South Sudan faces impending economic collapse

By Havard Bergo,

Global Risk Insight

South Sudan's President Salva Kiir at a news conference in Juba. Kiir's $1 billion investment in military to crash rebellion failed Kiir bought 1000 tractors hoping to restore the collapsing economy but experts say it is just too late(Photograph: Goran Tomasevic/Reuters)

South Sudan’s President Salva Kiir at a news conference in Juba. Kiir’s $1 billion investment in military to crash rebellion failed Kiir bought 1000 tractors hoping to restore the collapsing economy but experts say it is just too late(Photograph: Goran Tomasevic/Reuters)

May 03,2015(Nyamilepedia) —  Oil production has been slashed and oil revenues hurt by falling prices, depriving the government in Juba of most of the money it desperately needs. The UN warns that South Sudan’s economy is edging towards a complete collapse, as authorities begin printing money to fund state services.

The power struggle between President Salva Kiir and former Vice President Riek Machar has caused tens of thousands of civilians deaths and displaced nearly 2 million people, all but destroying any progress made in South Sudan, the world’s youngest nation.

The struggle started as a political conflict within the SPLM, the liberation movement-cum-main political party, stemming from serious dissatisfaction over Kiir’s governance and disagreement over party leadership. The war has since largely been fought along ethnic lines – Kiir being Dinka and Machar being Nuer – and has seen ethnic cleansing and civilian massacres on a large scale.

South Sudan is now facing a complete economic collapse, with the Juba government reportedly printing money to cover their expenses. Toby Lanzer, the top UN humanitarian official in the country, recently warned of the financial dangers of this practice, emphasizing that “printing money when there is nothing to back the value of that currency usually leads to hyperinflation.”

Oil revenues are down 75%, partially from output reductions due to the ongoing violence and as a result of the sharp drop in global prices. This has made it increasingly difficult for the government in Juba to fund their bills and pay their salaries, the large majority of which goes to the army and the police.

Oil production seriously hit

South Sudan has the third largest oil reserves in Sub-Saharan Africa, and oil exports account for virtually all government revenues.

Output was at 350,000 barrels a day in 2011, shortly before Juba shut down production due to a payment dispute with Khartoum, the seat of the Sudanese government. South Sudan is dependent on Sudanese pipelines, refineries, and port facilities in the Red Sea, and the northern government, having lost major parts of their reserves when the south seceded, demanded a transit fee of $32-36 per barrel in an attempt to cover some of their losses.

The two countries resolved the dispute in 2013 (settling at $24-26/bbl) and production reached 240,000 barrels by the summer. Then, fighting broke out, and rebels seized large swaths of the oil fields, reducing output to an average of 160,000 barrels in 2014.

The government barely made $3.38 billion in oil revenues last year, of which $884 million was spent on costly transit fees to Sudan. A major strategic and economic goal for South Sudan is to lessen their dependency on Khartoum by developing alternative outlets for their crude oil exports.

The Toyota Tsusho Corporation has undertaken a feasibility study for constructing pipelines through Ethiopia to Djibouti and to the Kenyan port of Lamu, and the South Sudanese government has signed MoUs with all three countries to explore these possibilities. However, the projects were put on hold due to security concerns, and foreign investors and construction companies are not in a hurry to get involved anytime soon.

A political conflict turned ethnic

Serious clashes occurred last week in Malakal, the capital of the oil-rich Upper Nile state, which has changed hands numerous times since fighting broke out. Fighting is still ongoing, despite four failed peace agreements signed in the last year and a half.

Halle Jørn Hanssen was invited by President Kiir to mediate in Juba in October before the war broke out, when a conflict between Kiir and several of his deputies had already been brewing for months. “It was essentially about who should lead the country after the 2015 election, about who should have power in the country,” Hanssen, a former leader of the aid organization Norwegian People’s Aid that worked for decades in the country, told GRI.

He claims that widespread dissatisfaction with the corrupt and inefficient leadership of Salva Kiir quickly spread in the years after independence: “It was very visible that a few people in Juba became immensely rich, while most people saw little or very little development.”

Hanssen dismissed the official argument that Machar and the rebels were planning a coup before the war broke out. Having participated in several projects for democratic development in South Sudan, he instead stressed the increasingly authoritarian tendencies of President Kiir and his unwillingness to share power with his war-time allies. The president, Hannsen said, faced huge pressure from within his own tribe, in particular from the informal Dinka Council of Elders, to fight for their “special rights” to rule in the new South Sudan.

This tribal factor led to the decision to secretly raise a militia of thousands of Dinka youths outside of the capital. ”The Dinka leaders had taken the decision to massacres the Nuers in Juba. They had secured maps and lists of names showing where the Nuers lived (…) killing probably more than 20,000 in Juba alone”.

Economy might be a solution to war

The inequitable distribution of oil revenues was a key factor behind the war. With exports falling and government finances in an abysmal condition, it is increasingly difficult to fund even the scarce state services, let alone the huge costs of running a war.

It is estimated that the war could go on to cost the country $28 billion over the next five years, as well as $53 billion in neighboring countries for refugee expenditures and spillover effects. The dire economic situation might give the warring parties an incentive to reach a temporary solution, yet huge progress must be made to reconcile the underlying causes for the conflict.

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  13 comments for “South Sudan faces impending economic collapse

  1. May 3, 2015 at 3:33 pm

    Lies will never help, if 20,000 were killed in Juba then, how much Nuers numbers were living in Juba before war breakout? Counts how many people runs to UN compound? counts how many soldiers left Juba? From what I know there was a killing happen in Juba but it was not a genocide. There were about 664 total death in three days fighting and these 664 dead bodies were including Nuers, Dinkas and all others Equatorians.

    Like

    • May 3, 2015 at 10:26 pm

      Mawien Magol,

      First off, 664 were the South Sudanese people who were killed by their government. Whether these individuals were Nuer, Equatorians, and Dinka, they were innocent

      They did not deserve to die on the hands of their own government. These were our brothers and sisters who were forced to die by the government. The government of South Sudan has a responsible to protect her own citizens.

      The President of South Sudan should treat the 64 tribes as his children. He is the father of the nation so he has a full responsibilities to leader and protect the 64 tribes. It is wrong for the President to misuse his power to kill his own people.
      The government has to differentiate between politicians and the ordinary South Sudanese people.

      Let us talk about genocide. What is genocide? Let us have a look at the crime of genocide. The United Nations approved the Convention on the Prevention and Punishment of the Crime of Genocide.

      This convention establishes “genocide” as an international crime, which signatory nations “undertake to prevent and punish.” It defines genocide means any of the following acts committed with intent to destroy, in whole or in part, a national, ethical, racial or religious group, as such:
      (a) Killing members of the group;
      (b) Causing serious bodily or mental harm to members of the group;
      (c) Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part;
      (d) Imposing measures intended to prevent births within the group;
      (e) Forcibly transferring children of the group to another group.

      In your own defense you stated that Nuer, Equatorians and Dinka were killed in Juba. Were Dinka and Equatorians killed from house to house like the Nuer were?

      Why do you think Nuer, Equatorians and Dinka were killed in Juba? Are these the only tribes that were in Juba that time? Is there relationship between the Nuer, Dinka, Equatorians and the government that killed? Who killed Equatorians and the Dinka? We all know that the government militias were killing the Nuer?

      Did the government of South Sudan committed genocide in Juba? Definitively, the government has committed crime against humanity. The government killed the members of the group. The Nuer were mercilessly murdered in Juba.

      After Juba massacred, South Sudanese were mercilessly killed in Bor, Malakal, and Bentiu in retaliation. Those who killed the people in Bor, Malakal and Bentiu had committed a crime against humanity too. There is no better human than other human.

      Like

  2. May 3, 2015 at 4:09 pm

    It is still early for you Mr. Killer Mayardit, you never know the end of what you plan. Oil belong to Upper Nile therefore God of Upper Nile is on our side. In Juba there is shortage of Fuel, Water and food items. No salary for government employee and the is no more buying weapons this time. DINKA KINGDOM DAYS ARE NUMBERED!

