JohnAkecSouthSudan

Sunday, December 11, 2016

South Sudan’s Economy: Is fuel the new dollar?

By John A. Akec

I recently asked a young relative what small business he would start if I were to give him some money. His answer came quickly, with no hesitation whatsoever: he would be buying and selling fuel (diesel and petrol) and charcoal. In that order. I was somewhat amazed to know that charcoal business was that lucrative to be on the same league as fuel, but was not shocked to hear that diesel and petrol would sell like hot cake at a premium. And for the last few weeks, it has become apparent to this writer that many of our citizens living around our capital city have discovered yet another money-making machine through buying highly subsidised fuel and selling it on the streets at five times its original price to make a fortune. And here is how.

Nile Petroleum Corporation, the South Sudan’s national oil operator, spends about one dollar (or between USD 0.98 to USD 1.05) to purchase a liter of diesel or petrol and then sells it at a retail price of 21 SSP (20 cent or USD 0.2). Retailers (Nile Petroleum Corporation included) then sell it to consumers at 22 SSP or so per liter, as from January 2016. At the beginning of 2016, South Sudan pound exchange rate against dollar in the parallel market was round 25 SSP to a dollar. That amounted to subsidies of SSP 23 million a month to supply the market with 2 million liters in January 2016 alone. As demand picked up and South Sudan pound exchange value against dollar continued to deteriorate, the value of subsidies began to increase exponentially to peak at SSP 500 million for the month September 2016 alone.  

Overall, fuel subsidies, according to reliable sources, for 12 months from January to December 2016 amount to around SSP 3 billion to supply the market with 112 million liters of fuel. As things stand, and at current exchange rate, one would estimate that fuel subsidies will cost the nation some SSP 6 billion next year from January 2017 to December 2017, assuming exchange rate stays the same, which is doubtful. If not, it could cost even more to maintain the subsidies in 2017. The minimum projected fuel subsidies for year 2017 is equivalent to 20 percent of approved budget of the SSP 30 billion for fiscal year 2016/2017.  It is the money our government will spend on the premise that it is helping keep low the prices of transportation services and other fuel-price sensitive goods. 

Looking more critically at current fuel subsidies though, the next question is who is really benefiting and how the government has been able to afford such a huge undertaking? The beneficiaries are young men, women, and children selling fuel on roads’ side, and their distributors who are pocketing subsidies at most. It explains why fuel queues are so long at our fuel distribution stations and depots.  Many motorists fill their tanks with diesel or petrol at 22 SSP and sell it to young street retailers who in turn sell it at more than 100 SSP a liter, and share the differences as profits. Others would fill containers and sell the fuel themselves at higher prices. The next day, many of them are back on the queue to buy more to sell. But at whose expense? Calls to float the prices of fuel and remove subsidies as well as opening the market up to private sector providers, it seems, have fallen on deaf ears.

It is a similar story to how the system of fixed exchange rate was exploited for a decade before it was finally and partially abolished in December 2015. Those well connected were able to buy dollars at low fixed exchange rate from the central bank and made twice or three or five times the value on the black market rate. It was for that very reason that many economic activists supported the floating of the exchange rate so that government can get value for money from its oil revenues.

By the time the Ministry of Finance finally gave a go ahead to the central bank to float the exchange rate, monthly income from oil revenues had already dwindled due to fall of prices of crude oil on the world markets. An important window of opportunity had been missed, and a deep economic hole had been dag.

What’s more, the system of auction of dollar at the central bank in which all the bidders – from the highest, to middle, to the lowest, won, is seen by this writer and other economists spoken to as not the best because it is open to price-fixing and, and vulnerable to internal dealings.

It is small wonder that things had not improved even after switching to floating exchange rate policy. From this author’s viewpoint, the policy of floating exchange rate was a sound one. However, the implementation of the policy, as well as delayed adoption, have left much to be desired. Besides, rushing to increase salaries of the members of armed forces by 300 percent without proper cost benefit analysis has wiped out any gains that could have accrued to the nation coffers.

The other part of the question that has not been addressed adequately in this article is how does the government afford to pay for these huge subsidies? Reliable sources have informed the author that a share of South Sudan’s crude oil is handed over to a foreign company that gives South Sudan a certain quantity of refined fuel every month at an agreed price. Hence, though it appears at the surface that Nile Petroleum has unlimited ability to sustain the losses month after month, ad infinitum, it is coming at the expense of reduced oil revenues to the government of South Sudan. What goes around must come around, the saying goes.

