Africa Housing Finance Yearbook 2018

South Sudan

KEY FIGURES

Main urban centres Juba

Exchange rate: 1 US$ = [a] 22 Jul 2018 142.38 South Sudanese pound PPP Exchange rate (Local currency/PPP$) 1 South Sudanese pound = [b] 6.90 Inflation 2016 [c] | Inflation 2017 [c] | Inflation 2018 [c] 379.8 | 187.9 | 104.1 Population 2017 [b] | Urban population size 2017 [b] 12 575 714 | 2 423 089 Population growth rate 2017 [b] | Urbanisation rate 2017 [b] 2.78% | 4.02% Percentage of the total population below National Poverty Line n/a Unemployment rate [d] 18.5% GDP (Current US$) 2017 [d] | GDP growth rate annual 2017 [d] US$2 870 million | -11.1% GDP per capita (Current US$) 2017 [b] US$237 GNI per capita (Current US$) 2017 [b] US$390 Gini co-efficient [e] 45.50 HDI global ranking [e] | HD country index score [e] 187 | 0.388 Is there a deeds registry? Yes Number of residential properties that have a title deed n/a Lending interest rate 24.20% Mortgage interest rate | Mortgage term (years) 24% | 24 Downpayment 60% Mortgage book as a percentage of the GDP n/a Estimated number of mortgages n/a Price to Rent Ratio in City Centre | Outside City Centre n/a | n/a Gross Rental Yield in City Centre | Outside City Centre n/a | n/a Construction as a % of GDP n/a What is the cost of standard 50kg bag of cement? US$45 What is the price of the cheapest, newly built house by a formal 2 135 700 South Sudanese developer or contractor? (Local currency) pound What is the price of the cheapest, newly built house by a formal Overview developer or contractor? (US$) US$15 000 The economy of has suffered slow progress due to the July 2016 What is the size of this house (m2)? 120m2 bouts of political insurgency that undermined development gains recorded earlier What is the average rental price for this unit (US$)? n/a during relative calm and stability. With the peace deal collapsing in 2016, hundreds What is the minimum stand or plot size for residential property? 40m2 of thousands of people were killed and about 5 million were displaced leading to Ease of Doing Business Rank [f] 187 a worsened regional refugee situation. One half of the relatively small population Number of procedures to register property [f] 9 of 12.57 million continue to face severe food insecurity. It is against this Time to register property (days) [m] 50 days background that efforts to restore peace commenced and culminated in the Cost to register property (as % of property value) [f] 15.90% signing of a peace deal between South Sudanese President Salva Kiir and rebel NB: Figures are for 2018 unless stated otherwise. leader Riek Machar on 26 June 2018, which aimed at ending the war. [a] [b] World Bank World Development Indicators The peace deal is likely to see an implementation of a permanent ceasefire, [c] IMF World Economic Outlook Database [d] Central Intelligence Agency (CIA) World Factbook cantonments for all forces and the deployment of forces by the Intergovernmental [e] UNDP Development Indicators Authority on Development and the African Union to safeguard the ceasefire. [f] World Bank Doing Business Additionally, the country will have three capital cities; namely Juba, Wau and Malakal on a temporary basis to host the three proposed vice-presidents. The Khartoum government will also be allowed to secure oil fields in South Sudan in coordination with the Juba administration, and to rehabilitate the wells to restore the previous expenditure on health and education only sums up to about 6.4 percent of total levels of production. This is likely to boost trade gains for the most oil-dependent government outflows. To try to manage the worsening deficit, the authorities have country in the world, whose oil export revenues account for approximately monetised the fiscal deficit against the backdrop of declining domestic and foreign 60 percent of its GDP.1 revenues. This has resulted in a steady rise in inflation to unprecedented levels. The inflation rate as measured by the annual Consumer Price Index increased by South Sudan’s GDP per capita was SSP144 719 (US$1 111) in 2014, dropping to 480 percent in 2016 and by 155 percent for the one-year period ending in 2017. less than SSP30 871 (US$237) in 2017.2 Due to the fragile political state of the country, the subsistence sector has become dominant and livelihoods increasingly The foreign exchange value of the South Sudanese pound (SSP) has continued to rely on low productive, unpaid agriculture and pastoralist work. The county’s depreciate. The monetary authority’s decision to move from a fixed to a floating economic collapse from July 2017 to June 2018 has seen output contract and exchange rate arrangement in 2015 resulted in a 830 percent depreciation of the inflation soar. For the one-year period to June 2018, the economy has contracted local currency against the US dollar from SSP18.5 per dollar in December 2015 by 6.9 percent because of an increasing reliance on low output agriculture and a to SSP173 per dollar by August 2017. With the return of relative peace, remarkable decline in oil production. Whereas the contraction in GDP is culminating in the signing of the peace accord in June 2018, the SSP has recovered significantly better than the -11 percent recorded in 2016-2017, the position has and trades at SSP130 per dollar in July 2018. worsened the fiscal deficit to over 4 percent of GDP in 2017. Overall, the new wave of peace and commitment from regional member states Exports and household consumption have continued to decline while government towards ensuring sustained peace in the promising nation will most certainly act consumption recorded a sharp increase because of high-level spending on security as a springboard for development initiatives over the next few years. The rapid operations of this fragile political state. Public expenditure is skewed toward inflow of resources towards the country’s biggest resource, the oil sector, coupled security at the expense of development initiatives. Security-related spending with multiplier effects to other sectors including housing, infrastructure and finance, accounts for over 70 percent of the total budget whereas, the combined will encourage development initiatives in the country. 