It has been over a decade since South Sudan gained its Independence. On the 9th of July 2022, South Sudan celebrated 11 years of independence since separating from the North through a plebiscite that saw southerners overwhelmingly in favor of an independent state.
Given the foundation of the country, one birthed after many years of protracted armed struggle driven on the core principles of Justice, Liberty and Prosperity, hopes were sky high among the populace and friends of the new country that with South Sudan managing its own affairs far from the helm of the then rogue Khartoum regime under deposed leader Omer Al Bashir, the new rulers would fulfill the promises of the liberation struggle.
At the end of the devastating civil war in 2005, the Southern leaders had the chance to build the impoverished region using its rich oil resources – the Comprehensive Peace Agreement (CPA) granted the then semi-autonomous region up to 50% share of oil revenue. In 2011, the country broke away with over three-quarters of the oil reserves of the old Sudan, pumping at least 350,000 bpd when it became a sovereign state. This would be the mainstay of the government contributing about 99 percent to the national budget until 2012 when it unprecedentedly closed oil production for almost a year following clashes in March and May of that year with the North over the control of the oil-rich Heglig area. Subsequently, disputes arose over pipeline transit fees and other oil-related payments to Sudan.
Ever since then the country has struggled to peak pre-independence oil production levels and revenues. That the 2013 conflict happened was a straw that broke the donkey's back diminishing the new nation’s oil output by almost a third to a paltry 130,000 bpd at some point, crippling the oil-dependent economy to date.
The management of the oil industry is premised on the 2012 Petroleum Act and 2013 Petroleum Revenue management Act which provide specific provisions for the sector. However, these critical laws have not been meaningfully implemented. The Public Financial and Accountability Act, 2011 which guides general budget preparation, appropriation, borrowing, accountability, and audit of accounts, among others, has also generally been ignored. Had public finance been in accordance with these provisions, perhaps we would be writing a whole different story – a positive glimpse into prosperity propelled by the black crude.
Calls by local stakeholders including Civil Society Activists who have for long campaigned for a more transparent and accountable oil and gas governance should be heeded to. Equitable management of natural resources particularly “oil for the benefit of the people now yet without compromising the future, should be the government’s goal. Apply transparency and accountability in all transactions involving national, regional, and international investors in the natural resource sector as guided by the Petroleum Act, 2012 which requires disclosure of information on payments made to the government by the investors.
Despite its oil exports, South Sudan has failed to undertake significant infrastructural projects from its oil revenues, and the management of the oil revenues is marred in opaqueness. A recent report by the country’s Vice President in charge of Economic cluster H.E Dr. James Wani Igga indicated the country lost more than 4$ billion in uncollected oil taxes over the last 10 years. He lamented malpractices and maladministration as reasons for this colossal loss and urged enacting measures to recover the money.
Also, excessive borrowing against oil should carefully be reviewed. The new model dubbed “oil for development” adopted by the President in 2017 in taking Chinese resource-backed loans for infrastructure development is shredded in opacity and off-budget spending. There are concerns that road construction projects are badly run and prices are inflated and or billions are unaccounted for.
In the past, some of the conflicts have been triggered by the need by political actors to control the enormous oil wealth. Many citizens are still wondering how their country could produce so much oil wealth while so little filtered into creating opportunities for the bulging youth population, schools, clinics, electricity, and clean water supplies.
A rethink in the management oil the oil sector is needed and the climate crisis highlights the urgency of diversifying the economy away from petroleum. A shift to clean energy is now a global agenda, and more and more countries are unveiling ambitious carbon neutrality strategies. The ongoing Environmental Audit spearheaded by the Ministry of Petroleum provides a benchmark to understand the true effects of the oil production since drilling started in the late 1990s, however, this should meet international standards.
Also worrying to the South Sudanese authorities should be the accelerating momentum of climate action by the global powers as enhanced in the recently concluded COP26 agreement known as Glasgow Climate Pact, aimed at staving off dangerous climate threats. It has implications and not all of them are positive for economies dependent on hydrocarbons. The country needs an economic reform programme and more efficient and transparent use of the state’s oil resources. Chapter 4 of the Revitalized Agreement on Resolution of Conflict in South Sudan provides a blueprint.
To realize South Sudan’s potential oil governance, peace and security is critical and supersedes all other ingredients for development and investments. Therefore the parties to the Revitalized Peace Agreement on Resolution of Conflict in South Sudan (R-ARCISS) must implement the accord in letter and spirit to create a conducive environment, improve credit worthiness, and build confidence among investors to increase investment for the people of South Sudan to enjoy dividends of peace. Bottom of Form
If the country doesn’t lay urgent transitional plans to spur growth in other critical sectors like Agriculture, tourism, and service industries as envisioned by the former Sudan People’s Liberation Movement (SPLM) leader late Dr. John Garang, it risks huge shocks from a steep decline in future demand for oil potentially burying billions of reserves. A goodwill to employ the necessary fiscal policies towards achieving this objective should be in high supply.
Source: Radio Tamazuj