South Sudan: Why new economic policy or Tisaconomics is more destabilizing to the country than past austerity measures or Kosterity?

By John A. Akec

There is no question, the sacking by President Salva Kiir Mayardit of his cabinet last July 2013, and swearing in of new government, was received in the streets of Juba and across the cities of the nation with great jubilation and optimism. The move has raised hopes that the President has finally resolved to lead from the front as opposed to leading from the rear, a style the President has adopted since coming to power in 2005.

Unlike his predecessor, Dr. John Garang De Mabior, President Salva Kiir Mayardit is known for his delegatory and consensual approach to leadership. He allows plenty of space for national ministers to craft and implement their own policies with little or no intervention. Dr. John Garang, in contrast, led from the front and was a micro-manager who left nothing to chance. While many may miss Garang's leadership style, a significant opinion amongst the citizens admire Kiir's delegatory approach as more democratic; given the potential of empowering his officials to be autonomous, creative, and innovative.  Still some view this as weakness and lack of confidence to give clear directive to ministers and to follow through with implementation; although these are in minority. The majority of citizens I have spoken to insist that it is a sign of self-confidence and secure leadership. All the same, the jury is still out.

That said, leading from the hind might have caused President Kiir's government more pains than gains. It has rarely worked as might have been expected. Take as an example how his cabinet voted unanimously to shut down oil production in January 2012, following the dispute with Sudan over the amount of fees to be paid for export of South Sudan oil. The decision stunned the citizens, friends, and even foes in equal measure. Few could comprehend how a nation that depends on oil revenue to fund 98% of its programmes could allow such a decision to pass.

Some rumors had it that the President was opposed to shutdown, but relented to the decision of majority in the cabinet. The President could have simply overruled the cabinet with his veto powers. For example, the US President Abraham Lincoln was once said to have overrule his cabinet saying: "I count one yes and six no. The yes wins!"

After that decision, austerity measures had to be imposed on all government spending. These measures came to be known as Kosterity measures after Kosti Manibu, the then Minister of Finance and Economic Planning.

As if it was not bad enough, after shutdown of oil production, months of negotiations passed without any hope of agreement being reached with Sudan over oil transit fees. Thanks to President Kiir's delegatory leadership that allowed the now suspended SPLM Secretary General, Pagan Amum, to drag the negotiations on indefinitely with no sign of comprise, while the austerity measures continued to bite the nation harder and harder, and the relationship with the neighbouring Sudan continued to go from bad to worst.  

It was that kind of indecision that prompted Secretary of State, Hillary Clinton, to pressurize Juba saying: "Percentage of something is better than percentage of nothing."

However, it was after President Kiir Mayardit personal intervention that things began to look up again. Following Kiir-Bashir summit, a cooperation agreement with Sudan was struck in Addis Ababa in September 2012, and as a consequence, production of oil from South Sudan oil fields resumed in April 2013.

What's more, President Kiir moved quickly and (rightly so) to repair relations with Sudan so that trading and flights could resume between the two countries by reaching an understanding with President Bashir on measures that would reduce tensions, such as relating to the trading of accusations of support of armed dissidents from each country. It was completely results-based leadership: effective and self-evident. It was also a testimony to the fact that when leaders ignore the pleas for consensus in critical matters, and follow their guts, success can easily come their way.

But sadly, President Kiir's pains are far from over. No sooner has the President passed over one crisis – that of austerity, and oil shutdown; has another crisis begun to peer out its ugly head. This is the new crisis in the making, caused by none other than economic policies currently being unveiled by the Ministry of Finance, under the leadership of Mr. Aggrey Tisa Sabuni. This, we will call Tisaconomics.

   

According to the policy adopted by Mr. Sabuni, austerity measures will continue until January 2014 when new and more generous supplementary budget will be submitted. In October 2013, the Parliament passed an austerity budget of SSP 19.0 billion with the plan of borrowing SSP 4.5 billion or USD 1.6 billion to bridge a gap in that budget. Interestingly enough, this budget was three times higher than that under Kosterity measures in July 2012, and the highest since the nation gained its independence in July 2011.

However, in the past week or so, the Bank of South Sudan issued an order to raise the exchange rate of dollar against South Sudan pound from SSP 2.93 (bank rate) to SSP 4.5 (the black or so called parallel market rate). The markets were shocked and the rate of exchange of SSP in the black market jumped from SSP 4.5 to between SSP 5.00 and SSP 6.00. Fuel disappeared from petrol stations, and supermarkets and warehouses for building materials closed their doors in panic, as traders tried to figure out how to respond. This is because in South Sudan, majority of traders access dollar through black markets as opposed to Central Bank.

Following that, the Parliament summoned the head of BoSS, Mr. Kornelio Koryom, the next day, and ordered him to reverse the decision with immediate effect. And he did. The rate of exchange of dollar went back to SSP 4.6 immediately which was slightly higher but close to its pre-decision rate.

The explanation provided by the Finance Ministry and the Central Bank was that the government would like to raise an additional SSP 4.5 billion needed to finance the hole in the approved budget in order to meet the budget shortage by devaluing South Sudan pound by 38%, as opposed to borrowing externally, as was initially proposed.

That decision was greeted with dismay nationwide, and Isaac Cuir Riak, Professor of Economics at University of Bahr El Ghazal, reacted by describing it as "misplaced" because, according to his analysis, the devaluation could lead to inflation in prices of imported consumer goods, and could push more people below poverty line. Many other commentators and economists also condemned the decision describing it as abrupt and not well scrutinized.

And as weeks and months passed since the Parliament approved the new budget, the country is going for two months without paying the salaries of civil servants, academics, doctors, nurses, and teachers. Ministries and government agencies have not received any of their allocation for services and operation to up to the time of this writing, thus risking bringing the country to near standstill. The question that imposes itself is: Is it not truly ironic that the financial situation in the country is deteriorating by the day at the time when oil money is following into government's coffers?

Thus, one is bound to conclude that if Kosterity had weakened the government of South Sudan ability to provide services the citizens need, Tisaconomics which appears to lack direction and is incapable of taking prompt decisions is threatening the country with social and political upheavals that could lead to igniting an African Spring in form of mass action across the country.

The eyes are again focused on President Kiir Mayardit to intervene and diffuse the situation by directing the Finance Ministry to take immediate remedial action. These times are critical times, and the President is more than able to rise to these challenges at this juncture in the life of the nation.