245 Access to finance constitute the balance (one percent), and they are offered at interest rates of The Bank of South Sudan, at the helm of the country’s monetary policy, has been between 18 and 20 percent. The main sectors which received commercial instrumental in licensing financial institutions in the country. The banking industry include (i) domestic trade, (ii) households, (iii) building and construction and (iv) now boasts 22 commercial banks concentrated in major urban areas of South real estate. The average size is estimated at approximately US$25 000. A Sudan. Access to bank branches and ATMs is estimated at 1.4 and 0.76 high downpayment of up to 60 percent is required to reduce credit risk. However, respectively per 100 000 adults. Access to deposit bank accounts stands at a financial institutions have scaled down housing finance because of rising political marginal 6.4 percent. Although access to banking services is still minimal, the rise tension and increasing credit risk. Some banks have, including Equity Bank, exited in commercial banks’ presence is monumental as it signifies a 100 percent jump the mortgage space. from 11 banks in 2011. The financial sector in South Sudan is still plagued by low levels of regulatory oversight, weak depositor protection legislation and low levels As an intervention in the financing space, the government introduced a Youth of client financial literacy. The leading financial institutions are regional entities with Business Startup Programme to offer financing opportunities to youth in the roots in neighbouring Kenya. These include Kenya Commercial Bank (KCB), Equity politically fragile country. Under this programme, approximately SSP130 260 to Bank and Co-operative Bank. These banks have, however, not derived value from SSP156 312 (US$1 000 to US$1 200) is offered as a grant to youths, of which their operations in South Sudan, thus making their subsidiaries in the country 60 percent are female beneficiaries. The recipients participate in week-long training unlikely to remain profitable due to the recent conflict and currency depreciation. for life and business skills before they obtain access to the allotted grant through KCB, Stanbic, Equity Bank, and Co-operative Bank have seen their subsidiaries in their respective commercial bank account. The grant is unconditional and can be the troubled country fall on hard times due to hyperinflation and currency used for any expenditure at the discretion of the beneficiary. devaluation, coupled with the recent armed conflict that has nearly crippled the fragile country’s economy. The initial programme attracted about 6 000 applicants in 2014 and funds were disbursed in 2015 through to 2016. The programme was, however, cancelled due To help the economy stabilise and attract investments in the banking industry, the to the outbreak of war in 2016. It is hoped that more youth will be considered authorities need to put special emphasis on controlling public expenditure, with the return of relative peace and calm over 2018, leading to marginal increasing non-oil revenues, encouraging investment and economic diversification improvements in access to finance. and removing subsidies to the national oil company (Nilepet). The 2018 national budget aims to limit the government’s ability to deplete the central bank’s Affordability resources through borrowing, reducing inflation and preventing further The government of South Sudan has over the past few years been the major depreciation of the South Sudan pound. economic player in the country, through its various monetary and fiscal arms as well as being the dominant employer after the collapse of the private sector due In , the insurance industry is nascent, comprising 10 companies, to armed conflict. With a deteriorating revenue base and rising defence-related both private and partially government-owned providers. The total premiums spending, the government has largely been financing itself through accumulated collected by the industry amount to US$0.7 million and is still unavailable to arrears to civil servants and printing more money to finance the deficit. Non- support mortgage lending in the country. The pension sector is a key driver of payment of salaries to government employees in both urban and rural areas has long-term funding for mortgage lending in many developed and developing nations. affected their ability to afford the minimum food basket and has resulted in a The country’s Pension Regulation was passed in 2013 but little has been done to number of employees quitting government service. The urban labour force establish and support pension schemes in the country. The deduction of civil participation rate in urban South Sudan has declined from about 50 percent to servant’s pension contributions began in late September 2016 for workers at the about 34 percent between 2016 and 2017. The drop has mainly been attributed national government level. This excludes workers at state level. In addition, the to deterioration in the political and economic conditions of the country. Military Pension Scheme, Organised Forces Scheme and private sector schemes are yet to be established. Printing of more money on the other hand accelerated inflation from 187 percent in June 2016 to 550 percent in September 2016, before decelerating to 118 The microfinance sector is young, underdeveloped, and unregulated. The sector percent in recent months to the end of 2017.4 This has resulted in a large loss of is monitored by the South Sudan Microfinance Development Facility, a joint wage purchasing power, driving many households into poverty. Poverty among initiative of the government, the Bank of South Sudan and the Multi-donor Trust wage-earning households has more than doubled from 28 percent in 2015 to Fund, yet these shortfalls remain prevalent. A number of microfinance institutions over 65 percent in 2017 (MFIs) operate in the country, as well as small savings and cooperatives or Rotating Savings and Credit Associations. The largest MFIs by asset base are BRAC SS (a Economic decline has resulted in an increase in poverty from 49 percent in 2015 subsidiary of the Bangladeshi INGO), SUMI (the result of greenfield investment to 74 percent in 2017, particularly in urban areas.5 The urban poverty gap funded by USAID), and FSL (funded by ARC International and Micro Africa increased by over 54 percent between 2015 and 2017. The gap between the rich Limited). MFIs still face huge operational challenges including high non-performing and the poor also increased as reflected by the poverty severity index which loans as a result of emigration resulting from civil unrest, and low levels of client doubled from 0.10 in 2015 to 0.22 in 2017. Overall, deterioration in economic financial literacy and business skills, both of which, collectively, drive up the MFIs’ conditions has led to depressed demand for goods and services across all sectors cost of doing business. of the economy.

