9 Jul 2012

Bad news for South Sudan on first anniversary

With the world’s youngest nation celebrating its first anniversary, a World Bank report predicts that South Sudan’s decision to shut off its oil supply will have disastrous consequences.

Even as they danced in the streets and blew their trumpets in the capital, Juba, most South Sudanese know there isn’t much to celebrate.

There’s a tragic irony in the fact that infant mortality – a key indicator of development – is on the rise in South Sudan. Death stalks the under-fives just as it stalks the infant nation. Failed statehood is a real possibility, because South Sudan is about to economically implode.

President Salva Kiir, in trademark cowboy hat, today vowed to confront corruption. (A copy of a letter he wrote in May – and obtained by Channel 4 News – admits to $4bn worth of unaccounted for funds. Click here for page one and page two of the letter)

But the president asked the world to cut South Sudan some slack. “My fellow citizens,” he said. “The year to come will be hard, but we will prevail. In all of this, I ask the international community to stay with us.”

And well he might, because even some of South Sudan’s well-wishers today are having serious doubts about what his government has done.

Extreme austerity programme

The nascent nation is one of the poorest on the earth, but it is about to feel the effects of an austerity programme so draconian that it will make Europe’s look cushy in comparison. Six months ago, President Salva Kiir shut off his country’s economic lifeline: oil money, which had provided South Sudan with 98 per cent of government revenue.

The landlocked South inherited three quarters of Sudan’s oil, following divorce with Khartoum last year. But it had no way to get that oil to its export markets, other than by a Chinese-built oil pipeline snaking north, past Khartoum, to the Red Sea coast at Port Sudan. Hopes of building a route out for the oil from Juba to the Kenyan coast are still a pipe dream – and will be for years.

The Juba government turned off the oil tap because Khartoum was charging ten times the going rate to let its brother enemy use its Chinese pipeline. Some called the move brave – others, reckless. Whatever else it is, it has spelled disaster.

Situation is ‘dire’

The United Nations Secretary General’s Special Representative Hilde Johnson simply called the situation “dire” and said that unless the oil’s turned on again, the situation would be “very difficult”.

That’s an understatement compared with what the World Bank says. In a confidential document leaked in May, it says the government of Salva Kiir appears to have little inkling of what’s about to hit it.

The document says “the World Bank has never seen a situation as dramatic as the one faced by South Sudan.” Its analysis, the document says, refers to comparable shocks in other countries, including Mexico in 1994, Indonesia in 1997, Russia in 1998 and Argentina in 2001.

It predicts:
– the unprecedented collapse of South Sudan’s economic output
– the “massive” depreciation of the South Sudanese Pound and a run for US dollars
– the exponential rise in inflation, deepening food insecurity.

The social impact of all this will be devastating, the report says:
– pushing a further third of the population (3.6m people) into poverty within a year. That will leave 83 per cent in poverty by the end of 2013.
– doubling the infant mortality rate to 20 per cent of live births
– and dramatically curtailing school enrolment from half of all children to just one in five.

Economic liberty is long-term goal

The government’s retort to all of this is that it’s been through hard times before and that after two decades of war, the people of South Sudan know all about what it means to suffer. They’re prepared to suffer more, the president asserts, to win their economic liberty.

The World Bank brands this attitude “unrealistic.” It’s pretty hard to see how South Sudan can keep things going as reserves run dry, salaries of civil servants go unpaid and development gains are dramatically reversed.

For the government in Juba, the only upside to all this is watching the Khartoum regime suffer too; losing three-quarters of its oil revenue has cost it dear and street demonstrations against rising prices are taking on the feel of Arab Spring-style revolution.

The world can ill afford to let South Sudan fail. Today the Foreign Secretary said Britain would continue to support the new nation as it “builds a more secure and prosperous future.”

The reality though is that on its first birthday, South Sudan’s future looks neither prosperous nor secure.