The Political Economy of South Sudan
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ADB/BD/IF/2018/211 - ADF/BD/IF/2018/159 RDGE/ECCE/RDTS DEPARTMENTS AFRICAN DEVELOPMENT BANK GROUP The Political Economy of South Sudan AFRICAN DEVELOPMENT BANK GROUP REPUBLIC OF SOUTH SUDAN The Political Economy of South Sudan III [August 2018] Management Director General Gabriel NEGATU, RDGE Deputy Director General Nnenna NWABUFO, RDGE Sector Director Sibry TAPSOBA, RDTS Country Manager Benedict S. KANU Lead Economist Abraham MWENDA Assessment Team Team Leader Flavio A SOARES DA GAMA, Senior Country Economist, COSS Task Member John Bosco BUKENYA, Principal Financial Management Specialist, RDGE/RDTS Darlison KAIJA, Consultant, RDGE Reviewers Bruno BOEDTS, Chief Operations Implementation Officer, RDGE0 Albert MAFUSIRE, Partnerships Development Officer, RDTS0 Emilio DAVA, Senior Macroeconomist, COMZ Magidu NYENDE, Senior Country Economist, RDGE0 jv The Political Economy of South Sudan Table of Contents Table of Contents iv South Sudan States v Acronyms vi I. Executive Summary 1 II. Introduction 3 Rationale 3 Approach and Structure of the Report 3 III. Origin and Evolution of the Situation in South Sudan 5 IV. Key Development Challenges 8 Political 8 Economic 10 Social 18 Cross-cutting 21 Summary of Opportunities, Challenges and Risks 22 Effects of the Challenges in South Sudan on the Bank's Portfolio 23 V. Governance and Stakeholder Mapping 25 VI. Conclusions 30 Annexes 31 Annex 1: Ministries and Organizations Interviewed 32 Annex 2: Key Policy Documents 33 Annex 3: Focus of the Draft NDS for South Sudan (July 2018-June 2021) 34 Notes 36 The Political Economy of South Sudan V South Sudan States VI The Political Economy of South Sudan Acronyms AfDB African Development Bank ARCRSS Agreement on the Resolution of the Conflict in the Republic of South Sudan AU African Union CAMP Comprehensive Agriculture Master Plan CoHs Cessation of hostilities CPA Comprehensive Peace Agreement CSOs Civil society organizations DDR Disarmament, demobilization and reintegration EAC East African Community FAO Food and Agriculture Organization of the United Nations GDP Gross domestic product GoSS Government of South Sudan HLRF High-Level Revitalization Forum IDP Internally Displaced Person IGAD Intergovernmental Authority on Development IMF International Monetary Fund JCE Jieng Council of Elders JMEC Joint Monitoring and Evaluation Commission NDS National Development Strategy NGO Non-governmental organization NORMA Non-Oil Revenue Mobilization and Accountability PoCs Protection of civilian sites SPLM/A Sudanese People's Liberation Movement/Army SPLM/A-IO Sudanese People's Liberation Movement/Army - In Opposition SSCC South Sudan Council of Churches SSP South Sudan pound SSuNDE South Sudanese Network for Democracy and Elections TGoNU Transitional Government of National Unity OCHA United Nations Office for the Coordination of Humanitarian Affairs UN United Nations UNDP United Nations Development Program UNHCR United Nations High Commission for Refugees UNMISS United Nations Mission in South Sudan UNSC United Nations Security Council USAID United States Agency for International Development WFP World Food Program The Political Economy of South Sudan 1 I. Executive Summary 1. The African Development Bank’s (the Bank) 4. South Sudan gained independence from East Africa Regional Development and Sudan on July 9, 2011. Business Delivery Office (RDGE) commissioned this report on the political Before that the unified Sudan had fought economy of South Sudan. civil wars in 1955-1972 and 1983-2005. The last war ended with a comprehensive peace Its development was based on the March agreement that was put into action from 2017 recommendation by Bank's Board of 2005 to 2011. In a referendum in January Directors to extend the period covered by 2011, 99% of the population voted for the 2012-2016 Interim Country Strategy independence. With secession, three- Paper (CSP) for South Sudan to December quarters of the oil reserves are in South 2018 so that this report could inform the Sudan; however, the country is landlocked subsequent CSP The interim CSP focuses on and remains dependent on Sudan's oil export state building through capacity building and pipelines and port. Unresolved issues infrastructure development. continue to cause tension between the two countries. Their border is undefined and 2. The report analyzes the trend in South some areas along it are contested. Sudan’s political and economic issues Disagreements between the two countries over oil revenue sharing plus armed conflict The current situation and dynamics, and the have curtailed oil production in South roles of the various actors. It identifies the Sudan. critical challenges, gaps, and opportunities in the formulation and implementation of 5. The