A New York finance house has linked up with a former warlord in south Sudan to farm an area of land bigger than Luxembourg in a swords-to-ploughshares plan.

Jarch Capital has signed the literally groundbreaking deal as a partner in Leac, a company run by Gabriel Matip, eldest son of Paulino Matip, former head of the South Sudan Defence Forces, an armed group now integrated into the former rebel Sudan People's Liberation Movement which administers (mainly Christian and animist) south Sudan.

"It's actually two separate transactions. (In one of them) Leac has the rights from the government of southern Sudan to do the agriculture... the rights to grow, to transport and to export," Jarch chairman Philippe Heilberg said.

Sudan has much unexploited agricultural potential as well as oil deposits and Jarch can provide the necessary finance but Leac's licence from the government did not give it access to any land.

"So we turned to General Paulino," who has granted Leac a lease on an area of 4,000 square kilometres (1,600 square miles) he controls in south Sudan's Unity state, Heilberg said.

"You put the two together and you have an agriculture venture," said the Jarch CEO, whose business, headquartered on Park Avenue in Manhattan, has a former CIA agent and the former US diplomat Joseph Wilson on its board.

"The land will require at least a billion dollars in investment over the next five to 10 years and maybe more," he said.

Jarch will give back at least 10 percent of profits to the local population in Unity state's Mayom county but it makes no pretence to be a not-for-profit operation.

"We are not an NGO. We do this to make money. We would give back to the people because it is the right thing to do and we also want to see people prosper because, if the people prosper, they will like us to remain," Heilberg said.

'We want to grow foods that people need'

Gabriel Matip said production will not all be for export. "We want to grow foods that the people need," he said.

The story may not end there, as the land could also contain minerals or oil, which US companies are barred from extracting in Sudan, at least for the moment.

In 1997, the United States imposed sanctions forbidding its companies from investing in almost all sectors in Sudan, accusing the Khartoum government of being a state sponsor of terrorism after it gave sanctuary to Al-Qaeda leader Osama bin Laden.

Then president George W. Bush loosened the measures in 2006, permitting US companies to invest in south Sudan, apart from in the oil sector, in order to stimulate the region's economy as it came out of 21 years of civil war with Khartoum that saw two million people die.

The peace agreement between the north and south envisages a 2011 referendum on independence for south Sudan and the deal's full implementation could lead to a complete overhaul of the US sanctions.

If that happens, the contract between the Matip clan and Jarch Capital will give the US investment firm a head start over other American businesses wanting to invest in Sudanese oil, according to a source close to the deal.

However, the partners are not ordering the drilling equipment just yet as the lands controlled by the Matip family are within a petroleum prospection block held by a Chinese company.

In a further complication, the agreement between the Matips and Jarch has not gone down well with the SPLM's top leadership, which is drawn from the Dinka ethnic group, while the Matip family are Nurs.

It was the rivalry between the two peoples that prompted Nurs like the Matips to break away from the SPLM in the early 1990s.

There is also an ethical question about links between financiers and former fighters, although Gabriel Matip has no concerns. "We all know who we are doing business with and there is confidence between us," he said.