* South Sudan isolated by poor trade links
* Ancient Nile route still key for commerce
* Traders complain of currency obstacles
* Officials see big southern demand in long term
By Ulf Laessing
KOSTI, Sudan, Oct 5 Standing by his truckful of
onions at the bustling Nile port of Kosti, Sudanese trader Omar
Sheikh hopes shipping his goods to newly independent South Sudan
will justify the bureaucratic hassle.
Nearly three months after the south split from the north
after decades of civil war, no comprehensive trade agreement
exists between them, hampering the flow of goods to the poor,
isolated and underdeveloped south, which has only a little more
than 50 kilometres (31 miles) of paved roads.
"In the south there is big demand for all sorts of goods,"
Sheikh said as he waited for his customs papers to be cleared.
"But we need agreements between the governments to facilitate
trade. Without such agreements, there will be no trade."
Commerce on South Sudan's southern flank is hindered by
tribal violence and the world's youngest country must rely on
one of the oldest trade routes, the Nile, as its main link to
That forces it to deal with the north, but relations have
been frosty since they split on July 9, and arguments over oil
revenue and their common border have pushed the vital question
of trade down the agenda.
Both countries have launched new currencies without any
coordination. The south issued its pound in July, forcing the
north to launch its own new currency as it feared being swamped
with old notes hoarded in the south.
The barges that travel up the White Nile are loaded in
Kosti, a dusty, low-rise town on the river's western bank 300 km
south of the North Sudanese capital Khartoum. The rusty boats
sag in the Nile's pungent waters as they fill with food,
consumer goods, luggage and equipment for United Nations staff
working in the south.
"Trading just resumed. In the south they want many products,
such as food, juices, lentils and other items," said Babiker
Alsayer, an export trader in Kosti's port.
It is around 1,000 km straight overland from Kosti to the
southern capital Juba. The Nile bends and twists through the
arid landscape as it wends its way south, making for a river
trip of up to two weeks.
Trade almost ground to a halt in the run-up to southern
independence as violence broke out along stretches of the poorly
marked joint border, cutting off food supplies to the south.
Southern inflation soared to 57 percent in August as a result.
Northern port officials say bilateral trade has grown since
the two states signed a limited agreement last month to
facilitate trade and travel. Since then, about ten or more
trucks have been arriving every day in Kosti, port officials and
SOLD UP THE RIVER
The lack of roads makes the Nile as vital for the regions
either side of its banks as in ancient times. But the traders
plying the Nile say they are taking big risks because of the
long list of hindrances to commerce, raising the costs for
buyers in the south.
"I will ship my goods by barge and then sell on local
markets, for which I will get paid in southern pounds," said a
trader who gave his name as Malik.
Since it is almost impossible to change southern pounds in
the north, Malik must first change the southern money into
dollars -- a difficult task. Both countries have shortages of
dollars, which traders say are only available at a bad rate on
the black market. Some dealers in the south are demanding 5
pounds or more for 1 dollar, well above the official rate of 3
pounds and above the black market rate in the north, they say.
The northern central bank allows traders to change only
small amounts of northern pounds into dollars in Khartoum,
making it harder to buy imported goods to ship south.
"I must bring back the dollars I changed at the central bank
within 45 days. I had to leave a cheque as a deposit," said one
merchant, showing a letter from the Khartoum-based central bank.
The traders struggle to get their goods to Kosti and down
the Nile, sell them, swap the southern pounds for dollars and
bring them back to Khartoum to meet the central bank's deadline.
"We need government coordination on how to trade with the
south. There is big business there but we need agreements," the
Reliable data for the size of bilateral trade could not be
obtained, but some analysts said the potential size could be
gauged from the fact that before the split, Sudan's non-oil
exports were about $1.7 billion annually -- north-south
merchandise trade could eventually grow to a significant
proportion of that figure. The total population of the north and
south is about 41 million, of which 80 percent are in the north.
The Nile trade is also important for Egypt, which exported
$274 million of goods to Sudan in the first half of 2011, a
figure that may rise as demand grows from the south in the face
of food shortages after rain and tribal violence, experts say.
South Sudan will have to rely on the north to export its oil
for years, as the only pipeline from the southern fields runs to
Port Sudan on the north's Red Sea coast. The south, which is
producing around 300,000 barrels of crude oil a day, made some
$500 million in revenue from its first oil shipment exported via
Port Sudan, the deputy finance minister said last week.
Diplomats say both the north and the south seem willing to
improve economic ties.
"We see a big rise in trade with the south. There is huge
demand from merchants here to export to the south," said Mutasim
Matawi, head of the export department at the ministry of foreign
trade in Khartoum.
"We know the situation is not perfect yet. We have set up a
committee with the south to regulate trade."
South Sudan will have to significantly increase its food
imports in coming months because its own production this year
will come in 500,000 tonnes below its needs, according to U.N.
estimates. Some food supplies will come on U.N. aid flights but
much will be delivered through the Nile trade.
Samson Wassara, an analyst in the southern capital Juba,
said South Sudan also wanted to develop trade via Kenya to its
southeast, using the Indian Ocean port of Mombasa for trade with
Asia. For now, goods from Asia destined for South Sudan arrive
at Port Sudan for transfer to the slow Nile barges.
"They are trying to open new trade routes from Juba to
Mombasa. The port in Mombasa is relatively near to Juba compared
to Port Sudan," said Wassara.
However, Mombasa is difficult to reach for now because of
tribal violence and taxes imposed illegally along roads into
Kenya. Officials in Kosti say their port will remain the
cheapest, and simplest, option.
"Some of the traders don't speak decent English so they
prefer to deal with us than going via Kenya," said a port
official in Kosti.
(Editing by Tom Pfeiffer and Andrew Torchia)