Finally, the question I need to pose is whether or not these subsides are worth it? And I fear, they are not. For once, the subsidies are not reflected on rate of transports either on fairs of matatos (mini-buses) and boda-bodas (motor cycles). This is because the owners of mini-buses and boda-bodas still pitch their fairs to reflect the inflation, even if fuel prices remain fixed officially. It therefore begs the question whether it is worth it to put our scarce resource to alleviate the economic burden on our citizens where it makes no real impact.

In conclusion, the Ministry of Finance and Economic Planning in our Republic, in its effort to cut expenditure, should consider removing fuel subsidies completely (the sooner the better), and allow private companies to supply and sell the fuel to those who need it at competitive prices which  are determined by "market's invisible hand."

Redirecting resources away from fuel subsidies could help reduce the deficit in the current budget from 40 percent to about 20 percent. It will not solve all our economic owes, but will partially assist towards closing the large gap in our public finances. It will also help stabilize the exchange rate of South Sudan pound against dollar as it will increase the oil revenue coming in.


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Cynics will describe such a proposal as a politically risky undertaking to pursue. However, not taking bold measures, such as this one, to put our public finances in order is simply to delay the inevitable. For sooner, or later, not doing the right thing, at the right time, will catch up with our struggling economy. To the disadvantage of us all.

Tuesday, October 25, 2016

FundingOur Universities to Deliveron their Mandate: The Case of University of Juba

By John A. Akec

UNIVERITIES AND NATION-BUILDING
“Before going to war, Haifa must speak”, Israeli politicians are apt to telling their audience. This is specially so, when showcasing the importance their nation attaches to universities and centres of knowledge and research. The University of Haifa, a flag bearer on national security issues, is one such institution reference is made to when making important decisions central to their nation’s security and its citizens’ wellbeing. Surrounded by innumerable challenges since its inception, Israel has built top notch and highly specialized universities such as Haifa for security studies, Hebrew for agriculture, Ben-Gurion for water and desert research,Technion and Telaviv for science and technology, among others. These universities allow the Jewish nation to effect socio-economic advancement in a region where land is limited, waterscarce, and security a nagging concern at all times.

Not only Israel, but its powerful Arab neighbour, Egypt, is using its top ranking universities such as Cairo and Alexandria to develop technologies that would allow expansion of agriculture into its deserts as well as harnessing technologies that optimize water reuse. These are strategic concerns that will occupy Egypt’s policy-makers for generations to come. And their universities are well equipped to give answers which will enhance the quality of decisions being made along the road.

And the world over, all seem to agree that no country can develop or compete in the global marketplace without establishing universities that provide quality education to its youth and conduct research that informs national policies and drives innovation. However, in South Sudan, we still have a long way to go in order to reflect in our national budgets the important mandate placed on universities as generators of knowledge necessary for our socio-economic development.

SOUTH SUDAN’S UNIVERSITIES
We, as a country, have five functioning public universities (Juba, Bahr El Ghazal, Upper Nile, Rumbek, and Dr. John Garang); and 4 proposed universities (Northern Bahr El Ghazal, Torit, Bentiu, and Yambio) that are yet to function when funding becomes available. The functioning public universities are seriously under funded and lack the basic infrastructure such as adequate lecture halls, well-stocked libraries, equipped laboratories, internet, and office space for the teaching staff. The Ministry of Finance and Economic Planning in its annual budgets commits itself to payment of salaries of staff and rarely anything for operation or infrastructure or lab equipment. This funding situation has never changed since independence in 2011.

UNIVERSITY OF JUBA – PROGRESS AND CHALLENGES

University of Juba is the oldest and the largest of South Sudan’s universities. It was established in 1975 in order to train civil servants for then autonomous government of South Sudan. Startingas 4 colleges in 1977 when it admitted its first students, it grew over the years into the current 11 colleges/schools, 7 specialisedcentres, and two institutes. It is a comprehensive University offering undergraduate programmes in medicine, engineering, agriculture and natural resources, music and fine arts, management sciences, finance and banking, public administration, law, education, economics, and social sciences, among others. Before independence, the University had about 18,000 students, 700 academic staff; and 1000 administrative, technical and support staff. Right after the declaration of independence, the number of students dropped to 9,000 and academic staff to a mere 137.