Overall, the banking industry suffers from limited utilisation of the credit reference Housing supply bureau due to a low coverage rate and an underdeveloped collateral registry, The supply of housing units in South Sudan has continued to weaken amid periods thereby restricting access to credit facilities. The financial sector has been of political unrest. Several small-scale developers that had commenced the supply characterised by high interest spreads of up to 24 percent while most of the of low-income housing units stopped because of declining demand for rental lending activity is concentrated in short-term lending, usually between three to houses in South Sudan’s major urban centres, including Juba, Wau, Malakal, Bor, 24 months over the entire period of post-independence (2010 and beyond). Gogrial, Nimule, Yei, Tonj and Torit. The demand for residential housing units had risen because of an increasing presence of not-for-profit organisations and small- Less than eight percent of the entire loan portfolio is attributed to the real building business holders serving various segments in the young nation. With the outbreak and construction sector, with banks preferring to lend to well-known and well- of war in 2016, most project staff and business operators were forced to flee the established individuals and institutional customers. Commercial bank lending is country, leaving most housing units vacant. Over the past two years, the supply of still less advanced with over 90 percent of the loans being short-term (less than housing units has largely been through the re-introduction of formerly occupied a year) at interest rates of between 8 and 10 percent.3 residential units that have since lost tenants due to civil strife.

