Friday, May 25, 2012

The Revenue Question for South Sudan

I have been more than a little bit overwhelmed since coming to Juba. There are hundreds of issues that need to be addressed—including health, infrastructure, agriculture, and education—and they often contribute to a vicious cycle of poverty, insecurity, and corruption. Where do you begin? Let me throw out some statistics to put things in perspective:

According to the South Sudan National Statistics Bureau, 27 percent of the overall population is literate (40 percent for males and 16 percent for females) and only 37 percent of the population over the age of six has ever attended school. Dr. Jok Madut Jok, South Sudan’s Undersecretary for Culture, told me that a 14-year-old girl was more likely to die in childbirth than attend high school. And according to Save the Children in 2011, the majority of the population struggles to survive on less than 2.5 Southern Sudanese Pounds per day ($0.83). That’s unbelievable.

South Sudan has outlined comprehensive strategies to tackle health, education, and other problems, and it seems to know exactly what it needs to do to improve in every area of governance. But when discussing strategic plans for development in South Sudan, there seems to be a large elephant in the room: How are they going to pay for all of this?

In January, after a transit fee dispute with Sudan, South Sudan opted to halt oil production. The country is incredibly oil-rich, but it relies on refineries in Sudan because of its lack of infrastructure. My good friend Aduei Riak, who lives in Juba, said that people cheered the move as a success in South Sudan—the perception was (and is) that President Salva Kiir is being “tough” and standing up for the south. The problem? Oil production accounts for 98% of the country’s revenue. Without it, South Sudan is relying almost entirely on foreign aid and independent donors to sustain its economy. The World Bank warned earlier this year that the decision has left the South Sudanese on the verge of collapse.

In our meeting with Undersecretary for Culture Jok Madut Jok, he outlined three scenarios for South Sudan’s economy. The first: reach an agreement with Khartoum about oil production. It seems pretty obvious to the outside world that South Sudan should probably find a way to gain back 98% of their revenue. Sudan was asking exorbitant amounts for the oil (over $30 a barrel, when the international standard is around $1), but it seems like South Sudan can only play hardball for so long.

Jok’s second scenario was that the two countries don’t reach an agreement, and that oil companies would build local refineries and other industries would be forced to develop. I see this as more of a fantasy than a possible scenario, and I think it’s important to look at the urgent needs of South Sudan. Kiir made a public plea last week asking citizens to begin producing their own food, but the effort seems misplaced considering rural insecurity. It’s critically important to develop industries other than oil—we don’t want the country to become the next victim of the oil curse—but in the meantime the country needs revenue. Humanitarian aid can help sustain life at basic levels, but it can’t help South Sudan build an infrastructure, an agricultural sector, or an education system.

Jok’s final scenario, which shouldn’t be taken lightly, is economic collapse. South Sudan would be forced to take billions of dollars in Chinese loans and it would never be able to pull itself up out of a dire humanitarian situation. Indeed, there are already signs of trouble and that the oil shutoff is taking a toll on the economy. South Sudanese Pounds, which were valued officially by the government at 2.7 to the dollar last week, are now being traded for a rate of around 5 pounds to a dollar because of pressure from the black market.

The bottom line is that South Sudan needs to be looking towards its future, and not the current standoff with Sudan. There are too many consequences to delaying on oil production, and the country doesn’t have the time or money to develop other industries right now. With such urgent health risks and infrastructure needs, South Sudan should be taking advantage of its (current) best resource.

1 comment:

  1. Just thought I'd let you know how proud I am of you, Stef. You honestly inspire me to do bigger and better things with my own life. I've loved reading about your South Sudan adventures thus far and I can't believe how knowledgeable and motivated you sound. Love you, sista :) -tay