The U.S. Departments of State, Labor, and Commerce issued a business advisory on August 14, 2023, outlining key risks for U.S. companies operating in South Sudan. Concerns revolve around corruption, transparency, and human rights violations. Businesses are particularly cautioned against engaging with entities connected to South Sudanese government officials, especially in the oil and mining sectors. The main areas of concern noted in the advisory include:
- Government Tenders: Firms engaging in South Sudanese government tenders may face significant reputational risks, mainly due to perceptions of corruption and resource diversion. The country ranks poorly in public sector corruption indices, with specific allegations of corrupt dealings in oil cargos and the misuse of oil revenue. Transparency International ranked South Sudan as the country with the world’s worst public sector corruption in its 2021 rankings of perception of corruption; South Sudan tied for second-worst in 2022.
- Oil and Gold: South Sudan’s primary income sectors, oil (over 90%) and gold, are riddled with challenges, including corruption and lack of transparency. There is evidence of substantial leakage and diversion of oil revenue, and gold production is allegedly tied to illicit markets and high-level government officials. This has prompted U.S. regulatory actions and calls for enhanced due diligence.
- Contracts for Assistance Delivery: South Sudan’s transitional government’s reliance on international aid has created opportunities for corruption and resource diversion. Examples include unnecessary fees, engagement with unqualified companies, and siphoning of funds intended for critical relief. U.S. entities are advised to exercise caution, particularly if engaging directly with government-tied entities.
- Arms, Military Equipment, and Related Activity: The UN’s embargo on arms and related items in South Sudan is upheld by U.S. in the International Traffic in Arms Regulations (ITAR), which reflects the policy of denial on the export of defense articles and defense services to South Sudan with certain exceptions. Businesses are cautioned against dealings with South Sudanese armed forces due to widespread human rights abuses. Compliance with laws and sanctions is emphasized given the alarming degree of impunity in the region.
Additionally, the advisory includes two annexes:
Annex 1 offers an overview of U.S. Government reports and resources relevant to South Sudan, emphasizing legal measures, sanctions, and monitoring mechanisms concerning human rights, corruption, money laundering, and more. Specifically, U.S. Government Measures include:
- Department of the Treasury has sanctioned individuals/entities in South Sudan under various sanctions authorities, including Executive Order 13664 and under Executive Order 13818.
- Department of Commerce can impose licensing for security or policy reasons, adding entities to the Entity List (Supp. No. 4 to Part 744 of the EAR). March 22, 2018 – 15 South Sudanese Entities Added to the Entity List.
- Department of Labor maintains lists of goods and countries associated with child and forced labor, including cattle from South Sudan. They provide tools and reports to help businesses assess risks and ensure compliance with labor standards, and they have assessed South Sudan as making no advancement in eliminating the worst forms of child labor.
- Department of Homeland Security investigates allegations of forced labor, issuing orders to prevent relevant merchandise from entering U.S. ports, and conducts criminal inquiries into businesses and individuals connected to forced labor.
- Department of State’s 2022 reports highlight South Sudan’s ongoing challenges with human trafficking, child soldier recruitment, forced labor, and sex trafficking, keeping the country in Tier 3 of the Trafficking in Persons Report and on the Child Soldier Prevention Act List. Additionally, the Investment Climate Statement underline South Sudan’s dysfunctional legal system, plagued by corruption, unenforced laws, and challenges related to investment.
Annex 2 lists a number of resources for businesses conducting due diligence and establishing compliance programs.
For past SmarTrade Updates on Sudan, see: