How is South Sudan’s Economy doing?

BY: CHAP PHAN, Michigan, USA, AUG/29/2013, SSN;

With ongoing radical political changes across South Sudan spearheaded by president Kiir, and the introduction of supposedly technocratic cabinet members, it seems a perfect time to gauge how South Sudan had done economically in the last few years and make some generalized recommendations.

Gross Domestic Product (GDP) is generally used to gauge the health of a nation’s economy, generally speaking economic growth is supposed to be accompanied by some improvement in social living standards.

But as you might have expected, many social indications in South Sudan have not improved. According to African Development Bank, this year people living in poverty will increase from 51 percent to 80 percent, Infant mortality rate in South Sudan is projected to increase from 10 to 20 percent while school enrolment is expected to drop from 50 percent to 20 percent (African Development Bank Group, 2013).

All those social indications are telling us that many South Sudanese have not realized peace dividends in terms of better living conditions and rewarding jobs that they had hoped for in 2011.

The available data shows that South Sudan’s economy grew at an average rate of about 3.55 percent nominal growth, from 2008 through 2011, the young nation experienced deep slump in 2012, GDP plunged by 56 percent as the result of oil shutdown in 2012, showing that over-dependence on oil as the major source of revenue come with real cost.

To put this performance in perspective, on average Rwanda’s Economy grew at 8.2 percent annual rate in same years and Ethiopia’s economy grew at whopping 9.2 percent annual rate in same time frame.

A look at another important factor, inflation, which measures how fast prices rise; the picture is not good as well.

The average Inflation rate peaked at 59.2 percent in 2012 although it has declined considerably ever since (African Development Bank, 2012).

Discounting 2012 data due to oil and geopolitical shocks, 3.55 percent annual growth rate is anemic given all the resources in terms of oil revenues and foreign donations.

Other things being equal, South Sudan, which is much poorer, compared with Ethiopia or Kenya, is supposed to grow faster since the country is starting from low base and does not have huge depreciating assets.

For Instance, Afghanistan, which is a war-torn country like South Sudan, managed to grow it economy at 10 percent for the last 5 years without oil money.

Below is a four year (2008-2011) comparison graph of economic growth rate for selected few countries.

Figure 1.1

Source: world Bank development indications.

As the figure 1.1 above shows, South Sudan economy grew at 3.55 percent on average for the last four years (2008-2011), compared to Afghanistan at 10 percent, Ethiopia at 9.2 percent and Rwanda at 8.2 percent.

A 3.55 percent annual growth rate is not good enough to take South Sudan to a bright and more prosperous level, especially considering that population growth rate is not factored in.

South Sudan has a lot of catch up to do if the leadership dares to close economic gap with other African counties.

Recommendations:

• Improve the overall security in the country. This requires that government has credible commitment to ensure integration of formal rebels into political and economic system to help address the underlying cause of rebellion; help the war effected areas by promoting economic activities to support peace and create stability for long term economic development.

• For a company to invest in any country the political system must be predictable, that means that transfers of power must be peaceful and in orderly manner.

Senseless killing of citizens does not promote national pride, it tears it apart. The killing of SGT Banyjiath, like the case of Isaiah Abraham, plus other voiceless victims, can lead to ultra-nationalism, which does nothing but inflict a mess on the international community.

Indeed, highly publicized regular political and other related violence discourage many firms from investing in south Sudan, no company wants to invest in a country that does not respect its own citizens.

The government must practice its monopoly of power to provide security for all it citizens, both internal and external security. Security is the foundation for peace and propensity.

• Improve the overall institutions and harmonize policies, and set priorites. Disarming and demobilizing former combatants is work that needs to be down, but it must be done in parallel with economic empowerment to prevent the recurrence of violence. Former combatants must be given incentives to love peace not war.

• Promote and pursue strategies that are designed and aimed at creating investment; productivity growth that enables people to live dignified lives.

