The Africanists

Insights. Comments. Thoughts. Analysis. Africa.

South Sudan OIL: LESS IS BEST

                                    The price you pay for oil

                                                          **

The predictions were dire soon after South Sudan had closed the pipeline to the North and thus its oil production. The World Bank, apparently unflustered by the reputation it has built up in South Sudan since 2005, claimed in a confidential report last February that the reserves of the country would be depleted by July and then ‘state collapse’ would be imminent. And indeed Oxfam early July exclaimed with characteristic understatement ‘Skyrocketing fuel and food prices deepen humanitarian crisis as country teeters on the brink of economic meltdown.’ But what are the facts ?

The South Sudan pound (SSP) has depreciated to the dollar in Juba’s black market as follows: in mid March the dollar was SSP 3.7; in mid April SSP 4.4; mid May SSP 4.8; mid June SSP 4.9 and mid July SSP 5.2. Fuel has been stable in Juba at SSP 6 per liter since April, though sometimes the price would triple for a few days awaiting new supplies to arrive. On July 25 over 30 tankers were waiting at Juba’s bridge to bring their diesel and petrol into the town. South Sudan is a vast country and the story will be different in the isolated border areas with e.g. Ethiopia or Uganda.

Early May in Pochalla for example one needed SSP 6 to get the birr equivalent of one dollar while in Juba it would have been less than 5. The border areas with Sudan have been even worse off but for entirely different reasons: because the Sudanese president Bashir closed the border most of these areas can now only be supplied by air. The economy too is vastly heterogeneous.

The average Toposa cattle keeper or Zande peasant lives in a cashless economy and can easily survive without the goods modern society considers important. At the other extreme is the Ugandan teacher who teaches in a Southern Sudanese school on an SSP salary: what he can send home to his family in Uganda has almost halved in value since February.

In between these extremes finds himself the salaried Southerner, including the SPLA soldier and the policeman: life has become more expensive for them but up to now they have been tolerant with considerable equanimity. Many of them have on top started to take care of relatives who returned from the North and have not yet found jobs, homes or even land.

The values of austerity and solidarity that were essential during the war have not yet disappeared among the middle class. The Southern government too deserves praise these days: it is succeeding to allocate the increasingly scarce foreign exchange to those areas where it matters most. Diversion of funds has also minimised witness the posh mansions that the elite had under construction but that are now standing abandoned half-finished. The relative ease with which the South, at least up to now, has coped with the sudden loss of the oil income raises the question whether it really needs the vast amounts of money the oil provided over the last 6 years.

It is true that both the Northern and the Southern representatives in the Addis Abeba talks think so. Khartoum has been insisting on a solution of all other issues before it would be willing to discuss the oil question. The South on the other hand offered recently 3 billion dollars plus a still very royal transit fee in return for getting the possibility to let the oil flow again to Port Sudan.

But South Sudanese president Salva Kiir admitted himself that 4 billion dollars from the oil income disappeared over the last few years. Since then the government has not taken any visible measures to prevent similar corruption from re-emerging once the oil flows again. And even when corruption was not involved there has been mismanagement, as in the case of the drug purchasing programme and the hundreds of tractors that are standing idle in Juba. Perhaps it would be best to forget about pipelines and instead limit oil production initially to what a few local refineries would need.

Such an alternative would have several advantages: the oil income would be of a more reasonable size, easier to handle and control by the government, and with a clear need for it in the society; the oil, once refined into consumable diesel or petrol, could be economically transported by tanker to the local market and to the neighboring countries, making use of the existing road network rather than of a pipeline that belongs to Khartoum or, perhaps even worse, still has to be built; more oil would remain available for future generations to benefit from; more funds would be available to future governments that no doubt will be more qualified and better equiped to handle larger budgets; the talks in Addis Abeba would not have to waste time any longer on the oil issue but could concentrate on the important issues of the human condition in the border region, the disputed areas, and Blue Nile and the Nuba Mountains.

To pump out as much oil as possible as quickly as possible may be in the interest of international investors, the Khartoum government and a small corrupt elite in Juba. And it may also be promoted by the chattering classes in Oxfam and the World Bank. But it does not seem to be in the interest of the owners of the oil: the ordinary Southerners present and future.

 

** The author prefers to remain anonymous. The author lives in South Sudan since 1984

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