political economy of South Sudan is key policies; aiming at providing characterized by six realities recommendations on how the Bank and other development partners can contribute to (1) overwhelming opportunities in the non- the country's sustainable and inclusive oil sector that remain untapped due to development. political and civil insecurity; (2) high dependence on oil, which accounts for about 3. This report is based on extensive 90% of government revenue, 95% of total consultations and a desk review. exports and more than half of the country's GDP; (3) political and security challenges The interviews, which were held mainly to that drain government resources and validate the information from the desk constrain foreign and domestic direct review and to obtain new data, involved investments, and create macroeconomic South Sudanese government agencies, instability; (4) poor economic and social international development partners, bilateral infrastructure, limiting economic partners and humanitarian agencies. Others productivity and diversification; (5) were civil society organizations, the private diversion of attention by development sector and local and international non- partners to humanitarian support since the governmental organizations in South Sudan. 2013 conflict; and (6) governance challenges and limited political will and capacity to make the necessary institutional changes. 1 2 The Political Economy of South Sudan 6. South Sudan has overwhelming development challenges that could prolong its current conflict and plunge it into economic and state collapse. On the political scene, politics are fractured and non-inclusive, governance institutions are unstable, state capacity is weak, and the number of rebel groups and institutional corruption are growing. The current crisis emanates from the political economy of rent seeking and the heavily militarized political and bureaucratic public administration. The economy is volatile and the instability in oil revenues continues to pose serious economic challenges, including heightening inflation, currency depreciation and depletion of foreign reserves. The country has low resilience to external shocks, especially fluctuations in oil prices. The 8. The Government of South Sudan has non-diversified economy and accumulated comprehensive policies and strategies debt burden worsen the economic situation. aligned to the Bank’s corporate priorities but The socioeconomic infrastructure and their implementation is weak. service delivery are deficient, causing high poverty, unemployment and illiteracy levels, There are also key strategies and plans, especially for women. No retirement scheme notably the draft National Development exists for public servants. The country and Strategy for July 2018-June 2021 to be its neighbors are being affected by an launched in June 2018. Policies and plans overwhelming humanitarian crisis. could be more effectively implemented with better political will, and if capacity gaps 7. Structural and systemic crises continue to were closed and security were ensured. affect peace and stability in South Sudan. 9. The government and other stakeholders could use The structural issues relate to ethnic tensions several entry points to bring peace and economic and the regional dimension, while the development to South Sudan: systemic issues concern the divisions within (1) exploration and better use of mineral resources and the Sudanese People's Liberation Movement the rich soil, fisheries and timber resources; (SPLM/A). SPLM leadership is fractured (2) proper implementation of the different peace and there are unresolved political tensions initiatives, such as the National Dialogue and High- among SPLA top brass. There is need to Level Revitalization Forum; (3) building capacity and deal with the influence of the Jieng Council improving accountability, which is a stated goal of the of Elders over the organs and institutions of Transitional Government of National Unity; (4) the state, of the military in policy-making, improving the government's receptiveness to and of the political and security elite in development support; and (5) development partner decision-making, as well as to strengthen support, especially if the conflict is resolved. consultative decisionmaking. 2 The Political Economy of South Sudan 3 II. Introduction 10. This report is an in-depth analysis of the the drivers and manifestations of fragility, their political economy of South Sudan, and it interactions, the political economy behind critically assesses the development challenges changes and the role of the Bank". since independence. 13. This report is guided by the March 2017 It particularly focuses on the period after the recommendation of the Bank Board of August 2015 Agreement for the Resolution of Directors to extend