Post Referendum – An economic perspective of what lies ahead for Southern Sudan

Category: Writing aboard the Kenya Airways: A story on coming to Rwanda for the first time
Published on Monday, 17 January 2011 20:22
Written by Melody Atil, The New Sudan Vision (NSV),
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The resolute nature of the Southern Sudanese and the visionary organized leadership that culminated in today’s emancipation holds much promise for the nation’s ability to deal with these challenging circumstances and execute the necessary tasks,Melody Atil, founder and managing director of Peace Dividend, which channels global capital to southern Sudanese small businesses with limited or no access to finance, writes in this piece.  

(Juba) - Today, 15th of Jan 2011, marks the close of the referendum vote that could make Southern Sudan the world’s newest nation. After twenty one years of draining and destructive war by a ruling elite intent on oppressing the population and extracting the country’s resources for its sole benefit, Southern Sudanese are justifiably excited in anticipation of the chance, finally, to rule themselves and control the rich resources of their land.

Yet, the balanced development of the fledgling nation of Southern Sudan will be a challenge. Rich in natural resources including oil, gold, and other minerals it is easily subject to rent seeking by government officials and individuals alike, and building an empowered population and an equitable and stable economy will be quite challenging. Limited by its poor access to the sea, and recovering from the lack of public investment, Southern Sudan has less than 100 km of paved roads across an expanse of land roughly the size of Texas or Afghanistan, a literacy rate of 15% amongst its adult population, legal and institutional structures that are still in the making, and a complex history of tensions amongst the various communities that populate its lands. Given these complications a recipe for success would be one geared at long term growth, short-term economic opportunity for the region’s citizens, equitable power sharing, and an efficient and transparent management of its plentiful natural resources.

Long-term growth ultimately involves the accumulation and transfer of both human and technological knowhow, as well as a focus on the identification of the nation’s future comparative advantages.  Potent sources for human capacity building and technological transfer include education and skill building, the attraction and regulation of foreign and Diaspora investment, and partnerships with foreign firms - as long as Southern Sudanese partners are keen to get involved and learn on the job. The best approach from a policy standpoint would involve a keen attentiveness to the needs of the private sector and the deficiencies of the labour force, a roving search and promotion of industries with future potential comparative advantage and a focus on the goods and services high in the value chain (rather than the sale of raw materials) that provide larger profit margins. In this effect, Southern Sudan has no shortage of exportable high value per bulk items for export in addition to oil and minerals including amongst others:

Services are also a propitious focus, as they do not depend so heavily on access to the sea. Tourism in particular has much potential with mind-blowing wildlife migrations, stunning mountain ranges and parks, as well as beautifully rich and fascinatingly diverse culture. Finally, from the perspective of local markets, there are also a myriad of abundant resources for future local consumption from cattle, to solar and hydropower, to construction materials such as cement. Clearly, there is potential for a thriving economy balanced on a range of resources in addition to oil and mineral extracts.

In the short run, the economic perspective is a little different. As a country transitioning from crisis with few legal or institutional structures in place, there are both numerous market inefficiencies and very attractive opportunities. Firms pursue either activities with very high short run returns, to match the very high country risk (such as construction, catering, hostelry, trade, procurement for either the government or international organizations) or industries where they can gain a large long-term share of the market (such as banking, telecoms, beverages etc.). However, most Southern Sudanese are unable to take advantage of these lucrative prospects, due to either lack of capital or lack of knowledge.  The major employer is the government and only 10% of the workforce is officially employed, with the remainder of the working-age population surviving on subsistence activities (such as livestock, farming, and fishing) and the informal economy. Thus, whilst foreign firms stream in, hardly any of the resulting benefits accrue to the local economy, as these firms hire mostly foreign labour and purchase mostly foreign-produced goods and services. The challenge lies truly in solutions that can connect the current skills, and capacities of the local population to this growing market. Given the very independent nature of Southern Sudanese and the scarcity of local employers, vigorous promotion of the emerging segment of small local firms is particularly desirable and policy makers would be well advised to pursue this track.

With independence, equitable power sharing and giving voice to each member of the very diverse population of Southern Sudan will be crucial to maintain stability. Neighbouring Kenya provides a poor example, where rampant corruption and ethnic nepotism since its emancipation led to the surges of violence in 2008. Yet, the government is not the only source of power and equitable control of other resources such as land, as well as equitable access to education, finance and income are key ingredients of stability. Presently, the distribution of these other sources of power mirrors the distribution of power within government and given market inefficiencies there is a high probability that inequality (amongst tribes, geographic areas, rural vs. urban, young vs. old, gender, etc.) will increase exponentially in the years to come if appropriate policies are not pursued. Unless the balance of power from government, to land ownership, to education, as well as access to finance and income – is comprehensively addressed, inequality will stoke dissatisfaction and inter-group tensions in the long run.

Finally, and most importantly, given the lucre and the very easy rents extorted from Southern Sudan’s plentiful natural resources – transparent and efficient management of these is crucial to its stability and its potential as a strong and resilient economy. Current institutions must rapidly increase their capacity in order to face the upcoming surge of firms keen to extract these resources.  From timber to land, minerals and oil to wildlife, it is crucial that the benefits of these resources accrue to Southern Sudanese equitably and transparently, and that these resources are not extracted at the expense of communities and the environment. Such would be the recipe for success.

The resolute nature of the Southern Sudanese and the visionary organized leadership that culminated in today’s emancipation holds much promise for the nation’s ability to deal with these challenging circumstances and execute the necessary tasks. Thus far, the central bank has progressed in terms of its ability to regulate the financial sector and appears to be capable of managing the transition and maintenance of a new stable currency without abuse from other government agencies. Certain ministries show tangible efforts at executing their roles despite the scarcity of resources at their disposition. Yet the true test is at hand, and only the future will tell whether the current leadership is geared and keen to deliver.

Given the uncertain execution by new leadership - the empowerment of social strata unconnected to the current governmental powerbase seems increasingly important in giving power and voice to minorities and disempowered groups. “After all, this is Africa, why would it be any different here?” states a foreign investor from Kenya detailing the history of how all too often a ruling elite draws rent from government coffers, whilst the rest of the population’s needs remain unaddressed. In this light, a focus geared on building local enterprise might prove an alternative model to provide voice to the disempowered and hence present a fundamental counterbalance to government leadership.

*Melody Atil is founder and managing director of Peace Dividend, which harnesses global diaspora networks to expand access to finance in countries recovering from civil war. The project is getting its start in Southern Sudan, where Peace Dividend channels global capital to small businesses with limited or no access to finance. From 2007-2009 Atil was with the World Bank's private sector development project for Southern Sudan in Juba.  She has a background in microfinance business development in Mexico and previously worked in finance at GE CapitalLondon.This email address is being protected from spambots. You need JavaScript enabled to view it.