Medium-term loans of one to five years, at interest rates of between 22 and 24 Impediments to housing finance continue to be evident as the major commercial percent, constitute about four percent of the loans. Loans of over five years banks including the Co-operative Bank, Equity Bank, KCB Bank and CFC Stanbic

246 Africa Housing Finance Yearbook 2018

SOUTH SUDAN

Annual income profile for rural and urban households based on consumption (PPP$)

PPP$40 001 – PPP$10 000 000 PPP$119 254 Population: 12 575 714 PPP$23 001 – PPP$40 000

PPP$12 001 – PPP$23 000 Urbanisation rate: 4.02%

PPP$8 001 – PPP$12 000 PPP$10 075 PPP$5 001 – PPP$8 000 Cost of cheapest 2 135 700 SSP newly built house: PPP$309 522 PPP$3 601 – PPP$5 000 PPP$2 401 – PPP$3 600 Urban households that could afford this 2.87% PPP$1 601 – PPP$2 400 house with finance: PPP$801 – PPP$1 600 6.9 South 1 PPP$:

- - - Average annual household income needed for the cheapest newly built house by a formal developer, 2017 Average annual household income using expenditure, 2017 (PPP$) Source https://www.cgidd.com/

Bank and Buffalo Commercial Bank continue to scale down operations in most Policy and regulation areas affected by political instability. A significant number of residents in major In the past year, there have been no new developments in the policy and cities including Juba continue to reside in temporary structures at a going rate of regulatory environment governing South Sudan’s housing finance sector. Efforts US$25 a month for a single room. Furthermore, land acquisition, particularly the to end the protracted conflict have, for two consecutive years, forced the high cost of land leases, has deterred prospective investors from developing government to prioritise military spending, stifling resources to ministries, modest housing projects (between 20 and 50 units). departments and agencies whose mandate is relevant to the development of the housing industry and housing finance sector. The country has several policies, Property markets strategies and regulatory frameworks that espouse practical and feasible measures The bulk of housing units in South Sudan are low cost, low quality housing on how to adequately and sustainably develop the housing industry and housing structures mainly constructed for the poor and migrant low cost earners (earning finance sector. below SSP26 052 (US$200). Many peri-urban areas are dotted with grass thatched huts (Tukuls) that are traditionally built for family units and other The Ministry of Housing, Physical Planning and Environment continues to oversee structures made from iron sheets and timber that are mostly leased to foreign housing developments in the country and also monitors compliance with nationals at monthly rates ranging between SSP2 605 (US$20) and SSP3 908 established planning and building standards. The Land Act of 2009 continues to (US$30). A few luxury single-suite apartments are also available at rates ranging govern land use management. Additionally, the government adopted the Land between SSP325 650 (US$2 500) and SSP390 780 (US$ 3 000) a month. Such Policy of South Sudan in 2013 to address issues pertaining to land acquisition and luxury structures include Liaison Courts with 12 apartments, Tongpin area with land management. 14 units, Atlabara with 20 units, Diplomat, Hudsson and Classiqueson. Opportunities The cost of renting these structures varies depending on the developer’s business South Sudan is a country with immense growth potential across several sectors model. Some developers rent the rooms out on a daily rate and others on of the economy. The bulk of this growth depends on renewed activity in the oil monthly basis. The daily rates model mostly applies to structures built near sector, which is likely to commence with the actualisation of the peace agreement markets, with a focus on the mobile traders, especially those delivering items to signed in June 2018. A few challenges will need to be overcome for the markets and then heading out of the city once they have sold their merchandise. opportunities in the housing sector to be realised. The first