THE ECONOMIC IMPLICATIONS OF SOUTH SUDAN WAR!

By Dhuor Reath Badeng,

Part 1

Source: via net Baudelet

Source: via net Baudelet

July 2, 2014(Nyamilepedia) — Wars has influenced economic profoundly across time and space. Winners of wars have shaped economic institutions and trade patterns. Wars have influenced technological developments. Above all, recurring war has drained wealth, disrupted markets, and depressed economic growth.

South Sudan Economy

South Sudan economy is the world’s most oil-dependent, with the oil export accounting for 98% of the country’s revenue and approximately 80% of its GDP.

In recent years, a significant amount of foreign-based oil drilling begun in South Sudan raising the country geopolitics profile. Oil and other mineral were found throughout South Sudan with Upper Nile being the most blessed. The areas of Bentiu, Uppernile are commonly known to be the richest in oil while Jonglei, Warrap and Lakes States are believed to be having potential reserves.

Despite the fact that South Sudan is rich in Agricultural land and has one of the largest population of pastoralists in the world, since Sudan started exporting oil in 1999, agricultural land has declined dramatically with only few individuals practicing small scale farming around their homesteads. South Sudan relies on food imports from neighboring countries such as Uganda, Kenya and Sudan. These food imports come at high transportation costs coupled with inflation hence increasing prices severely. The declining agricultural production and the reliance on foreign food supplies have contributed to severe food shortage.

Economic Effects of War

Wars are expensive (in money and other resources), destructive (of capital and human capital), and disruptive (of trade, resource availability, labor management). Large wars constitute severe shocks to the economies of participating countries. Notwithstanding some positive aspects of short-term stimulation and long-term destruction and rebuilding, war generally impedes economic development and undermines prosperity. Several specific economic effects of war recur across historical eras and locales.

The deadly turmoil that erupted in Juba six months ago has ignited a full scale ethnic civil war across the country with greater Upper Nile citizens the mostly affected. The war sparked out in Juba on 15th December,2013 as a result of political difference between some SPLM politicians and later spread to other States of Greater Upper Nile when Nuer youths got angry because their relatives were brutally massacred on the 16th , 17th and 18th December 2013.

The most frustrating economic effect of this war is the fact that it has caused shortage of food supplies as no more food commodities could be supplied to the affected areas especially those in the Greater Upper Nile region. This has consequently push up prices of the little available supply and thus as a result, reducing the living standards of the citizens in these areas. This war-induced inflation was described in ancient China by the strategist Sun Tzu:”Where the army is, prices are high; when prices rise the wealth of the people is exhausted” (Tzu Sun, c.400 BCE). This was especially true when Salva Kiir and his inner circle relied heavily on mercenary forces. The tribal king was advised that waging war required three things – money, money, and more money. Salva Kiir and his cronies asked M7 to provide them with a reinforcement force because 70% of SPLA had defected to the opposition. In order to pay for these mercenaries, the government had to borrow enough money from the Oil Companies operating in South Sudan but in such large amount that the circulation and value of the pound was eventually becoming useless in the face of Dollar that was used to pay the Mercenaries. Paying for war by borrowing money increases government debt and war-related debts which drive states into bankruptcy as they did to Spain in 1557 and 1596.

Secondly, In addition to draining money and resources from the government pocket, most wars create zones of intense destruction of capital such as farms, factories, and cities. These effects severely depress economic output. The famine and plague that accompanied this war killed as much as one-third of South Sudan’s population. Cities that were destroyed by the hired Uganda Planes will require a huge portion of the next county’s budget to be rebuilt.

Given that the government had unsettled debts already and the huge sum of money that have been spent on the mercenaries, the citizens are likely to face a lot more difficulties since the oil revenues that could be used in the provision of basic services to the citizens, will instead be used to settle the expense accrued to war.

Positive Economic Effects.

War is not without economic benefits, however. These are not limited to having misfortune strike trade rivals. At certain historical times and places, war can stimulate a national economy in the short term. During slack economic times, such as the Great Depression of the 1930s, military spending and war mobilization can increase capacity utilization, reduce unemployment (through conscription). The fact that many idle youths (more specifically from Bahr el Ghazal region) were mobilized and got recruited into SPLA has made them become regular SPLA soldiers that will be receiving salaries monthly.

War also sometimes clears away outdated infrastructure and allows economy-wide rebuilding, generating long-term benefits (albeit at short-term costs). For example, after being set back by the two World Wars, French production grew faster after 1950 than before 1914.This may also work well for South Sudan if the government starts to work on the repair and rehabilitation of the war affected cities and change them into modern states.
…………………….to be continued.

The Author is an Economist and a Political analyst living in Kampala -Uganda. He can be reached through dhuordebull031@yahoo.com