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Corruption threatens again to plague South Sudan and its oil

Monday September 4 2017

President of the Republic of South Sudan, Salva Kiir Mayardit, makes an address on July 9, 2017, to government officials and the media at the State House in Juba, South Sudan. Corruption threatens again to plague the country and its oil.  PHOTO | ALBERT GONZALEZ FARRAN | AFP

President of the Republic of South Sudan, Salva Kiir Mayardit, makes an address on July 9, 2017, to government officials and the media at the State House in Juba, South Sudan. Corruption threatens again to plague the country and its oil. PHOTO | ALBERT GONZALEZ FARRAN | AFP 

By MARK ACAK

In an opinion, John Prendergast, a well-travelled and erudite journalist who has lived and breathed Africa for more than 30 years, accuses the South Sudan government and the international community of allowing the six-year-old newest nation to sink in social and economic turmoil.

The United Nations has declared a full-blown famine in South Sudan and the country, driven by armed conflict, stands on the brink of genocide. More than one and a half million South Sudanese—a substantial part of the population—have fled to neighbouring countries.

The short history of South Sudan has been charted primarily by accumulation of wealth and power by a clique divided along ethnic lines. One of the poorest in per capita terms, it is, however, vastly wealthy in natural resources with some of the largest undeveloped oil reserves.

With the 2015 peace deal that ended the North-South civil war, the southerners were given authority over an interim administration in the southern half. Two rival factions—one led by President Salva Kiir and the other by Dr Riek Machar—maintained ethnic militias and patronage networks.

ADMINISTRATION

Neither side was genuinely interested in democratic institutions, good governance, transparency, service delivery or economic development but self-enrichment.

The administration suddenly found itself managing a budget of a whopping $1.5 billion, up from a mere $100,000, because of the oil-sharing provisions. International firms that held oil concessions with Khartoum had to renegotiate their Exploration and Production Sharing Agreements (EPSA) with Juba. The contracts also created a pathway to vast income for local governments.

But many of them have found it difficult to talk with Juba. Civil strife, falling prices, alternative investments in safer, developed economies and corruption have made South Sudan an unattractive investment destination.

The only production is by Chinese firm CNPC—300,000 barrels of oil per day—and State-owned Nilepet (130,000). New EPSA talks have either dragged on or well-known firms either walked away or adopted a wait-and-see strategy.

HOPE

South Sudan is the most oil-dependent country with the resource accounting for almost all the exports and 60 of its gross domestic product (GDP), which was $9.02 billion in 2015.

Looting of public coffers led to a fallout—first politically and then militarily in December 2013—between the two main factions, which have committed atrocities over the past few years in a violent pursuit of the spoils of a captured failed State. And with oil revenues drying up, the economy faces a major financial squeeze while an illicit economy is expanding.

Nevertheless, some events since 2016 have raised hope. Dr Machar, the independence First Vice-President, fled and was replaced with Deng Taban Gai, a former general politically aligned to President Kiir. The President has promised to end corruption in government and introduce a transparent regulatory framework.

After South Sudanese-American dual citizen Ezekiel Lol Gatkuoth, Juba’s first ambassador to the US, was appointed Minister of Petroleum and de facto Minister of Finance, the level and intensity of violence receded and there are signs of political reconciliation. Many major oil companies are returning.

NEW TRENDS

The optimism was boosted in May when Gatkuoth told the Africa Oil & Power conference in Cape Town that Juba is seeking committed operators.

But new trends suggest a return to questionable and opaque practices of granting acreage and concessions to briefcase companies.

Eyebrows were raised over a March deal with an entity with little experience in Africa, and a firm Gatkuoth recently said the government was negotiating with is owned by a man with a questionable reputation.

The international community, which midwifed South Sudan, are yet to address the graft at the heart of the conflict and economic implosion.

 Mr Acak is an analyst on oil industry regulatory affairs based in Juba. [email protected]