    Like

    • May 3, 2015 at 8:28 pm

      Goweng Torbar really?
      Is oil real belonging to Upper Nile alone? I think you are wrong to say, the national resources are belong to one particular Region instead, of saying it is for Southern Sudanese people including the region of Upper Nile and its nation. Remember, there is also oil in Bhar el Ghazal Region and I am not going to tell you others resources that, are more important than oil located in Bhar el Ghazal Regions. What we have in Bhar el Ghazal Region are the one who will bring development in the Young nation.

      Like

  3. GatNor
    May 3, 2015 at 5:24 pm

    South Sudan is far from economic prosperity.

    Like

    • May 4, 2015 at 12:57 am

      Kiir and Museveni who plan and executed their plan on 15th December 2013 have no where to go, they have been exposed to the maximum globally and those who side who them are so shameful to sing song of SPLA……..!

      Economy collapsed is one of the solution so that both evils Kiir and Museveni can to go to hell. There will be no peace in the whole region, if Museveni and Kiir are still alive because museveni is a cancer of the entire region if not entire African continent because of his greedy influence and evil behaviour.

      Museveni is well know of killing his good friends. he did that in Burundi, Rwanda, DRC and now in South Sudan. Museveni is professional design of genocides in the region.
      The region will have peace when Museveni has gone for good together with his partner in crime Kiir mayadit.

      those who are still siding with them will soon be ashamed indeed.
      God is on our side.

      Liked by 1 person

  4. May 3, 2015 at 7:59 pm

    Why South Sudan economy should collapse while there is no war in entire country,almost war everywhere in all Syria,but Damascus still with normal. What went wrong with South Sudan normal and simple life? Why should South Sudan collapse while there is no Social Welfare.Majority people of South Sudan gain non from government in Juba? The elites are now insulting themselves.

    Like

    • Eastern
      May 4, 2015 at 5:41 am

      Don’t ever compare Syria with South Sudan. Syria has been a country for over 1,000 years. South Sudan just emerged from a long and devastating war. South Sudan is a tribal Union will Syria is not. There are many differences between Syria and South Sudan ya Agumut.

      Like

  5. May 3, 2015 at 8:17 pm

    Mawein Magol! You will never learn, i know Dinka rely on false reports but how come you deny the genocidal killing which is acknowledged by the whole world. We have South Sudan crisis finding report which is prevented by Kiir to be known to public, UNMISS Report which is known to whole world and AU commission report which all of us read its leaked document Yet you don’t acknowledge the genocide which took place in Juba. Defense Minister, Interior Minister and Former Chief of Staff recognize the killing of innocent Nuer in Juba who are you to deny the fact?

    Like

  6. May 3, 2015 at 8:40 pm

    Kiir is Queer.Who told Kiir to become president.Queers are crying for their protection,but who told them to behave like that, Meerkat methinks.Many people in this recession have no cents in their pockets,but they are still moving on.What about stolen money?

    Like

  7. Yeitop
    May 3, 2015 at 11:45 pm

    The Juba regime have gone to the last resort of massive printing of Money trying to fight back the economy which is not the resolution to the current situation. On 28th April 2015, the Government received 13 containers of money which turned into nightmare. so called Gov’t officials meet at night to share these public money to benefit themselves. where in the world does this happen? how can a country print money and share among themselves without shame and yet they say “this is our SPLM share”?

    Like

  8. May 4, 2015 at 2:01 am

    Wow!!!!!!!
    What great confusions and mess the country is leading to

    Like

  9. May 4, 2015 at 3:15 am

    Goweng Torbar
    you people are liars how come 20000 nuers had been massacres in Juba? While most of the nuers are in UNMISS and some ran to Uganda and Kenya and you don’t account Dinka who had been massacres in Bor,Bentiu and Malakal are 150000 people had been killed your notorious James Koang Chuol and Peter Gatdet must go to ICC.

    Like

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