Juba broke as war takes a toll on South Sudan economy

By BARBARA AMONG, Special Correspondent, THE EAST AFRICAN,

Posted Saturday, August 16 2014,

IN SUMMARY:-
*The current oil output is half of what South Sudan was producing before the war broke out in December last year.
*The biggest oil production wells in northern Upper Nile and Malakal have shut down, and only the Faloch oil well in Unity State is producing oil.
*Earlier in the year, rebel leader Riek Machar said that the oil fields were targets for his forces and that revenues generated from oil sales should be placed in independent coffers. *He accused the government, which he served till July 2013, of corruption and mismanagement of oil money.

POSTED ON SSN, AUG/16/2014;

The South Sudanese government is struggling to stay afloat as months of fighting with rebels loyal to former vice president Riek Machar have halted oil production, the lifeline of the country’s economy.

Currently, the country is not in position to pay its debts, amounting to hundreds of billions of dollars borrowed from the oil companies, and yet it plans to borrow another $1 billion to fund the budget for 2014/2015, read last week.

The current oil output is half of what South Sudan was producing before the war broke out in December last year. Its revenues are thus expected to drop by more than 60 per cent to about $200 million.

“All oil fields, except one, have been shut down. And as you know, 98 per cent of funding for government budget comes from oil revenues,” South Sudan’s acting ambassador to Uganda Micheal Amanamoi told The EastAfrican.

He confirmed that oil production had decreased to 15,000 barrels per day from 30,000. The biggest oil production wells in northern Upper Nile and Malakal have shut down, and only the Faloch oil well in Unity State is producing oil, Mr Amanamoi said.

“We were caught off guard; even the non-oil revenue sources are not generating enough revenue. The government is now selling the oil before it is pumped out. We are getting the funds to run the country through promises to oil companies,” Mr Amanamoi revealed. “This has gone on since the war broke out, especially revenue to pay civil servants’ salaries and provide social services.”

Earlier in the year, rebel leader Riek Machar said that the oil fields were targets for his forces and that revenues generated from oil sales should be placed in independent coffers. He accused the government, which he served till July 2013, of corruption and mismanagement of oil money.

President Salva Kiir’s government, however, rejected Dr Machar’s proposals of an independent body to monitor oil revenues and said that if allowed, it would amount to a violation of the country’s sovereignty.

Media reports and the UN Security Council indicate that the money borrowed from oil firms, especially Chinese firms, being used to purchase arms, a claim President Kiir’s government denies.

The economic crisis, and the government’s inability to pay some of its civil servants and the army, has led to shootings in military barracks among South Sudanese soldiers, and also between South Sudanese soldiers and Ugandan troops over what the former claim is special treatment of the latter, at their expense. This has prompted fears of a mutiny.

The South Sudan government is not only afraid oil companies will soon run out of patience, but regional governments as well.

Joint regional infrastructure projects such as the Lamu Port South Sudan-Ethiopia Transport corridor and the standard gauge railway are halted. The construction of several major roads linking South Sudan to the region have also stalled.

Defiant Juba to issue oil contracts
There have been fears that proceeds from oil will be used on military spending in the power struggle between President Salva Kiir and former deputy Riek Machar, who was sacked in July last year.
Concessions for blocks B1, B2 and B3 located mainly in Jonglei and Lakes States are believed to be under negotiation. The states are among those most affected by insecurity.
Since the outbreak of conflict, oil revenues have reportedly been diverted to finance the war instead of going towards infrastructure and social programmes.

South Sudan has said it will continue issuing new oil contracts despite concerns by a global watchdog on natural resource use that the deals could be used to aggravate the conflict that broke out in December.

Petroleum and Mining Minister Stephen Dhieu Dau said oil was the backbone of the Juba economy and suspending issuance of new contracts for prospecting and drilling activities would hamper growth.

“We do not agree that a moratorium on petroleum contracting is at this time in the best interests of the citizens of South Sudan,” said Mr Dau.

Global Witness, which investigates the role of natural resources in funding conflict and corruption, had in June asked the government to suspend new contracts and review existing ones until peace and the rule of law are restored.

Mr Dau, in a letter to the London-based non-governmental organisation dated July 8, said that South Sudan’s budget was too dependent on oil production.

“Even while we seek to diversify our economy and attract investments in new industries, we foresee the oil industry remaining a substantial, if not predominant sector of our economy for a number of years,” wrote Mr Dau.

Global Witness had recommended a halt in issuance of new exploration and production agreements (EPSAs) including in refinery and transport until the Petroleum Act 2012 and Petroleum Revenue Management Bill are enacted and operational. It said reports of human rights abuses by both sides, particularly in oil-producing areas, needed to be investigated and those found guilty held to account.

Concessions for blocks B1, B2 and B3 located mainly in Jonglei and Lakes States are believed to be under negotiation. The states are among those most affected by insecurity.

