South Sudan is drowning in its oil

Oil that flows freely takes away the development dreams of 13 million South Sudanese.

Child soldier (New York Times photo).

 

State Mafia, weapons, corruption … South Sudan is drowning in its oil

September 24, 2019 (Ecofin Agency) – On September 17, South Sudan obtained a $ 600 million loan from China. According to the authorities, this support will be used to “cover the cost of paying civil servants’ salaries for the next six months”. A situation deemed shameful by local public opinion when we know that this country has vast oil reserves and economic potential among the largest on the continent. Unfortunately, the youngest democracy in the world is swamped by mismanagement and grand corruption. Diving into the heart of a system where the oil that flows freely takes away the development dreams of 13 million South Sudanese.

In 2011, the date of the creation of the new federation born of the secession with Sudan, its 12 million inhabitants cherished the hope of a united and prosperous nation which will take full advantage of its immense oil reserves in a climate of peace. It is estimated that the deposits are ready to be exploited at more than 4 billion barrels.

However, very quickly, in 2013, President Salva Kiir and his Vice President Rieck Machar disagree on the date of a conference on national reconciliation. An event supposed to appease the tensions between their different ethnic groups, preliminary to build a nation. The first accuses the second of having attempted a coup d’etat and dismissed him and the whole government. The second in return, accuses the first of having “dictatorial tendencies”. There will be an endless brawl between government forces and rebellion commanded by Machar. The clashes will kill more than 400,000 people and displaced 4 million in five years. This, before a peace agreement finally comes to whistle the end of the fighting.

In the midst of this chaos, the executive power has been managed in the greatest disorder and opacity, leading to the establishment of one of the most corrupt systems in the world.

One of the most corrupt systems in the world.

 

In its 2018 report, Transparency International, in fact, ranked the country 178th in the ranking of the most corrupt countries in the world. 180 countries were studied in this context. And it’s not the scandals that are missing.

Oil money feeds violence

In early 2017, a United Nations report showed that oil revenues of $ 243 million between March and October 2016 were almost reinvested in the purchase of weapons to fight the Machar rebellion.

A GDP per capita of nearly 240 dollars.

 

This system, which has endured since 2013, despite a European arms embargo, has enabled the country to build one of the most powerful armed forces on the continent. Paradoxical for one of the poorest countries in the world with a per capita GDP of nearly $ 240.

In its 2019 ranking of African military powers, the Global Fire Power Organization (GFP) ranks South Sudan at 24th position in defense.

Regarding the embargo, he was circumvented in complicity with neighboring Uganda according to the UK-based investigative group Conflict Armament Research (CAR). Specifically, the CAR’s investigations revealed that Juba has sought the Ugandan government’s assistance in bringing weapons from Bulgaria, Romania and Slovakia to the country. However, the European Union (EU) has extended to South Sudan the arms embargo it imposed on Sudan in 1994.

“We have written records from the place of manufacture, exporting to Uganda, diversion to South Sudan and the recovery of weapons on the battlefields (…). These weapons arrived in Kampala between 2014 and 2015,” said James Bevan, Director of the CAR.

But while Juba goes shopping, 5.5 million South Sudanese are dying of hunger in Darfur and donor countries are mobilizing to raise funds to help these people. This famine must be remembered, is one of the many consequences of the spiral of violence in which has plunged the country since 2013.

It should be noted that the country derives 98% of its revenue from the sale of black gold. Moreover, the public oil company (Nilepet) has been accused by Sentry, an investigative group led by American actor Georges Clooney and the NGO Global Witness, to be the main source of funding for the war. “Since 2013, millions of dollars in oil revenues from the public corporation have been paid into the accounts of security services, pro-regime politicians, military officials, government agencies and companies owned by politicians and their families members to feed the crisis. The money would also have been used to finance a loyal Juba militia, which is accused of human rights violations, “said a report co-signed by the two organizations.

Of these disbursements, there was one of $ 80 million, which received particular attention. According to documents obtained by Sentry, this sum was paid to a militia with the motive of “maintaining security”. While the affair is making a splash with the country’s financial partners, Yiey Puoch Lur, director of public relations at Nilepet, denounced “false words”.

In South Sudan, the state of the road network is such that it takes 3 days for a pickup truck to travel 1,000 km between Juba and Bentiu in the South.

