South Sudan: Fake or Failed State

By Emilio Tongun Mongu,

An armed man, left, walks as displaced people who fled fighting between allied forces backing South Sudan government and a break away SPLA forces in Bor by boat across the White Nile, prepare to sleep in the open at night in the town of Awerial, South Sudan Wednesday, 2014. (Photo: AP/Ben Curtis)

An armed man, left, walks as displaced people who fled fighting between allied forces backing South Sudan government and a break away SPLA forces in Bor by boat across the White Nile, prepare to sleep in the open at night in the town of Awerial, South Sudan Wednesday, 2014. (Photo: AP/Ben Curtis)

Nov 22, 2015(Nyamilepedia) —- Our country, South Sudan, from the autonomous regional interim government; the government of Southern Sudan (GOSS), to the current independent government of South Sudan, had never been heard in making any progress in term of development. The oil industry, the only industry we inherited from Sudan, remains the sole source of revenue to the entire newborn nation. The first mistake of our improper management of South Sudan resources during autonomous regime and there after one year of CPA reign under the on going SPLM dominated government let by President Salva Kiir Mayardit, was the former regional finance minister in the Government of Southern Sudan, Arthur Akuen’s, action when he increased the salaries of all civil servants in Southern Sudan three times more than the salaries of their counterpart in the Northern part of the country. For example, the government employees who were receiving SDG100 Sudanese Pounds in Sudan were entitled to receive SDG 300. This increase was in the expense of development fund.

The action of Arthur Akuen alone alarmed the countries surrounding South Sudan, such as Uganda, Kenya, Ethiopia, Eritrea, and many others to flock in to the country to siphon what the government has given into the hands of individuals who has the freedom to use in the way they want. The foreign countries brought in goods and services, which were cheaper than what were prevailing in the markets of South Sudan. With these cheap goods and services from other countries, South Sudanese politicians and policy makers sat back at their seats and begun to think for other strategies that would help them to scoop the only revenues from oil into the hands of few individuals. This is done by using techniques such as purchase of lucrative vehicles in addition to free housing on the expense of the nation without return of tangible services provided to the citizens. The only benefits our country is experiencing are the new constructed buildings in big cities like Juba, which is not even benefiting all but owners, though keep the resources within the border. The second mistake was the implementation of wrong policies such as nepotism, which only encourage the recruitment of incompetent factors of production that add nothing to the economy if not worsening.

Going back to the subject of this article, we may need to distinguish a fake state from a fail state. To do that we need to look into the terms themselves. Anything fake is known to be something not real, true, right or misleading. Meaning that wrong routes or policies, established by our government, were followed that only not ending up with nothing really tangible to please the population and lead them to the prospective future and the future of their generations but misleading. With the falling oil prices, what would be the case if the foreign oil companies pack and leave the country to eliminate the extra costs incurring in providing security to their oil installation if the current war is left to continue? The answer is left to everyone.. In regard to failed state, it is the state that actually existed but fail in its endeavor to reach its planned goals. The difference between the two terms is the “intentional and none intentional acts. Fake is considered an intentional act because its outcomes are drastic. In our case, fake policies happen when the leadership of our country handpicked people ethnically to control our resources, stemming from the ministry of finance and economic planning to the banking system in term of Central Bank (Bank of South Sudan).

It is for the first in the life of this author to see currencies being sold in the open markets like any other type of vegetables being sold in the market as is happening now in the streets of Juba and other cities in the Republic of south Sudan. These unprofessional financial transactions in the foreign exchange market is questionable because it is only in the hands of one ethnic group in the country the foreign currency, the same group in power, and the same group in charge of Central Bank, The Bank of South Sudan. What happened was that the only revenue from the oil was channeled into the hands of few individuals in the country in two ways: before independent and during the independent. Before independent, the oil revenue was handed over by the oil companies to the government of Sudan first, and then the government of Sudan calculated the share of the Government of Southern Sudan as stipulated in the CPA agreement and handed it over to them in boxes.

It is to be understood here that the oil revenues paid to the Government of Sudan are all in United States dollars and the same dollar are channeled to the Government of Southern Sudan. Here is where the problem lies. The oil revenues entering Southern Sudan were filled in boxes where some boxes go directly to the hands of individuals in the government and from there to the streets, using innocent and ignorant ethnic community members to exchange for local currency for local use with no formal registration in the government’s financial ledger accounts to be accounted for by the government. The few boxes that reached Central Bank were then considered revenue to the nation with 60% devoted to fund the security, followed by salaries, and very little, if any, for development. The security sector in the country is also controlled by the same ethnic group to protect them while looting public funds without giving any protection to the civilians as evidenced in December 15, 2013 by blackmailing innocent and ignorant ethnic community members to cover their making.