Ever since the declaration of our independence, the University has faced serious challenges and has been struggling to deliver on its mandate. Under the new administration, the number of academic staff rose from 291 in January 2014 to 574 in July 2016 (still far short of the 700 in June 2011). Due to irregular admission of new students by the Ministry of Higher Education, Science and Technology, the graduation rate was higher than the intake rates from 2011 to 2016. The number of students plummeted to the lowest ever in May 2016 to 6,000 of which 1,000 are at postgraduate level. This academic year, University of Jubadoes have students in most colleges in third and fifth years because in some years no intake took place, thereby creating those gaps. Nevertheless, with about 4,000 new students expected to join, the student population will rise to 10,000 in October 2016, and it is projected to climb back to 18,000 by October 2018.

By January 2014, about 50% of the academic staff were part-timers. However, over the last two years, progress has been made. Today, part-timer lecturers still make up 28% of the 784 needed teaching force at University of Juba. A marked improvement but ideally the figure of part-timers should not exceed 10%. The University has been able to revive annual graduation ceremonies from 2015, a feat that was abandoned by the University for over 12 years. The number of master programmes is increasing. A postgraduate school to train civil servants has been established since 2015. Student Union has been reconstituted after being banned for 4 years. An Institute for Transformational Leadership targeting women has been launched in January this year in collaboration with UNWomen.

SETTING OF NEW VISION AND MISSION
The new administration that came into office in March 2014 has developed and adopted a new vision and mission that position University of Juba as “a world-class centre of excellence that is committed to national economic empowerment and social transformation through education, research, innovation, entrepreneurship and service to community;” together with core values and a new motto (“Inventing the future, transforming society), to match. The administration has also developed eleven strategic goals to be achieved by 2030 that would see the University grow to 60,000 students with 10% of them being international students, while 20% of academic staff will be international. Besides,6,000 of the students will be at postgraduate and research levels. In addition, a 15-year physical master planis being developed to serve the mission of the University and match the expansion of its academic programmes and its services to the community.

A recent survey conducted by the Directorate of Planning, Innovation and Quality Assurance of the University of Juba, found that 77% of students and 51% of academic staff agree that the new University administration has made progress over the last two years. But the report also pointed out the lack of progress in several areas such as stocking libraries with new books, equipping laboratories, lack of internet, lack of constant electric power, and improving the quality of lecture halls.

THE CHALLENGE OF DWINDINLING FUNDING TO UNIVERSITY OF JUBA

In order to maintain this forward momentum and address the shortcomings highlighted by the opinion survey report, the University has reluctantly decided to adjust the tuition fees to reflect the rising market prices caused by the fall of the value of the national currency against the dollar. It was done in such a way not to compete with the inflation, so to speak, but to dampen its damaging effect on the quality of education the University provides to its student. For example, medical students are asked to pay SSP 15,000 (USD 200) compared to SSP 5,000 last academic year 2015/2016 which was worth USD 280 in real terms. Students of Engineering will pay SSP 12,000 (USD 160), Applied Sciences SSP 9,000 (USD 120); economic and social sciences, humanities, and education SSP 6,000 (USD 80); law 10,000 (USD 133), and management sciences SSP 8,000 (USD 106).

And in order to operate effectively, the University would need to raise SSP 240 million (USD 3.2m). The Ministry of Finance will provide in its budget this year some SSP 116 million for salaries, and the University of Juba administration plans to raise SSP 79 million through student tuition fees. However, it would still leave the University with a deficit of SSP 45 million (USD 600,000). What this means is that we may not be able to do all the things we need to do, but would at least see the academic year through.

COMING UNDER CRITICISM
However, the decision by the University of Juba to adjust the tuition fees for the new academic year 2016/2017 in order to offset the negative effect of the rising inflation on its operating budget and maintain purchasing power, has come under fire from the Ministry of Higher Education, Science, and Technologywhich described it as “burdensome to students and their parents.” Accordingly, the Ministry of Higher Education has issued an order containing a list of standard fees to which all public universities must comply. According to the Ministerial Order dated 6th October 2016signed by the Minister of Higher Education, Science and Technology, medical students should pay SSP 3,950 (USD 52 at current market value) compared to last year when theypaid SSP 5,000 (which was worth USD 280 at the time); engineering SSP 3,375 (USD 45);economics, social sciences, and humanities colleges SSP 1,950 (USD 26); management sciences SSP 2,245 (USD 29);and law SSP 2,230 (USD 31).