Lur also accused the two entities of falsifying the company’s payroll. Although he did not formally deny the $ 80 million, he noted that this money has been mobilized for community projects such as roads, schools and hospitals. And to conclude: “we can not finance the militia, it’s not part of our job”.

An opaque circuit of petrodollars

“We have discovered that oil revenues are not deposited in the South Sudan bank. We were surprised as representatives of the people to read the findings of the investigation. This means that there is nothing in the bank and it is useless if not some funds from international organizations and banks. These statements are those of a member of the Parliamentary Committee for Financial and Economic Planning of South Sudan, dated 30 August 2017, in the local daily newspaper Sudan Tribe. He wished to remain anonymous to avoid possible reprisals.

The intervention shocked the national opinion. Leaders were even challenged to react on the issue but nothing helped.

On March 24, 2019, a confidential source of South Sudan intelligence told Syrian news agency that the marketing of oil is handled by a group of three people close to President Kiir. According to his explanations, the men who benefit from the absolute confidence of the leader are those who direct the process of selling crude on the markets. They have also been given unlimited powers to act in this way, making the minister and Nilepet officials puppets who carry out the instructions of the three men. “They are the ones who negotiate and initial the crude sales agreements with international firms and foreign governments. They tell the Ministry of Oil what to do. These people work like a mafia,” the source said in a shock interview.

In this configuration, the question arises of what is the role of producing companies. To this question, the source answers “all foreign oil companies trust these three people more than our oil ministry. What is disturbing is the fact that they usually collect huge loans from oil companies in exchange for the sale of oil.”

Debt is nearing the peaks

The information on the oil revenue circuit comes in a context where a week ago, the IMF warned Juba that the accumulation of oil-backed loans threatens economic recovery efforts and return to peace. The institution said that these loans are generally concluded “without transparency”, which prevents the government from making the necessary expenditures to keep the economy afloat.

An isolated investigation by the Associated Press shows that the Peace Implementation Review Committee has approved at least $ 185 million in oil loans over the past few years. Money essentially spent on car purchases, adds the US news agency.

A month later in April, oil company Sahara Energy, which operates some deposits in the country, said it had granted a $ 600 million loan to the government to help finance the recovery efforts of the peace process. Both parties have been negotiating for several months for the installation of a 530 MW thermal power plant.

A few months ago, in January, the deputy foreign minister, Deng Dau Deng expressed a need of nearly 20 million dollars to implement the peace agreement. These investments are foreseen for the construction of road infrastructures, socio-community, the empowerment of women etc.

In April 2019, the African Export-Import Bank (Afreximbank ) suggested that it will provide $ 500 million in new funding to South Sudan – an envelope that will set up projects for transmission of electrical energy, infrastructure and agriculture. As a reminder, the country had already pocketed $ 200 million from the same partner.

In 2017, the public debt was about $ 8 billion. That is more than 80% of GDP. In 2013, before the start of the civil war, the public debt was about $ 2 billion. In four years, the debt has been multiplied by four.

Poor management of oil and gas resources

South Sudan, which is struggling to provide electricity to its population, signed in July 2019 with Kenya, a memorandum of understanding for the exchange of natural gas extracted from its oil basins for electricity. The government is also at the base of the agreement with the Chinese Export-Import Bank (Eximbank China) to deliver 10,000 barrels of oil a day against the construction of two major highways: Nadapal-Torit-Juba and Juba. Rumbek-Wau. This management of energy resources gives credence to the latest rankings of the index of governance of natural resources which places the country among the worst African students.

The worst African students in the governance of hydrocarbon resources are Uganda, Nigeria, Congo, Egypt, Gabon, Angola, Chad, Algeria and South Sudan. According to the Institute, their governance in this area is poor. For these countries, the paper explains, “selective and minimal procedures and practices are in place to manage natural resources, but most of the elements necessary for citizens to take advantage of the wealth derived from extractive resources are lacking”.

Curiously, last August, President Salva Kiir warned oil companies operating in the oil sector in South Sudan against mismanagement. “I will not tolerate any irresponsible activity of the oil companies in South Sudan,” he said.

By Olivier de Souza

Description of source: Sectorial and specialized information on African economies, covering nine key sectors on a daily basis: finance, listed companies, agriculture and agribusiness, mining, oil and gas, electricity, telecommunication & ITC, media, rights & laws. Country of origin: Switzerland
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