JUBA, Sudan (Reuters) - The forlorn wrecks of cars and motorbikes dotting southern Sudan's potholed dirt tracks and rare tarmacadam roads might signal chaos to some. But Zeru Woldemichael sees a business opportunity -- in insurance.
The Eritrean entrepreneur is hoping to snare a portion of the fledgling insurance market in this semi-autonomous region, which was born from a 2005 peace deal to end Africa's longest civil war and which survives on oil revenues.
But to do so he, like other insurers operating here, will have to work in a business environment lacking even basic structures after years of war, and where tales of mismanagement and corruption are rife.
It's also a land where the very concept of insurance needs to be taught.
South Sudan, which will hold a referendum on secession in 2011, is still cobbling together its institutions after decades of fighting between rebels from this mainly Christian and animist region and the Islamist government in Khartoum.
The war killed 2 million people and drove another 4 million from their homes. Today, its consequences have been overshadowed by the anarchy in Sudan's western Darfur region, where rebels have been fighting the government and its militia since 2003.
The peace in the south is shaky -- earlier this month, former rebels clashed with tribesmen in a volatile border area and scores were killed. Southern officials have warned that such attacks could reignite the civil war.
But Woldemichael is banking on the peace holding, and hoping officials in the three-year-old government will jump at the chance to insure their cars in a region where road etiquette is still a work in progress, and where official license plates are a new development -- until recently many were hand-painted.
Under the peace deal, south Sudan receives 50 percent of revenues generated from oil wells in the south -- around $1.5 billion to $1.7 billion a year. It is exempt from U.S. sanctions placed on Sudan over accusations that it supported terrorism.
"We think the government will be our biggest client ... they are the ones that have the money," Woldemichael said at the New Sudan Insurance Company's offices, where balloons pinned up to mark the January opening were deflating in the heat.
With capital of $3 million and some 20 staff, the insurance company is the largest insurer in the south, Woldemichael said.
"Very few of the cars you see are insured even against third party," said the grey-haired, softly-spoken entrepreneur. He plans to offer third-party insurance at around $175 per year for a saloon car, with total coverage of up to $500,000.
Majority shareholder Wawat Securities Ltd is partly owned by the Sudan People's Liberation Movement (SPLM), the former rebel group that now heads the southern government.
The firm will be competing with Kenyan companies, including UAP Insurance, and insurers from the north.
George Ochira, country business manager at UAP, said it was impossible to estimate the size of the market. Most of its clients are non-governmental organizations and United Nations' agencies, and premiums are slightly higher than in east Africa.
He said the real issue was a lack of awareness.
"In so many years of war, (the people) have taken risks before. So they think: do I really want to transfer the risk?"
Also, although third-party insurance is required by the law, this is rarely, if ever, enforced.
There are other problems, not unique to insurance, but which could potentially shrink the size of the market by keeping foreign investors away.
Corporate taxation laws have not yet been passed -- among scores of new laws, including investment regulations, that parliament needs to draw up. Out-of-date or badly written laws are being used to fill the gap, or even traditional justice.
"If you were to hit a cow, in some places, the people will sit down and say that's the price. It's a challenge how to incorporate this," said Ochira.
Another problem is financing. Last month, the southern branch of Sudan's central bank said it would no longer provide commercial banks with U.S. dollars, seeking to reduce black market trade and avoid shortages.
With little capital or foreign trade, southerners will be little affected but foreign businesses -- like a Lebanese importing company in Juba or Kenyan companies that charter planes -- could be hit, dealing another blow to investment.
Some say companies like Woldemichael's could at least help encourage other investors to take a look at the region.
"If you have someone who will insure, this will make people less hesitant to invest in south Sudan," said Bhandari Guruvir, an Indian who owns a hotel in dusty, rubbish-filled Juba.
He has a complex mix of insurance from Dubai and Kenya.
"It would be better if I could claim here and get money here," he said.
Woldemichael offers all non-life insurance except for agricultural insurance. But for now, few individuals are expected to sign up for health insurance, which would have to include expensive overseas medivacs.
Vehicle insurance is more promising in a region where reckless driving is common, even among official drivers who speed through Juba's tiny road network, ferrying government leaders in large convoys.
A government official, who was standing beside a freshly painted vehicle, said many drivers are former rebels.
"You know in the bush we did not have licences," said the official, who declined to give his name. But he said there was growing pressure in some ministries to insure the cars.
There is also a question of trust and security.
As well as the fighting in the disputed Abyei border region, elections due next year are under threat because southerners say funds are not being unblocked by the north for a vital census.
Some potential insurance clients, like Victor Boulos who has been doing business in Juba for 40 years, are likely to take a wait-and-see attitude to using a local insurance company.
"No one knows what will happen if a tragedy occurs," he said. "You need confidence."
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Editing by Clar Ni Chonghaile