The Africanists

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Oil

South Sudan: extremely poor or ridiculously rich

Surrounded by a series of blue and red suitcases two young women check in for the flight to the South Sudanese capital Juba. Their suitcases are of an expensive brand and their clothing is pricey too. The luggage weighs much heavier than the free baggage allowance but unlike other passengers, they do not plead for exemption. They pay without batting an eyelid a considerable amount for the excess luggage.

“It is mainly presents for family. In Juba it is hard to get nice things unlike here in Nairobi where you can buy almost anything as long as you have a happy back account”, says one of the ladies. The two South Sudanese women study in Kenya where their fathers possess houses besides the homes they own in Juba. They clearly belong to the elite of South Sudan because upon arrival in Juba they do not throw themselves into the mayhem in order to obtain a stamp on their passports or retrieve their luggage. This is taken care of by a man in a dark suit and fashionable sunglasses who sees them through customs with a simple hand gesture, and whisks them away.

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Native inhabitants of Lamu see new port as threat

Old Town of Lamu ©Ilona Eveleens

A wide, dusty road ends in a gaping hole in the mangrove forest through which the water of the Indian Ocean is visible. A man appears from the remaining forest of trees that grow in the shallow, salty water along the coast. He carries a bag with two live crabs. “There are abundant crustaceans between the mangroves. But they will soon disappear when the new port of Lamu will be constructed”, he says.
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Africa’s Fabulous Mineral Wealth that isn’t ALL there

 

 

Copper mining near Lumumbashi in DRCongo. Photo Koert Lindijer

Copper mining near Lubumbashi in DRCongo. Photo Koert Lindijer

 

So let’s assume for one moment that you are an international corporate executive responsible for your company’s emerging market strategy. You are hearing a lot more about Africa of late, and feel strongly that your organisation needs a well-researched and informed strategy on a continent that has for so long evaded your radar.

Be careful though how much store you place on stock wisdom about Africa packaged as authoritative.

You may find that such commentary does not always enlighten, so that, in a paradoxical sort of way, the more you read the less truly educated you become.
Before you begin to ponder what avenues may be available to your company as it seeks to escape this information trap, let me illustrate what I mean with a classic example.

There is a near-universal belief that Africa is the richest continent on Earth from a natural resource point of view. This belief is most strongly associated with mineral wealth, which is the form of natural resource endowment easiest to measure.

In what has become the accepted narrative, Africa is poor both because of and in spite of its fabulous mineral wealth. The logical implication of such a view is clearly then that Africa has to do little more than just chuck out “its greedy dictators” and/or “incompetent governments”, for its natural endowments to translate into economic and financial wealth. Obvious enough.

But is Africa that super-endowed?
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South Sudan OIL: LESS IS BEST

                                    The price you pay for oil

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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