Friday, September 08, 2017

Reorganising South Sudan’s Civil Service for Economic Recovery – A Personal Perspective (Part 1 of 2).

By John A. Akec

Konyo Konyo Market- Juba- South Sudan- Copy Right JA Akec 2017

A View from Periphery
A diplomat I met at a function in Juba recently confided that the challenge posed by current economic crisis to the stability of South Sudan far outweighs the threats posed by armed non-state actors. To overcome these challenges, he proposed that the government moves speedily to appoint competent civil servants and technocrats in key positions at government institutions to lead the reforms. That the government spells out a strategy for turning the economy around, follows transparency in reporting on revenues and spending, and eliminates the leakages of funds through misappropriation. That it should also consider incorporating in its action plans the technical advice of the IMF and World Bank on economic reforms. These measures will help to restore confidence in government’s commitment to reforms. That done with honesty and commitment, he believes the government will find willing development partners to contribute financial resources to help in implementation of the economic recovery plan. Failing that, the diplomat fears, South Sudan might have to brace for more political and social upheavals on the road ahead. And I could not agree more with these candid observations. And here are my reasons for agreeing.

What is the Matter with Our Civil Service?
Right from its inception in 2005, the Government of South Sudan has never had the kind of bureaucracy and the caliber of civil servants capable of developing policies and plans which it could translate into executable projects to realise national developmental goals.  There are competent civil servants in our public sector but they only form a small minority. This was because political patronage and politics of accommodation, as opposed to merit, dominated appointments of undersecretaries, directorships of government departments, independent commissions, county commissioners, and payam administrators. That result has been the gross mismanagement of public finances, impoverishment of the country, and subsequently the onset of political crisis and civil war in 2013.

Because of inability of our civil servants who run our public sector to conceive and execute development plans, all major cities including the capital Juba lack electricity from grid as well as other essential utilities such as running water, sewage system, public transit, and broadband internet connectivity of the sort enjoyed by our East African neighbours, among others. As a country, we are yet to establish credible health system capable of preventing death from many common treatable illnesses. Our public universities are underfunded and ill equipped to assist the nation in development of its human capital. No investment has occurred in technical and vocational training (TVET) system that can equip our youth with practical skills our economy needs to grow and diversify. What is more, financial markets necessary for moblising savings for business investment, physical capital accumulation, and access to credit by businesses and consumers have remained unregulated and underdeveloped. Land property rights that protect individuals and investors are not entrenched in our legal system. And above all, our nation is yet to establish efficient tax administration for revenue mobilisation, and a functioning pension fund to look after retiring public sector employees.

This state of affairs is in the main a by-product of ineffective public service that has excelled in extracting value for private gains as opposed to adding value for the common good; and thus, draining the country of its scarce resources. Left unchecked, our civil service far from being the bulwark of state-building, will remain the albatross on nation’s neck, and the Achilles heel that undermines our progress towards prosperity. And with the passing of time, an incapable civil service will pose existential threat to the South Sudanese state that we all cherish to thrive and prosper.

That is not to lay all the blame for the current economic and political stagnation at our civil service’s door. However, it cannot be emphasised strongly enough that without credible government bureaucracy in place that is run by competent civil servants, our government will struggle for a long time to come to deliver on promised prosperity; and the ongoing efforts to turn the economy around will hardly bear fruits.

And to be credible, one must acknowledge that the responsibility for instituting competent and effective institutions of governance ultimately lies with the political authority of our country; especially the office of the President, his deputies, advisors, and his cabinet ministers; as well as the states governors and their ministers. And without their buy-in and commitment, there can be no hope for reform of our civil service, and consequently there will be no hope for economic recovery anytime soon.  

Fixing the Problem: Management Sciences and Ethics to the Rescue
So what sort of civil service is competent enough to deliver on its mandate? The reader is bound to wonder. It is a sensible question to pose, although not too hard to address if there is political will. Anyone taking top civil service position must have proven expertise in the subject matter of the department or ministry they are leading. He or she must also have solid grasp of management sciences and public administration, as well as ICT and communications skills, analytical and financial skills, knowledge of project management, ability to monitor and evaluate projects and write excellent reports. A civil servant must have good appreciation of law in regards to the mandate of his or her department. He or she should be able to see the bigger picture, and can negotiate complex agreements. The civil servant worth his or her salt should be able to think strategically and lead by objective in order translate societal aspirations, as expressed by the government’s vision, into concrete realities on the ground. And above all, he or she must be ethical with impeccable integrity, and be of good moral character; to count but a few of essential attributes of a competent civil servant.