In response, the University of Juba administration has found it difficult to comply with the ministerial order because its implementation would create a deficit of SSP 92 million. There is no mention in the ministerial order how this gap would be bridged. It literally means we will find it extremely difficult to operate and see the academic year through with so low a budget.
THE LOST OF PURCHASING POWER
To fully appreciate the challenges faced by the University of Juba one needs to examine the inflation of prices and how they erode the purchasing power of tuition fees collected from students. For example, in 2014, our monthly operation cost was between SSP 350,000 to SSP 450,000 a month. At that time, were spending about SSP 80,000 a month on fuel and SSP 120, 000 per semester to print out examination answer sheets. Also at that time, a bag of cement cost around SSP 250. From July 2015 to December 2015, the operating cost began to rise to between SSP 1.2 million and SSP 1.4 million a month.

From January 2016, the operating cost exceeded to SSP 4 million a month. The cost of fuel for generators alone went up to SSP 420,000 for 20,000 liters of diesel. Printing of exams answer sheets went up to SSP 600,000 per semester compared to 90,000 in 2014 and early 2015.

In short, everything we purchase to operate has increased 6 to 10 folds, while our income from tuition fees remained the same. And because we did not have the SSP 4 million to spend per a month, we resorted to drastic cutting downof spending. For example, we suspended the payment of annual air tickets and medical insurance to our international staff. We also cut the hours of electricity on the campus by 5 hours. We froze all maintenance works that were planned to be carried out on engineering, science, and medical labs, and SamaniHall in 2016. That means we could barely afford to pay for a quarter of services we used to purchase in 2015 to keep the University running.

What is more, despite the concerns raised about our tuition fees,the value of new fees in real term hasactually declined over the past yearsas opposed to the claim that they have been rising every year. For example, medical students paid SSP 5,000 in academic year 2015/2016 (which was worth USD 280). But now they will be paying SSP 15,000 which, in real term, is USD 200 as opposed to USD 280. This fall in the value of tuition fees applies across all the colleges.

LOW FEES WITHOUT ALTERNATIVE FUNDING - NOT AN OPTION
It is not possible for the University of Juba administration tocommit to thefee structure presented by the Ministry of Higher Education Science and Technology, without indications of how the gap would be bridged, and to bridge the gap up front.

In fact, no South Sudanese citizen with any sense of patriotism would accept to see the decline of the University of Juba academic standing because of poor funding.

What is now needed is a solid commitment by all stakeholders to support the University of Juba financially as well as the other public universities in order to fulfil their mandate despite the current economic challenges. Doing so will serve our best national interest.


Wednesday, September 14, 2016

UN South Sudan’s ‘protection force’ is a trusteeship by another name

By John A. Akec

Could South Sudan be on her way to becoming another Iraq or Libya of Sub-Sahara Africa? I can’t help asking this most vexing question every time I reflect on what has been going on in our country in the past three years. And most specifically in relation to the heightened international intervention in our domestic affairs, and the political instability that preceded this intervention as a result of the civil war that erupted in December 2013 in Juba. This international intervention led to the signing in August 2015 of the Agreement on the Resolution of the Conflict in South Sudan(ARCISS), notwithstanding its many problematic clauses. The agreement’s implementation was delayed until April 2016 when a transitional government of national unity (TGNU) was formed, and which did not last for long but imploded under its own heavy baggage, resulting in a nasty shoot out at the State House (J1) on July 8th, 2016, between the government forces and opposition’s leader forces, unleashing in its wake 5 days of incredible carnage.  

And to add salt to injury, following the outbreak of the new hostilities and the ceasefire in July 2016, South Sudan’s well-intentioned African neighbours in the form of IGAD’s block of nations, backed by a number of veto-wielding members of UN Security Council, have been pressing our government to accept the deployment of 4,000 strong regional protection force (as articulated in the UNSC Resolution 2304). This Resolution gives the ‘protection force’ wide-ranging mandate that includes unimpeded access to and control of strategic infrastructural facilities such as transport routes in and out of capital Juba, highways, airports, and communications facilities. The protection, force acting under United Nation Mission in South Sudan (UNMISS) command is also mandated to disarm any actor or actors involved in any attacks directed against each other or are preparing to launch attacks against any target group (irrespective of whether or not the actor is the government of South Sudan or an opposition force).

In brief, the objectives of UNSC Resolution 2304 could be summed up as ensuring that citizens and humanitarian personnel in the country are safe and free to go about their daily chores unhindered; and that the UN’s Secretary-General, after assessing the implementation of this Resolution, consults with the stakeholders and government of South Sudan on further “options for increased engagement, including on governance, by the United Nations in collaboration with regional organisations.”

