6. The state and statebuilding in South Sudan
6.3. The privatized neopatrimonial state in South Sudan
The African state does not only suffer from a lack of legitimacy and a lack of services it provides. It is also (as shown in Ch. 4.1.3) said to be the object of capture by state and government elites that privatize and misuse state revenue and state resources for private gain and to sustain neo-patrimonial networks of dependents that help in sustaining the ruling elite. The problem of state privatization often stems from an abundance of raw materials that are squandered for the benefit of a small coterie while leaving the rest of the economy neglected, hamstrung and underdeveloped.
South Sudan, in spite of its youth, has not been spared either phenomenon. This chapter, therefore, will address the question to what extent the South Sudanese state has been privatized and its state coffers used for the enrichment of its leadership as well the creation and maintenance of clientelist support structures in the country.
Hence, the first section in 6.3.1 is devoted to an assessment of the state’s privatization and the prevalence of corruption, focusing in particular on the relevance of resource-based problems like the oil curse and land grabs on the state’s standing as a gatekeeper between the national and the international spheres. Section 6.3.2 will then try to discern to what extent patronage and neo-patrimonialism are apt descriptions of the workings of the South Sudanese state.
6.3.1. The privatized state in South Sudan: resource economy & the gatekeeper state The presence of and extreme budgetary reliance on 6.3.1.1 exports from oil fields in South Sudan additionally complicate the issue as incentives for state capture and misuse of oil income are even greater than in resource-poor countries. As pointed out in 6.3.1.2, land grabbing by the state elite to the detriment of local communities is another means by which national resources are privatized, as is 6.3.1.3 outright theft and organized crime. What all these cases have in common is that the state structure or select individuals near the levers of power abuse their status as the link to the world of international capital and commerce for private gain.
6.3.1.1. Oil & the resource curse
Since definite discoveries by Chevron in 1977, oil has been a driver of conflict and a source of violence and displacement in Sudan. Hassan al-Turabi’s ouster and the NCP’s shift to a more pragmatic (compared to the early-and-mid-1990s) governance system based on a mixture of patronage and autocracy not by accident coincides with the start of oil exports through the Port Sudan pipeline in 1999, made possible by joint ventures between the national petroleum company Sudapet and Chinese, Indian and Malaysian companies1287. A certain vicious circle of violence emerged from oil exploration: the revenue generated from the oil fields enabled Khartoum to purchase weapons – frequently from China, the main importer of Sudanese oil – which the
government would then use to protect the oilfields and attack Southern rebels1288. During the war, various Southern factions (Paulino Matiep, Riek Machar, mainstream SPLA, etc.) and their respective backers (Khartoum, foreign oil companies1289) fought for control over the oil fields1290 and in
1287 Anderson and (2011), p. 372.
1288 Coalition for International Justice. Soil and Oil: Dirty Business in Sudan. Washington, February 2006, p. 24.
1289 European Coalition on Oil in Sudan. Unpaid Debt: The Legacy of Lundin, Petronas and OMV in Sudan, 1997-2003. Utrecht, June 2010.
1290 Human Rights Watch (2003).
182
Northern Upper Nile and other places large amounts of people were forced off the land and permanently displaced to clear the land for drilling1291.
The post-war CPA and independence periods are characterized by a different set of oil-related misgivings inside South Sudan1292 – at least until the 2014 civil war engulfed the oil-producing areas, especially Bentiu in Unity State1293. Today, “governments in Khartoum and Juba alike rely heavily on oil revenues that derive primarily from the border lands”1294 and many donors are aware of the danger that oil revenues may preclude an integrative approach to politics in South Sudan and instead lead to a winner-takes-all mentality akin to other resource-based economies like Nigeria1295. Mining of other mineral resources may become more relevant in the future but apart from a minor gold rush in Toposa territory1296 oil reigns supreme even after investor-friendly mining legislation was passed in 20121297. However, given that that most oil fields are mature, i.e. appear to have passed peak
production, output and hence revenue will decline steeply in only a few years’ time unless new finds come on stream soon1298.
Official government policy is to use oil revenue (habitually estimated to contribute 98% to the national budget) to diversify the economy and allow for the modernization of agriculture and rural development in an effort to ‘bring the towns to the people in the countryside’1299. The problem, however, is that the reality on the ground is marked by “glaring examples of fiscal mismanagement and corruption [that] have fed resentment among local populations as unprecedented amounts of oil revenue flow into GOSS coffers”1300. A 2007 assessment of what the political economy of oil has brought to Sudan is still largely accurate for the contemporary South: “additional pressures for expenditure (some of which may be conditioned by capacity and other constraints), rent-seeking behavior, and reduced pressure to undertake key fiscal reforms that will ensure medium- and long-term stability irrespective of the course of oil production and prices”1301. There is also a legacy of murky and shadowy oil deals negotiated and signed by different members of the SPLM at different
1291 Gore, Paul Wani, “The Oil and Its Influence on the Demographic, Economic and Commercial Processes: The Case of Northern Upper Nile in Southern Sudan”, in Wohlmuth, Karl and Urban, Tino (eds.) Reconstructing Economic Governance after Conflict in Resource-rich African Countries. Berlin: Lit Verlag, 2007, pp. 171-180, p.
175.
1292 Oil extraction in South Sudan is organized by production sharing agreements between companies and the government. The GoSS presently still lacks the expertise to properly and independently oversee the oil industry and thus ensure that extractive companies are held accountable. Shankleman, Jil. Oil and State Building in South Sudan: New Country, Old Industry. Washington: United States Institute of Peace, Special Report No. 282, July 2011, p. 9.