In India, for example, the brightest young graduates dream to land jobs as government’s civil servants (being one of the most coveted, respected, secure, and rewarded vacations in that great country). And the brightest Indian often live their dream by excelling in written selection tests, tough interview regimes, and surviving fierce competition against peers. In Britain, recruitment into civil service is through highly competitive written exams, with very few openings every year. Even young John Maynard Keynes with a BA first class in mathematics from Cambridge could not make it first time into a UK treasury job, as he was beaten by his Cambridge classmate. Keynes had to contend with alternative employment as a lowly statistics clerk in East India Company, before quitting to embark on building his illustrious academic career that later turned him into a world renown economist, with a school of thought after his name.

In their book Reinventing Government: How Entrepreneurial Spirit is Transforming the Public Sector [in America], David Osborne and Ted Gaebler tells how American cities were once run like personal fiefdoms by mayors who ditched out favors and jobs to immigrant leaders in exchange for securing immigrants bloc votes as well as diverting public funds for personal gains. However, starting from 1890s and for three decades that followed, the American statesmen such as Theodore Roosevelt, Woodrow Wilson, and Louis Brandeis waged war on the inefficient US’s public sector and replaced it with a bureaucracy led by civil servants who were recruited through competitive process involving written exams. And once recruited, civil servants climbed the career ladder through stringent promotion system. They were also legally insulated from unnecessary outside political interference, and protected from arbitrary dismissal.

And to attract the best and the brightest, top civil servants are highly remunerated, not only to motivate them but that none should be in want least they be tempted to misappropriate public funds. This puts a high cost to their prestigious career should anyone be found guilty of gross misconduct.

The above practice is almost the universally accepted mark of credible civil service. Short of that, one must call it something else. And something else is what describes South Sudan’s civil service. And the results are not good.

Bureaucracy Not a Panacea but a Necessary Evil in State-Building
Bureaucratic systems have been criticised for their inability to respond quickly to changing operating environments. However, bureaucracies and application of scientific management have served many countries in the West beginning with industrial revolution in 19th and 20th century, a period that saw phenomenal growth of large enterprises that were characterised by complex inter-relationships of people and machines. This forced the pioneers of scientific management such as Frederick Taylor (1856-1915) in the US to argue that well tried management techniques should be applied to solve organisational problems, as opposed to relying on personal experiences, and what Taylor described as ‘seat-of-the-pants’ judgments.

It is worth mentioning that bureaucracy as efficient way for organising a government is far from being a Western invention as one might be led to think. This is because the Chinese dynasties, beginning with Qin dynasty (221-205 BC), were run by a bureaucracy whose officials were a special elite who were versed in calligraphy and philosophy, and who were selected by competitive written exams. The Qin dynasty pioneering establishment of bureaucracy marked the beginning of imperial China and resulted in unprecedented period of uninterrupted stability that lasted for over two thousand years. There is no doubt that a key contributing factor to that stability was the competent bureaucracy that was set up by Qin dynasty.

But it was in the West where management theories and ideas on modern bureaucratic systems were developed in more systematic and scientific manner. The French industrialist, Henry Fayol (1841-1925), advanced the concept of universality of management principles and efficiency of specialization in carrying out tasks, the essence of authority and responsibility, and management hierarchy with its chains of commands. The German sociologist Max Weber (1864-1920) complemented Fayol’s ideas and developed key innovations that underpin modern bureaucracy, as we know it today, by proposing the design of procedures to be followed closely by an official in order to improve the administrative efficiency, while eliminating the arbitrariness that is often associated with discretionary decision-making processes.

To begin the reform of our civil service, South Sudan can start by infusing the public sector with competent civil servants who will assist in designing more efficient state bureaucracy that will encompass all levels of the government (central, state, county, and payam). This will put an end to arbitrariness in decision-making and create goal-driven institutions that are capable of translating government visions and polices into concrete realities. Once established, and with passing of time, our bureaucracy can be gradually relaxed by injection with doses of entrepreneurial spirit and flexibility which are essential for any nation to thrive in the fast-phased twenty-first century global economy. This calls for an urgent action by political authority of our country if a speedy economic recovery is to be realised.