Not only that the security sector is to blame for the current making but the security apparatus are also blamed for terrorizing the citizens by taking their belongings by force such as the case in land grabbing, night time robberies, media threatening, and the killing of those who open mouths against wrong doing of those concern. With the current oil price plummeting and the draining oil wells, the security equipment in the hands of security personnel will be sold in the illegal open markets by those holding them because their masters will no longer be able to pay them. If this author is not wrong, the security personnel could be leasing or renting out public military equipment to the thieves to terrorize civilians when robbing their belongings. This will also compel the investors to quit the country; aggravating economic hardship if the peace fails to hold.

In term of development, what was allotted for development went out into the hands of few faked companies contracted by the same group in the government to deliver the services to the people, as evidenced in the story of Dura Saga. Other forms of misusing South Sudan revenue, include the payment to the community leaders to say “yes” to whatever decision the government brought fortth, leasing out of individuals’ land through foreign aliens in the name of “investment” with helpless benefits to the landowners, if any, and the current decision of unitarily adding 18 states to the current 10 states to become 28 states. These aliens, after receiving their commission are then disappeared; leaving a poor owner to suffer the pain of loosing his or her land without adequate compensation; putting into consideration the poor legal system prevailing in the country. There are also reports relating to the appearance of ghost names in the government payroll, which also represents wrong distribution of resources. These names do not come there by themselves but with the knowledge of those in power to cover their ill makings.

Now let us look how our leaders behave when our country becomes independent. After July 9, 2011, all the oil revenues extracted from the earth of our land become ours; meaning that the oil companies operating in South Sudan give all the revenue from the oil into our hands but keeping the same contracts as negotiated by Khartoum. For example, if Khartoum negotiated a contact with an oil company to extract oil in South Sudan territory, the oil company will only gives Khartoum 5% of whatever quantity of oil extracted from South Sudan regardless of changes in the price of oil. Six months later, and before receiving all the keys for managing the oil industry from Khartoum, we abruptly shut up the operation of the only industry generating revenue in the country on the allegation that Khartoum was stealing our oil. How? No one knows. Eight months or so later, when we become feeling the heat of our making and with international pressure, we turned in to Khartoum and poorly negotiated the usage of pipelines carrying the oil through Sudan to the international markets. In stead of sizing the lease or rent/price using percentage our negotiators simply named the figure for each barrel of oil crossing Sudan territory to the international market without due course in the changes of price of oil in the international markets. Not only these, but billions of dollars were also agreed upon and are to be given to Khartoum as charity while we don’t have enough for our own development.

Sincerely speaking, Juba agreed to pay Khartoum $25 per barrel for oil transported through the Sudanese territory was without simple knowledge of any effect of fluctuations in the prices of oil in the international markets. The $25 per barrel of oil being paid to Khartoum was intended to expedite the repayment of a $3 billion compensatory package they agreed to pay Sudan following South Sudan’s cessation in July 2011, according to South Sudan’s minister of petroleum. Not that long, and before the oil from South Sudan reached Port Sudan, the government under leadership of SPLM party, threw the rest of the cooperation agreements with Sudan into rest and then turned its attention to the leadership of the party. With full control of national revenue, few in the inner circle of the government ill-advised the president to eliminate those in the party expected to take the leadership of the party from the incumbent president; bringing the old bush differences in to the field by targeting the vice president, the 2010 election running mate. Now we are paying the price of what some of us were not parts of what was going on.

The government, but no one, is to blame for the pain our country is going through. The nation’s wealth was wrongly distributed, instead of formulating the right fiscal and monetary policies in the country to help development, the reserve funds in the reserve government account at Central Banks (The Bank of South Sudan) is channeled into the market through hands of the few on the ethnic lines at a low price and sold in the black market at a high price precipitating the down turn of the economy as evidenced by high exchange rate against South Sudanese pound. There will never be development without adequate distribution of economic resources through proper tools to balance the country’s balance of payment. The country’s oil corporation, Nilepet, would have improved its operation if it exists by going public. The government would have allotted certain percentage of the corporation to be owned by public in form of shares provide that good management is in place; hence creating employment and increase investment as more money will be coming directly to the investors. The oil refinery would have been built, completed, and operating to supply local consumers with oil, tarmac our road to facilitate farmers to supply the local markets with home produces while exporting the surplus overseas to bring in more hard currency. All our roads would have been tarmacked, increasing the flow of local produces to fill the local markets and preventing our hard earned money from going overseas in terms of imports.

