South Sudan: Political Instability & War

This is the third and final post out of the mini series of three, focusing on the concept of Political Instability and War, within South-Sudan-the world’s newest state, riddled with civil war since 2012 resulting in major injustices and challenges for its economy.

Introduction:

South Sudan is an LIDC where war and conflict is rife, due to ethnic tensions between tribes. The nature of war is such that many South Sudanese people have this idea of war encoded in their DNA. They have no other skills or purpose due to a lack of employment opportunities meaning it is almost inevitable that they join a military group. Over the last decade this has taken a damaging toll on the economy and way of life. There are many issues associated with the existence of a ‘war economy’; rationing, lack of public investment in infrastructure and corruption on multiple levels are but just a few. South Sudan also has weak development of markets and a lasting level of insecurity, which hinders investment. It is unclear whether corruption causes poverty, or whether poverty results in corruption. Either way, corruption is ubiquitous from underhanded exchanges and trading weapons on the black market to large scale, government corruption (diversion of invested funds etc.). Another aspect of injustice is the leakage of assets abroad by the wealthy and others. Essentially this is where money and flows of capital leave the country hence the term ‘leakage’ resulting in a loss in GDP and growth opportunities for the home country, thus exacerbating the challenges.

 

The issues of existing in a ‘War Economy’:

  • Soaring Prices. Without incoming dollars to sustain central bank reserves, the currency is now in meltdown. Inflation was reported to peak at 300%, making the cost of living unaffordable for many citizens. In comparison the UK’s target for inflation is 2.0%.
  • Dependence on aid and a lack of diversification/expansion of the economy. Sudan controls the oil pipeline and has the power to set high tariffs. New investment in South Sudan’s oil sector has been severely diminished by the escalation of the civil conflict since 2013.
  • The scarcity of hard currency, particularly the US dollar, is a big problem; along with the sharp fall in the value of the South Sudanese pound. The official rate is 2.96 pounds for a dollar; on the black market it hovers around 14. As a result, life is increasingly expensive because South Sudan relies heavily on imports.
  • Before the war, South Sudan earned most of its money from selling oil. It accounted for 98% of government revenues. But since then production has halved because some oil fields have been taken over by the rebel forces or damaged.
  • South Sudan still offers businesses and workers in Juba from neighbouring countries – including Eritrea, Ethiopian, Kenya and Uganda the hope of getting rich quick, as there is far less competition than in their home countries
  • As well as attacks and kidnappings targeting foreign aid workers there have been several abductions of oil workers throughout 2017 with ransoms being demanded.
  • The South Sudanese economy shrankby 13.1% in 2016 and, according to the IMF, was expected to contract 6.3% in 2017.
  • The security environment in South Sudan will remain unstablein the medium term and the threat of kidnapping to foreign travellers will also consequently remain severe

 

The Issue of Corruption:

  • Corruption permeates all sectors of the economyand all levels of the state apparatus and manifests itself through various forms, including grand corruption amongst government officials.
  • South Sudanese leadership has been described as “shameless looters who are living in luxury while showing breath-taking indifference to their people”.
  • South Sudan was ranked 175 of 176 countries in the 2016 Transparency International’s annual corruption perceptions index (CPI), worse than Iraq, Pakistan and Bangladesh.
  • Within a year of independence, President Salva Kiir declared officials had already stolen horrifying amounts from the fledgling state. An estimated $4bn is unaccounted for or, simply put, stolenby former and current officials, as well as corrupt individuals with close ties to government officials. Most of these funds have been taken out of the country and deposited in foreign accounts. Some have purchased properties, often paid for in cash.

 

The Leakage of Assets Abroad (by wealthy and others):

  • The newest country in the world is in dire need of committed, educated nation builders. Many of its most wealthy citizens park everything from their assets to their families and themselves outside the country.
  • Many are even proud that South Sudan is one of the few African countries that, on balance, sends millions of dollars out to its diaspora, rather than relying on remittances sent in from abroad. Business people transfer money out to their families, especially for school fees.
  • An investigation by Avaaz, an online campaign group, indicates South Sudan’s top leaders move considerable property and banking assets outside their own country, into east Africa, the Middle East and Europe.While South Sudan goes up in flames, the families of the elite enjoy a luxurious lifestyle outside the country subsidised by endemic corruption of state coffers.
  • In Kenya’s capital Nairobi, South Sudanese number plates are commonplace on the four-wheel drives that circulate the leafy suburb of Lavington.

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