Part 2 of this article will look at other measures that will improve the capacity of civil service, as well as the institutional designs and arrangements that need to in place in order to enhance the ability of South Sudan to weather the storm of economic crisis, and bring about a speedy economic recovery.

Saturday, May 20, 2017

Higher education institutions in South Sudan on the brink of disastrous closures

By John A. Akec

There is near consensus among the global community that no country can develop or compete in the global marketplace without establishing universities that provide quality higher education and conduct research that informs national policies and drives innovation.

Reports estimate a return on investment of 21% in Africa’s higher education sector, by far the highest in the world. Yet this potential may not necessarily extend with equal measure to all the countries on the continent. Those countries that have persistently underinvested in higher education and human capital formation may miss the boat of rapid economic progress that higher education promises.

South Sudan is among the countries that are most likely to miss out, given a trajectory of underfunding of its higher education sector since the nation gained its independence in 2011.

The country has five functioning public universities (Juba, Bahr El-Ghazal, Upper Nile, Rumbek and Dr John Garang); and four proposed universities (Northern Bahr El-Ghazal, Torit, Liech and Yambio). Between them, the country’s five public universities host about 20,000 students, half of whom are studying at the University of Juba.

However, these public universities are seriously underfunded and lack the basic infrastructure, such as quality lecture halls, well-stocked libraries, equipped laboratories, internet connectivity and office space for teaching staff. When allocating its annual budget, the Ministry of Finance and Economic Planning commits itself only to the payment of salaries of staff and hardly earmarks any funds for operation or infrastructure costs or lab equipment.

This funding situation has not changed since independence in 2011. To meet their operating costs, public universities are permitted to charge a symbolic amount in tuition fees. But these fees have remained fixed since 2011 while inflation has risen dramatically, with SSP6 exchanged for one dollar in March 2015 compared to SSP145 in May 2017. This has significantly eroded the purchasing power of tuition fees.

Knock-on effects of inflation

High inflation is the result of a combination of factors, including the war, which has raised government expenditure on security; a reduction in oil revenues accruing to the national government due to low production output and a drop in oil prices on the global market; and the depreciation of the country’s currency against the dollar in the exchange market since December 2015.

To fully appreciate the challenges faced by South Sudan’s universities, take the example of the University of Juba, the primary national university. The impact of inflation on the falling purchasing power of tuition fees collected from students is staggering.

For example, in 2014 the University of Juba’s monthly operational costs were between SSP350,000 and SSP450,000 a month. At that time, the university was spending about SSP80,000 a month on fuel; and SSP120,000 per semester to print out examination answer sheets. A bag of cement for construction projects sold at about SSP250.

From July 2015 to December 2015, operating costs rose to SSP1.4 million a month. By January 2016, operating costs had exceeded SSP4 million per month. The monthly expenditure on fuel for generators alone went up to SSP420,000 per month. Printing of examination script sheets went up to SSP600,000 in 2016 per semester.

Faced with rising operating costs, the administration of the University of Juba decided to triple tuition fees in October 2016 in order to somehow offset these rising prices. The average tuition fees [fees differ from one college to another] were SSP9,000 (or US$100 based on the October 2016 exchange rate). The goal was to raise SSP80 million (or US$1.1 million) for operational and minor infrastructural developments.

However, the fee increase was met by an outcry from students and the public. As a result, the fee rise was annulled by the President of the Republic in an address in Parliament on 14 December 2016. The current reduced fees which average around SSP2,000 per year per student are predicted to raise about SSP30 million, leaving a deficit of SSP90 million, which the administration of the University of Juba needs to effectively operate.

Potential closures

As of May 2017, the exchange rate of US dollars to South Sudan pounds stood at US$1 to around SSP140. That has doubled the 2016 costs and further eroded the market value of the already meagre amount of money collected from tuition fees.

Not only that, but the market value of staff salaries has been tremendously diminished, with a full professor now earning the equivalent of less than US$200 per month and the majority earning less than US$100, down from US$3,000 in 2015.

Recently, the administration of the University of Juba has noted an increasing number of teaching staff taking leave without pay to work in a job in the NGO sector where pay is higher. Others are crossing the border for greener pastures abroad.

What is seen to be a bleak future for the University of Juba is also true for all the public universities of South Sudan. Many will soon close down. The consequences will be a delayed economic recovery and a retarded economic growth in the coming decades, unless measures are taken soon to reverse this dangerous trajectory of South Sudan’s higher education sector.

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.

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.