It is a short, innocently-sounding resolution with 7 clauses. Yet, understood correctly, it has implications of immense gravity for the sovereignty of South Sudan as an independent 193th member state of the United Nations with all the rights and privileges. Small wonder, our government has been reluctant to give an unqualified consent to the deployment of the proposed UN protection force.

Furthermore, much could be said (and desired) about the limited understanding, even misrepresentation by the international community, of the roots causes of the political crisis that is now engulfing our country; the challenges of literal implementation of ARCISS with all its minefields, as required by the mediators; and the contribution of various actors and stakeholders in aggravating the political and economic crisis facing our country.

In a previous article entitled: “The Economic Consequences of Peace in South Sudan,”(see Sudan Tribune, May 16 2016 at: http://www.sudantribune.com/spip.php?article58976), this author warned the readers that insistence by the peace mediators on the literal implementation of every clause of the ARCISS, while failing to recognise and reward the progress already made by the parties to the agreement; and that the total disregard by those concerned to the worsening economic situation in the country, could culminate in a premature unravelling of Transitional Government of National Unity (TGNU). With no financial resources to deliver vital services and execute plans, it turned out that the first attempt at forming TGNU was almost an exercise in futility. And by the time TNGU imploded, many coalition ministers were talking like opposition figures who were outside the government, disillusioned and ready to call it a quit.

What’s more, re-examining ARCISS itself, one would not fail to notice that its clauses do contain the seeds of its own destruction (See author’s article published on the Global Observatory entitled “Square Pegs in Round Holes? Doubts Remain Over South Sudan Peace Talks”, March 2015 at https://theglobalobservatory.org/2015/03/south-sudan-peace-talks-kiir-machar/). In that Observatory’s article, this writer cautioned against abandoning the Arusha SPLM Reunification Agreement in favour of subdividing SPLM party into factions such as IG, IO, FDs, which could potentially fragment the party, thus defeating the very purpose of making peace through reunification.
Moreover, instituting two separate armies with two commanders-in-chief as appeared in the peace agreement, in the persuit of the philosophy of “two equal partners with equal powers,” has had the theoretical effect of giving neither of two main coalition partners the right to declare war or peace. It implies that none of the two armies could exercise the monopoly of violence without being accused of masterminding the other.

That is why many would agree with the Information Minister, Mr. Michale Makuie Lueth, who was quoted as saying that the battle at the State House (J1) on 8th July 2016, and those that followed it, represented watershed moments in the realisation of sustainable peace in our country. It is a logical observation because the government was able to bring the situation under control in a few short days by using national army which is more resourced to push the dissenting opposition forces out of Juba and restore tranquility to the city. Here, St. Augustine and Thomas Hobbes, two intellectual giants of Western political thought who lived in 5th and 17th century respectively, would rejoice to see their political theories concerning the importance of a strong state, stand the test of time. Thinking of St. Augustine and Hobbes brings me to my final point in this article: the proposed UN protection force, and how it would undermine the sovereignty of South Sudan.

In the City of God, St. Augustine argued that the immense power of Rome (the superpower of his day) was necessary in order to keep under check men’s lust for domination (libido dominandi). Here, we would find Augustine’s view to be in stark contrast to the current push by our well-meaning “friends” in the UN Security Council to impose an arm embargo on South Sudan, the consequences of which would be to diminish our nation’s ability to defend itself against our enemies from without, and subduing rebellious and sedition prone citizens from within.

Likewise, Thomas Hobbes, in Leviathan, describes the State (CIVITAS) as an artificial man of monstrous power whose sovereignty is its artificial soul, and peoples’ safety (Salus Populi), its business. Not only that, according to Hobbes, restoration of peace after war is also the sole prerogative of a sovereign power.

Now then, if peoples’ safety and restoration of peace after war are the business of a sovereign state, why is the UN Security Council and our neighbours in the IGAD block of nations deny that they are taking away our sovereignty by insisting to take over the protection of our citizens and restoration of peace in our country?

It would thus appear to this writer that South Sudan being the new kid in the block of murky international politics, and therefore, still doesn’t know what she doesn’t know, is currently being sold poison as panacea for nation’s political challenges. And far from relenting to these illegitimate international pressures, our government and citizens should be mindful of Hobbes’ wise counsel that any type of government, no matter how iniquitous it might appear to outsiders or to its subjects, is far better than the absence of government or the reign of anarchy.


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So let’s describe UN’s protection force by its true colours: trusteeship by another name. And to respond accordingly if we do not like the sound of its music.