South Sudan, which broke off from its northern neighbor two years ago amid much hope, is going through a tumultuous period, as ethnic rivalries dent the nascent economy's prospects.
President Salva Kiir and deputy president Riek Machar's long drawn-out tussle came to a head in July when the president sacked him and many other members of the cabinet.
Retaining only a few ministers from the previous administration, the president then announced a new cabinet and retained Stephen Dhieu Dau as minister of the crucial oil sector.
"The restructuring of the cabinet is seen as an attempt by the president to calm political tensions that have come to characterize acrimony within the regime, primarily between himself and his former deputy, Dr. Machar," said Josephine Kibe and Mwangi S. Kimenyi, analysts at The Brookings Institution.
The analysts say the internal wrangling have made it difficult for the government to function effectively and adds to the economic instability of the fledgling country.
PROBLEM OF INSURGENCY
In addition, South Sudan's army - the Sudan's People Liberation Army - is also fighting Murle rebel groups in Jonglei state.
Human Rights Watch recently reported that at least 70 Murle civilians and about two dozen ethnic Murle members of the army have been killed since December.
"The re-emergence of a Murle rebel group in 2012 and the government's counter-insurgency has greatly complicated the situation and chances for peace in Jonglei and has plunged all of Pibor county, the center of the anti-insurgency effort, into humanitarian crisis, displacing tens of thousands of Murle," Skye Wheeler, a South Sudan researcher at Human Rights Watch reported on September 13.
The government has jailed a few high-ranking army officials involved in unlawful killings, but the fear of the military is spreading in the country and adding to the instability.
"South Sudan is embarking on a treacherous road," the Brookings analysts wrote. "Considering the fragile nature of the state today, its priority should be on building strong institutions that focus on the separation of powers and enhancing transparency, and any appointments to senior positions should be scrutinized by independent entities. Additionally, there is a need to limit the power of the president so that decisions are not arbitrary or largely informed by ethnic alignments."
ECONOMY NEEDS BOOST
Amidst the political issues, the economy is desperately in need of a shot in the arm.
"South Sudan has one of the most constraining business climates in the world," says the African Development Bank (AfDB) in its strategy report on the country.
"Many South Sudanese depend on the public sector payroll in the absence of an appropriate environment for the development of business activities."
Still, it is early days yet for the country.
The number of companies that registered in the country has shot up from 470 to 12,000 within two years, and new banks are reported to be opening in the country, including Qatar National Bank and Commercial Bank of Ethiopia.
In addition, four micro-finance institutions have established at a fast pace, and account for about 80,000 clients, the AfDB reports.
The authorities are also looking to attract investments in real estate, agriculture and transportation.
Earlier this month, China said it will finance South Sudan's mining sector with USD 43 million to help the country monetize its gold, uranium and copper deposits. The country also passed a mining law that permits international firms to secure five-year exploration licenses.
In addition, South Sudan is in talks with the Asian giant to secure as much as USD 2 billion in development loans. China, of course, is already a major investor in the country's oil industry.
OIL EXPORTS RETURN
While reliable economic data on the country remains elusive, analysts believe the South Sudanese economy contracted last year, and growth for this year will depend on oil exports.
Oil production, the lifeblood of the South Sudanese economy, had been reduced by about 140,000 barrels per day due to pipeline closure.
But over the past month, South Sudan resolved some of its economic and political issues with its northern neighbor Sudan, which means that the pipeline to the Sudanese oil terminal at Port Sudan is expected to remain open and unimpeded.
Government officials from South Sudan say production is expected to rise by around 200,000 bpd in October and 350,000 bpd by the end of this year.
"However, given the various rapid shut‐ins for political reasons and other less‐than‐ optimal treatment of field reservoirs historically, this target may be overly optimistic in the absence of additional investment," said the International Energy Agency in its latest report.
"Hence, we are forecasting a more gradual ramp‐up in the coming months. Another positive development for greater oil flows is that the two governments seem to have resolved payment issues, and South Sudan has reported that it has received USD 300 million from Sudan for crude sales since April. South Sudan, however, continues to explore potential alternative new pipeline export routes through neighboring countries to the south."
OPEC expects South Sudan's and Sudan's oil output to reach 220,000 bpd, as issues between the two countries were ironed out.
"Further upward revision to the supply forecast might be experienced in the coming period if the two nations demonstrate commitment to the agreements," OPEC said in a report.
Still, landlocked South Sudan would do well to pursue an agreement with Kenya and Uganda for the development of a pipeline that ends up in Lamu port in Northern Kenya.
In addition, foreign direct investment flows into the country could help lift the economy and promote economic diversification, says KPMG.
"In particular, increased FDI should help to reduce the country's substantial infrastructure deficit, and present considerable benefits to the wider economy. Despite the lack of data, most FDI in South Sudan is thought to go to the petroleum sector, although there is abundance of other natural resources, including agricultural land and mineral deposits. Given the still relatively unexploited nature of these resources in the fledgling country, there is a wide variety of foreign opportunities present in South Sudan."
© alifarabia.com 2013
