulino Matip, whose family says it owns some of the land in Mayom county, in Unity state.

“I never understood why the oil industry could spend $1bn drilling dry holes but they do not want to take a single dollar in legal risks,” Mr Heilberg told the Financial Times by phone from New York.

Mr Matip fought with the Sudan People’s Liberation Movement against the northern army before gaining notoriety during one of the bloodiest episodes in Sudan’s civil war, when he switched sides to form his own militia, with backing from parts of his Nuer tribe and the Khartoum regime.

“I am sure Paulino has killed many, but I am sure he did it in protection of his people,” Mr Heilberg says in his defence.

Following the 2005 peace agreement, his forces were appeased when he was brought in as deputy commander in the army of the autonomous south.

Mr Matip’s son Gabriel, who controls the company in which Jarch has bought a majority stake, told the Financial Times that he had negotiated with tribal leaders to secure access to more land.

He said the company also had written agreement for the agricultural development of the land, and other land it may secure in the south of the country, from the ministry of agriculture and forestry in south Sudan.

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