“If contracts for these concessions are granted, companies would need to employ armed security forces. In a region home to high numbers of military and militias, a further influx of armed actors could worsen the conflict,” said Global Witness.

Since the outbreak of conflict, oil revenues have reportedly been diverted to finance the war instead of going towards infrastructure and social programmes. END

7 Comments

  1. Elhag Paul says:

    The rebels should shut the remaining oil wells quick so that the Dinkocracy in Juba collapses quick. After all the money from these oil fields is going straight the the “Cobra” President Yoweri Museveni of Uganda. The days of President Salva Kiir and the Council of Jieng Elders are numbered. What do South Sudanese expect from leadership labelled by Gerrard Prunier as “idiots” and referd to as “stupid” by IGAD.

  2. kuol says:

    Please if you know nothing about South Sudan, you better don’t write an article about it. Most of your information in the article about oil in south sudan are wrong. The oil wells that are operating right now are in the upper nile state not unite state as you mentioned. Secondly, the information that you presented are obvious and nothing new about it. So, Don’t be stupid!! Don’t pretend that you alot of things about south sudan crisis. Many south sudanese have learned alot of things in this war. They have come to realize that the war they are fighting now was designed to fought by some of East africa leaders and their masters whom their intentions is to exploit the weakness of our country leadership and steal the country resources. Full Stop!!..

  3. John Philips says:

    President Kiir and the thugs are presiding over disillusion and South Sudan just boiled. History will not fever those who are distorying this country. Whether it’s Riek or Kiir. Those guys took us back to war again. Even God will not forgive the Nation. We used to pray for South Sudan war to stop and granting of our land to the people. God gave us that wish but we squander it and want to call the international community to do something as if they are the one who know best or owners of the land. you the citizen are the root cause of the problem. You let politician used you for their own advantage. Once they negotiate their position in Addis, I want what post will you get? Nothing basically. Some folks left their families in UN compound in the hands of the UN to go and fight with who? History has repeat itself in our eyes.

  4. False Millionaire says:

    Money is the key to the need for power.This is exactly the basis of the power struggle within the SPLM/SPLA elite that led to the grave human,social n economic tragedies that r raging in our country today.The thousands of lives that have been lost,the hundreds of thousands that have been displaced,the hunger n the humiliating misery that have been inflicted upon our citizens will never change the cruel attitude of the fighting protagonists to accept sincere peace.The true fact is that,the government borrows money for the oil it has not yet sold.The rebels do thesame thing.Buying arms with that money for the war is part of the story.But much to the reality is the fact that,they all need the money inorder to maintain the needs of their own life style with their families including in-laws n wayside mistresses dispersed every where on earth.If their tribesmen understand nothing other than one tribe against another therefore becoming the war human fire woods,their field commanders understand n play this dirty game-card in their own tricky ways.They r the benificieries of small lucrative business activities by the power of klashnikov.That enables them to take others’ wives n girls without paying doweries n force ordinary citizens to starve themselves inorder to feed them.Cows,goats,chickens,fish,jungle meat n fruits,rare harvest n the rest r all for them.In truth for them,the idea of peace is unacceptable nightmare for such fantastic cheap life.

    As for the rest of the citizens in general,caught up now in this irrelevant war,will still fall hostages to the bad peace that would come as a result of compromise,to share the oil money,among the SPLM/SPLA comarads in the government as in the opposition.It’s naive n irresponsible not to foresee difficult times for a very long time in the future.How could this b avoided,minimised or contained?Me personally I have no answer.But one hopes it is the responsibility of every south sudanese citizen to think about it.In fact the best reaction would b a national initiative that will bring changes from point zero.This being the only best option but in the context of being over-ambitious,unity among our citizens becomes the most needed
    precondition for any chance of success.

  5. BILL KUCH says:

    Impersonater,
    South Sudan could survive without oil production like they did during the civil war. So, please, stop pretending because you know nothing about this war. This hard headed war can continue with no money regardless. Where were these useless people during south and north war? North Sudan used to buy everything they could including arms to fight rebels and none of you hypocrites say nothing at all. So, why now?

  6. John Kijana says:

    What do expect of a country run by ill-educated and lazy thinkers to be? Stephen Dhieu´s assertion that issuing new oil contracts to oil companies is to the benefit of South Sudanese is outright stupid and only demostrates pure nonsensical jienge-logic. Kiir´s regime believes that oil is infinite: a-never-depleting resource. So the govt. madly goes on asking for credit when it can not repay it´s current huge debt, seriously pushing South Sudan into a circle of spiralling default. Even the Minister of Economic Planning Mr. Sabuni ( a learned accountant) has no in-depth knowledge of economic interlinkages. Just a bunch of i****s

  7. Lavina Lual says:

    I do not know why the president still keeps this thugster-Stephen Dhieu because the money Stephen embezzelled is already more than the little money produced in his payam at Pariang. He is just on this position to keep on selling our crude oil illegally with the chinese and the money ends up divided between him and the kiirler.

    What a mess republic of animals led firm!

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