Instead of depending on cement from Tororo in Uganda, South Sudan would have developed its own cement production facility perceived to be in Kapeota, Eastern Equatoria state; creating more employment and income to the citizens and preventing our money from flowing overseas. Instead of waiting for the rice to come from Uganda, Philippine or Pakistan, Aweil in Northern Bahr El Ghazal would sufficiently supply us with local produced rice, putting money into the hands of our farmers. Instead of waiting for juice from overseas, we would have put Fruit Canning Factory in Wau, Western Bahr El Ghazal states into operation to produce canned fruit and juice locally, encouraging local farmers to grow more fruits, and put more money into the hands of local population. Instead of importing sugar from Sudan, Uganda, Kenya, India, Pakistan or Philippine we would have put Melut and Mangala Sugar Factories in Upper Nile and Central Equatoria states into operation to produce sugar locally to put more money into the hands of our farmer producing sugar canes and employees working in the factories. Instead of importing clothes from overseas, we would have put Anzara and Mangala Textile Corporations in Western and Central Equatoria states into operation; creating more jobs to the citizens and putting more money into the hands of farmers producing cotton in the country.

By putting the right monetary and fiscal policy into place, our country would have seen a progress in term of economic development. Our balance of payment would have remained check. A country’s balance of payments is made up of the current account, financial account and the capital account. The current account measures international trade and the net income on investments, as well as direct payments. The financial account describes the change in international ownership of assets. The capital account includes miscellaneous financial transactions that don’t affect economic output. The balance of payment is important because it will tell us whether our country has enough savings and other financial transactions to pay for its consumption of imports. It will also tell us if it’s producing enough economic output to pay for its growth. A country with a balance of payments deficit probably imports more goods, services and capital than it exports. It is also borrowing from other countries to pay for its imports. This can be good for a while, so the country can fuel economic growth. However, if it continues for years, then the country may be seen as a net consumer, not producer, of the world’s economic output as can be seen in the situation we are in It may have to sell off its assets, such as natural resource and commodities, to pay for its consumption. Eventually, other countries may wonder if their investments will pay off.

A country with a balance of payments surplus is probably exporting much of its production. In addition, its government and residents are savers, providing enough capital to finance this production and even lend to other countries. This is a great scenario to boost economic growth, in the short term. However, in the long term, this country needs to encourage its residents to spend more and build a larger domestic market. This will keep it from being too dependent on export-driven growth. It will also allow its companies to refine goods and services, using the domestic population as a giant test market. Finally, a large domestic market can also inoculate the country from the volatility of exchange rate fluctuations. The current account includes a country’s trade balance. In addition, it adds in the effects of net income and direct payments. When the activities of a country’s people provide enough income and savings to fund all their purchases, business activity and government infrastructure spending, then the current account is in balance.

Current account deficit is created when a country’s residents would rather spend on imports than save. In addition, the country’s businesses are seen as a good investment to foreign lenders. It also helps if the lender country’s businesses profit from exports. It’s a win/win for both countries. However, if the current account deficit continues for a long time, it can be a drag on economic growth. Why? Because the foreign lenders may eventually wonder whether they will get an adequate return on their investment. If demand falls off, the value of the borrower country’s currency can start to fall. This can lead to inflation as import prices rise. It can also lead to higher interest rates, as the government must pay more on its currency. The Trade Balance measures a country’s imports and exports. This is the largest component of the current account, which is itself the largest component of the balance of payments. Most countries try to avoid a trade deficit, but it’s actually the best thing for emerging market countries.

A trade deficit results when a country’s imports of goods and services is greater than its exports. Imports are any goods and services produced in a foreign country, even if produced overseas by a domestic company. Therefore a trade deficit can occur even if all the imports are being sold by, and sending profit to, a domestic firm. With the rise of multinational corporations, and jobs outsourcing, trade deficits are on the rise. The capital account measures a variety of miscellaneous financial transactions. The important thing to remember is that they don’t affect income, production or savings. The capital account is usually pretty small compared to the other two component of the balance of payments. And finally, the financial account measures (1) changes in domestic ownership of foreign assets and (2) foreign ownership of domestic assets. If domestic ownership increases more than foreign ownership does, it creates a deficit in the financial account. This means the country is selling off its assets, like gold, oil, commodities, and corporate stocks, faster than it is acquiring foreign assets.

Now that instead of killing ourselves in order to control the only source of revenue in the country, we should actually develop our claimed abundance resources sufficient for our living to benefit our population and the generation to come; putting the right policies into place to sustain the economic growth.

The author is a concern citizen of south Sudan and can be reach at bia.parik.parik@gmail.com


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