When South Sudan won its independence in July 2011, its streets were abuzz with hope. Boasting oil, arable land and vast livestock holdings, some optimists believed that with the right leadership the fledgling nation had the potential to become a middle-income economy.
After seceding from Sudan, its erstwhile foe in a decades-long civil war, Juba took with it 75% of Sudan’s oil reserves. But just two years into independence a fierce power struggle erupted between the ruling elites, plunging the nation into a brutal civil war that raged for six years.
A humanitarian catastrophe unfolded, with famine and fighting taking a ruinous toll on the economy and leading to at least 383,000 deaths by 2018.
Today, more than half of South Sudan’s 11.7m population require urgent food assistance, about 40% of the population is internally displaced or live as refugees in neighbouring countries, and more than 80% live below the poverty line.
An uneasy peace
In February 2020 battleground rivals President Salva Kiir and his former deputy turned enemy Riek Machar signed the country’s 13th peace agreement since independence. The deal was an extension of a 2018 accord that bound the two sides to form an interim government of national unity which expanded the parliament to encompass the country’s myriad political factions.
But one year on from that deal and fighting still rages in pockets throughout the country, the UN reported in February.
Looking back on why the country’s promise of peace, stability and nationhood so swiftly unravelled, Alan Boswell, a senior analyst on South Sudan for Crisis Group, says independence gave birth to a new state before governing institutions and a power-sharing agreement were in place.
“What South Sudan’s collapse has shown is that not nearly enough thought was given to the country’s politics ahead of its independence,” he says.
The installation of the US-backed Sudan People’s Liberation Movement (SPLM), the political arm of the rebel army that fought for independence, as ruling party meant that when nationhood was declared the playing field was uneven for negotiating a fair power-sharing agreement. “The die was cast,” says Boswell.
International consultants were flown in in the run-up to independence, with blueprints for state-building and plans for economic development rooted in the oil sector. But this served as a distraction from the hard task of politics and laying the foundations of democracy and government, says Boswell.
“You can’t import a nation-state.”
While both leaders drew support from across Sudan’s 200 ethnicities, ethnic tensions between Kiir’s Dinka ethnic group and Machar’s Nuer ethnic group played a role in the conflict. In the absence of functioning institutions and an army there were no safeguards for peace or sustainable plans to share the nation’s oil wealth beyond the elite.
“The political elite mismanaged the situation and were caught surprised by how quickly the house of cards collapsed and split into its individual parts,” Boswell says.
Despite the hopes invested in the country, few nations are as underdeveloped as South Sudan. In 2011 the country was awash with guns and had only rudimentary infrastructure, with just 10,000km of paved roads across a landmass the size of France. The country has massive development needs, from building basic infrastructure, to developing education and health services, challenges for a country with very limited access to affordable financing.
Without state agencies to manage the country’s oil wealth it became a “slush fund” for the ruling elite, says Boswell.
“Instead of financing the development of the state it was fought over by the elite and what wasn’t spent in the wars was pocketed.”
As Covid-19 continues to limit global oil demand, South Sudan’s revenues are dwindling. Today the country is dependent on oil for exports for 88% of government revenues. Sinking global prices, coupled with devastating floods and the pandemic’s impact, saw real GDP growth shrink by 6.6% in 2020, according to the IMF.
A peace dividend and a projected rebound in oil production and exports is expected to herald partial economic recovery, with real GDP expected to grow 5.3% this year, according to the Fund. But inflation of 40% is expected this year.
An IMF Rapid Credit Facility disbursement worth $174m was arranged in March to combat urgent balance of payments needs arising from the pandemic after an initial $52m disbursement last November.
Since October 2020, the authorities have stopped monetary financing of the deficit which, along with forex auctions, have helped stabilise the exchange rate. Revenue mobilisation measures, including phasing out some tax exemptions, have bolstered domestic non-oil revenue in recent months, the IMF said.
But bailouts only provide a temporary solution. Cloaked in forest, ecologically diverse swampland and arable soil, South Sudan in theory has long-term potential for agriculture and tourism, but requires both peace and infrastructure that remain elusive, Boswell says.
The country signed onto the International Centre for the Settlement of Investment Disputes (ICSID), a treaty protecting foreign businesses, in 2012. The signing is usually followed by a flurry of bilateral deals with separate countries, protecting and confirming the rights of investors in those countries. But in South Sudan’s case only one bilateral deal followed, with Morocco, which has yet to come into force.
In May, President Kiir dissolved parliament and a new assembly of 550 legislators nominated by the former warring factions was appointed, in line with the 2018 peace accord.
The assembly, with a majority 332 from Kiir’s governing SPLM party, offers hope for a new era of lawmaking, says Kwadwo Sarkodie, a partner at US legal firm Mayer Brown. The country’s short history has been defined by a low level of legislative activity, with very few statutes and laws brought into force.
“It’s a concern making it more challenging for business people, because the scope for putting in laws and frameworks is limited”, Sarkodie says.
Boswell remains sceptical that real political progress is achievable.
“This peace deal is muddling forward step by step, but it’s still little more than a band aid.”
The latest power-sharing agreement may have stopped fighting between the two main warring factions, but violence still rages across largely ungoverened parts of the country, he says.
“Every year the country faces chronic famine and is unable to pay its own civil servants.”
According to the peace deal, fresh elections should take place in 2022, but in March the government said that it was not feasible to organise them due to delays in implementing the agreement. Calls from the opposition for the elections to take place on schedule risk fanning tensions further, Boswell fears.
Without a functioning state or army to enforce the result, an election is a recipe for disaster, he says. “What’s needed is a negotiation between the elites rather than a winner-takes-all solution.”