is restoring peace and A daily fee of SSP391 (US$3) is charged for this usually furnished room with a security through cessation of hostilities and implementation of governance and single bed, plastic seat and table. The monthly payment model targets low income security arrangements that promote private sector-led investments. The delivery (earning an average of SSP19 539 to SSP26 052 (US$150 to US$200) a month) of affordable housing entails harnessing both multiple stakeholder initiatives and foreign nationals with some level of residence in South Sudan. These are usually private sector-led initiatives to ensure housing sector development. To support market traders, hotel or restaurant attendants, construction labourers and other such initiatives, the government will need to implement comprehensive poor people. Tenants are required to move in with their household items because macroeconomic reforms to unify the official and parallel exchange markets and the monthly rental is not inclusive of furnishing. reduce inflation. This is essential for foreign direct investment in housing and other sectors of the economy. Additionally, clear plans for longer-term action to boost Overall, the property market is significantly underdeveloped with most residential employment, build infrastructure, and diversify the economy will help create areas lacking access to electricity, piped water and clear access roads. This makes demand for housing units during the post-conflict period of economic recovery. such areas unattractive to prospective developers due to additional estate running costs of thermal power generation, water pumping and road maintenance. A few Sources real estate brokers are available, listing some properties in their portfolio at high African Development Bank Group. South Sudan Economic Outlook 2018. prices. Other service providers in the housing supply chain are difficult to locate, https://www.afdb.org/en/countries/east-africa/south-sudan/south-sudan- operating informally in less structured settings. These include architects, quantity economic-outlook/ (Accessed 5 August 2018). surveyors and property valuers. Prospective buyers therefore encounter Ministry of Finance and Planning, Republic of South Sudan. Approved Budget challenges in ascertaining the true value of properties being offered. The current Tables – Fiscal Year 2017/18. September 2017. http://grss-mof.org/wp- benchmark of similar structures in nearby localities could be misleading if such content/uploads/2017/11/book-final-1718-1.pdf (Accessed 8 August 2018). properties also appear to be overpriced. Verification of true owners of landed National Bureau of Statistics, Republic of South Sudan. Consumer Price Index properties tends to be strenuous due to the absence of clear processes at the for South Sudan April 2017. 4 May 2017. land records office. Verification of ownership can take weeks, thus hindering http://www.ssnbss.org/sites/default/files/2017-05/CPI-April_2017_Press_ Release%202017%5B6091%5D.pdf (Accessed 6 August 2018). immediate conclusion of purchase transactions.

247 Phan, Chap. “Lack of progress in peace talks will lead to economic collapse in South Sudan”. 3 July 2015. South Sudan Nation.com http://www.southsudannation.com/lack-of-progress-in-peace-talks-will-lead-to- economic-collapse-in-south-sudan/ (Accessed 5 August 2018). The World Bank Group (2018). The World Bank in South Sudan. https://www.worldbank.org/en/country/southsudan/overview (Accessed 8 August 2018).

1 The World Bank Group (2018). 2 Ibid. 3 Interview with key resource persons from Bank of South Sudan Officers, Equity Bank and KCB Bank (2018). 4 The World Bank Group (April 2018). South Sudan: Macro Poverty Outlook. http://pubdocs.worldbank.org/en/713731492188171377/mpo-ssd.pdf (Accessed 24 Sept 2018). Pg. 1. 5 Dihel, Nora Carina and Pape, Utz Johann. South Sudan Economic Update, 2017: Taming the Tides of High Inflation. http://documents.worldbank.org/curated/en/806291508505062484/South-Sudan-economic-update-taming-the-tides-of- high-inflation-policy-options. Pg. 12.

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