This means that government needs to work with humanitarian agencies and other NGOs to induce them to moves away from food aid and to promote projects that encourage development.

South Sudan should not become a victim of aid trap; the tendency of aid to create disincentive to work, or create price distortion in market place while weakening local capacity.

• South Sudan has the benefit of having a huge young population, 72 percent of the population is under age of 30, according to (UNDP, 2013), but it must take advantage of its young population and create jobs; unemployed youth can easily become a source of resentment and instability in the community.

Investing in infrastructure and agriculture programs would increase economic activities for both short term and long term development and would help create a much needed labor intensive jobs for many young population that are in need of jobs while encouraging development in other economic activities i.e., transportation facilities, storage facilities.

• Re-orient government workers and weed out the incompetent ones to help improve efficiency and transparency in the government systems which will equally improve service delivery.

The rampant clientelism must stop; where workers are hired and fired based on kinship and political loyalty rather than on merit. There are sad stories of well qualified citizens that end up working for NGOs agencies as drivers simply because they don’t have some “big man” in the government, that is sad and it must stop.

This kind of practice deprives the country of highly and well trained professionals. Creating knowledgeable and capable work force will enhance the country’s performance in this globalized world and afford the country the respect it deserves.

• For immediate impact, South Sudan needs to target south Sudanese that are already trained i.e., high school graduates and university graduates. For example, high (secondary) school graduates are good candidates for entry level for police and community organization.

More aggressively, the government can target individuals that are already employed in foreign countries. This would make it easy to meet the needs of investors and therefore help attract the right industries and build capability for the local population.

South Sudan has well trained and educated population that is mostly in foreign countries…in East Africa, the United States, and United Kingdom.

There are good numbers of South Sudanese that are well educated and that are willing to go back and help rebuild the country if the government puts a good faith effort on the process.

Recruiting already trained South Sudanese from overseas will deliver immediate results and it will prepare the nation for reliable human resources that can retrain other south Sudanese, and in the long run this will enhance productivity.

Need to develop this immediate human resources should be tasked to all ministers. It’s sad that south Sudan has a high deficient in skilled manpower, yet the few well trained work in the areas that are unrelated to their specialized fields.

This mis-allocation of resources is something that needs to be fixed right away.

• South Sudan should diversify its oil customer base to mitigate future shocks in oil related disputes and encourages foreign direct investment in other sectors of the economy while increasing its international presence with purpose.

Final remarks.

This is not to discount some of the major milestones South Sudan has achieved, but people expectations have not been met, and certainly it would be unfair to suggest that people are worse off than 7 years ago, but at the same token it would be irrational to suggest that South Sudan is progressing at the right speed, economically or politically.

Until the government establishes its credibility on how it does business, private inflow or direct foreign investment will not be available, government needs to take economic growth seriously and promote growth strategies that have both short and long term underpinning, and only then that South Sudanese will pride themselves on having a truly independent state. END

Chap Phan live in Michigan, USA, he can be reach at pandeit@gmail.com

References:
South Sudan interim country strategy paper, 2012-2014, 2013. African Development Bank Group.
SSCCSE., 2013. Southern Sudan Centre for Census, Statistics and Evaluation, Statistical Yearbook for Southern Sudahttp://www.ss.undp.org/south_sudan/en/home.htmln.
UNDP, 2013. http://www.ss.undp.org/south_sudan/en/home.html
World Bank, 2013. World Development Indicators.

2 Comments

  1. the analysis is so good and in fact telling the real economy of south sudan given the situation on the ground. but it is not updated, because it only talked of south sudan economy in years 2008-2011, what about from 2012-2013 is there any improvement or not?

  2. the author says:

    2012 was bad year by all counts, South Sudan was growing at negative 57 percent and 2013 will not be better unless the governments of N.sudan and S. sudan agree on oil operation.
    thus, 2012 was not included because it is an outlier due political shock in the 2012, my best estimates is that S. sudan will grow at about 2 percent in 2013, provided that the oil is flowing.

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