South Sudan finance minister hails fragile peace

Salvatore Garang Mabiordit

South Sudan’s economy grew by 7.9% in 2019, according to International Monetary Fund (IMF) estimates, the country’s first positive result since 2014, and only its third year of annual growth since independence in 2011.

Yet the outlook for the world’s youngest country in 2020 remains precarious at best. A peace agreement signed in August 2018 – bringing to an end five years of internal fighting that displaced millions and provoked a widespread famine – continues to hold. Oil production, which accounts for the majority of South Sudanese exports, has increased significantly following improved relations with its northern neighbour Sudan, on which the country relies for oil exports.

Moreover, South Sudan has taken steps to boost non-oil revenues: its Non-Oil Revenue Mobilisation and Accountability programme has been developed in conjunction with the African Development Bank (ADB).

Slow political progress

Nevertheless, progress on the political front remains worryingly slow. The formation of a government of national unity including both president Salva Kiir and his former deputy Riek Machar – the leaders of the two opposing sides during the recent conflict – has faced delays over the integration of previous warring factions, and disagreements over the composition of the regional states. The parties have set themselves a new deadline of late February to reach an agreement, after missing the original deadline of November 12, 2019.

Amid such political paralysis, South Sudanese authorities face an uphill battle to retain the favour of both the international donor community and would-be investors. The collapse of most fledgling state institutions during the civil war has left a legacy of rampant corruption. In Transparency International’s most recent Corruptions Perception Index, the country ranked 178th out of 180 worldwide, with only Syria and Somalia posting a worse score.

Furthermore, there are signs that the government of the US – South Sudan’s largest aid donor – is losing patience with authorities in the capital city of Juba. In January, the US Treasury placed sanctions on first vice-president Taban Deng Gai, accusing him of human rights violations.

“Mr Deng has acted on President Kiir’s behalf to divide and sow distrust, extend the conflict in South Sudan, and impede the reconciliation and peace process,” US secretary of state Mike Pompeo said in a statement. “Such human rights violations and abuses curtail the political space needed for the full implementation of a durable peace in South Sudan.”

State of emergency

Droughts and floods in 2019 compounded South Sudan’s misery, prompting the government to declare a state of emergency in three states in October. More than 5.5 million people are at risk of famine, according to the World Food Programme (WFP).

“We know the problems that we’ve been having in South Sudan, but the rains and the floods have led to a national disaster and are much worse than anyone could have anticipated,” said WFP executive director David Beasley in December.

Salvatore Garang Mabiordit was appointed as minister for finance and economic planning after serving in the ministry as undersecretary since 2008, as well as working as a technical adviser in the ministry of trade, industry and East Africa community affairs.

The Banker spoke with Mr Mabiordit about the prospects for the country’s peace agreement, the development of its tax system, and the country’s non-oil investment priorities.

Q: What are the priorities of the new government of national unity likely to be for the coming year?

A: The biggest priority is that we sustain peace in the country. Without that, nothing else is attainable.

The peace agreement itself contains the mechanism to resuscitate the development of the country, its internal security and its image abroad.

South Sudan has plenty of resources, but they need to be managed properly. If we succeed in doing this, we can use the resources to provide services such as schools, hospitals and water, and build up our infrastructure and our agricultural sector in particular.

[While the formation of the government of national unity is important], the common person doesn’t need to know who the president is, who the chief of staff and chief justice are; they need the facilities for their children to go to schools and to put food on the table, together with opportunities to do business.

The question of corruption is always there, of course. When there is war, the legal and security apparatus is scattered. When the government is formed, the task is to make sure that we give services to our people.

Q: Is the 2018 peace agreement likely to hold? What makes this agreement different from others that have failed in the past?

A: The difference this time is that we have seen the ugliness of fighting among ourselves, which has achieved nothing. Second, the combatant forces have now reached a fatigue stage. Since the agreement was signed in Khartoum in 2018, there have not been regular violations. Previously when an agreement was signed, it would be violated the same day. There has been nothing like that this time.

Q: What steps are you taking to restore the international development community’s confidence in the country?

A: The only way [we can restore confidence] is by implementing peace via the development process. We are going to rebuild the schools and health facilities that were destroyed, as well offices for local and state government, all through our development strategy, which is aligned with the budget.

This is important for the population. If we can renovate the schools, the clinics, the water points to give people clean water, they will truly see that peace has come. There needs to be this level of rehabilitation first, so internally displaced persons and refugees in other countries can return.

We can only start with this level of development because we need to first give foreign investors the confidence that there is peace. The investors will not come unless they know there is peace. International capital doesn’t like the sound of gunfire.

Q: At what stage are your discussions with the IMF?

A: We are discussing a number of areas with the IMF, including macroeconomic activities, our expenditure and revenue generation, and how we can secure the budget.

Its last Article IV consultation with us was in May 2019. We agreed with several of the recommendations and implemented some of them. We need some support for monitoring and also technical support. Particularly we need technical advisers who can help us determine how we can collect more revenues in an efficient way while not hurting the taxpayer.

We also have a programme with the ADB to fund a commissioner general for our National Revenue Authority. We made an appointment in 2018 but he wasn’t doing [a good enough job] and so we had to dismiss him [in August 2019]. Now we’ve advertised the same position with the condition that [the successful applicant] has to have been a commissioner general in his or her own country or another country, so that they will bring their knowledge of tax and receivables, and be able to work with the ADB, the IMF and local banks.

Q: What is the outlook for inflation in 2020?

A: We have managed to reduce inflation since the peace agreement was signed, and we expect it [fall] to single digits [in 2020]. Production is rising from the oil fields, and non-oil revenue is increasing so that we can lessen our dependence on oil.

Increasingly we plan to use oil revenue for investment in sectors such as agriculture, mining and livestock, and use it to encourage external investment and build up our reserves.

Q: I presume that raising funds from international markets is some way off?

A: Yes, we’re moving slowly. The first priority is to establish a sustainable peace. Without that in place, you can’t tap international markets, as investors will just be afraid that their money will go down the drain. [Once that peace takes hold], banks won’t be afraid of us. Oil can be used as collateral.

We want the international development community to help us. We’ve asked them not to focus on relief. Relief just makes people lazy and creates a dependency syndrome. Free things are never free. The best thing donors can do is trade with us and invest in our country.