1293 Sudan Tribune, “Rebels claim killing hundreds including top army general in Bentiu”, 16 April 2014, http://sudantribune.com/spip.php?article50673 (accessed: 16 April 2014).
1294 International Crisis Group (2010), p. 1.
1295 Bennett et al. (2010), p. 38.
1296 Holland, Hereward, “Gold fever sweeps South Sudan ahead of new mining law”, Reuters, 9 November 2012, http://www.reuters.com/article/2012/11/09/sudan-south-gold-idUSL5E8M5DP220121109 (accessed: 19 August 2013); Bosco, Ijoo, “South Sudan: E.Equatoria Prepares for Gold Mining Exploration”, Sudan Tribune, 30 March 2014, http://allafrica.com/stories/201403310810.html (accessed: 31 March 2014).
1297 Adam Smith International, “South Sudan: mining act passed but nation too must benefit”, Guardian, no date, http://www.theguardian.com/global-development-professionals-network/adam-smith-international-partner-zone/south-sudan-mining-act-adam-smith-international (accessed: 19 August 2013).
1298 Shankleman (2011), p. 11.
1299 SPLM. The SPLM Manifesto. May 2008, p. 21.
1300 Patey, Luke, “Crude Days Ahead? Oil and the resource curse in Sudan”, African Affairs, Vol. 109, No. 437, 2010, pp. 617–636, p. 628.
1301 World Bank. Sudan Public Expenditure Review: Synthesis Report. Washington DC, December 2007, p. 10.
183
times of the war and post-war period1302. The one undeniable good oil revenue has done in South Sudan is to allow for the relatively smooth integration of various militias into the SPLA1303 – even if it leaves a legacy of a fiscally unsustainably large army.
Control over the oil pipeline is therefore the principal source of pressure Khartoum can exert over South Sudan because a reduction of the amount of oil transmitted through the North is
unsustainable. A sustained cut-off would lead to the breakdown of networks of patronage and corruption at the heart of the GoSS and SPLM1304; a situation that was nearing breaking point when Sudan and South Sudan signed the September 2012 Addis Ababa Accords to resolve the oil issue. The stand-off between the two Sudans had been long in the making as already in 2009 there were warnings that the suspected underreporting of oil revenues by the Khartoum government was undermining the little trust there was to begin with1305. Critically, far from being a show of strength on the part of the Juba government, the fall-out from the January 2012 cut-off may in the mid-term increase South Sudan’s dependence on foreign powers. For one, South Sudan depends on the re-import of refined oil from the North as there are presently no refineries in the South (two refineries are currently being built1306) but three in the North1307
From Karl Wohlmuth’s perspective, “the stop of oil production in January 2012 leads also to a new round of external indebtedness of South Sudan in relation to new actors (like China and Qatar) by mortgaging untapped oil resources for aid”1308. This alleged mortgaging of the future is only made possible by a not very subtle change to the country’s legislation governing the oil sector. Global Witness, a monitoring organization, had drawn up eight recommendations to the GoSS to ensure transparent use of the country’s oil wealth, including full public disclosure and wide dissemination of oil sector data, independent monitoring with participation of civil society, a transparent petroleum fund, transparent allocation of oil contracts and implementation of the Extractive Industries Transparency Initiative1309.
With hindsight, none of these goals have been met. South Sudan’s original petroleum bill contained a provision that prohibited any borrowing against future oil revenues in order to ensure a continuous revenue stream. Said clause was scrapped in early 2012 in the very different environment following the oil shutdown and oil is now increasingly being used as collateral for loans1310. In connection with these loans, Global Witness warns of the dangers of using future oil revenues to secure loans to fund
1302 Patey (2010), pp. 630-31.
1303 Dziadosz, Alexander, “Special Report: South Sudan's Chinese oil puzzle”, Reuters, 14 November 2012, http://www.reuters.com/article/2012/11/14/us-southsudan-chinese-oil-idUSBRE8AD0B520121114 (accessed:
19 August 2013).
1304 Marchal (2011), p. 79.
1305 Global Witness. Fuelling Mistrust: The Need for Transparency in Sudan’s Oil Industry. London, September 2009, p. 5.
1306 Ngor, Mading, “South Sudan’s New Refineries to Bring Fuel Independence Closer”, Bloomberg, 31 October 2013,
http://www.bloomberg.com/news/2013-10-31/south-sudan-s-new-refineries-to-bring-fuel-independence-closer.html (accessed: 1 November 2013).
1307 Augé, Benjamin, “L’enjeu pétrolier dans un Soudan éclaté”, Politique Africaine, No. 122, June 2011, pp. 85-99, p. 95.
1308 Wohlmuth (2012), p. 5.
1309 Wilkins, Dana. Affirming Accountability: Transparency and Independent Verification in South Sudan’s New Petroleum Law. London: Global Witness, May 2011.
1310 International Crisis Group (2012), p. 10.
184
the everyday workings of the government as the high volatility on global resource markets risks plunging the budget and thus the government into crisis at any point in time while also raising the likelihood of “a disastrous cycle of debt”1311. Lending against future oil revenue is also in direct contravention to the Future Generation Fund established by South Sudan’s Transitional Constitution whose objective is to retain funds for the mid- to long-term1312 and which only allows withdrawals for major long-term projects, e.g. investments in infrastructure.
6.3.1.2. Taxation & non-oil state revenue
The budgetary uncertainty induced by near-absolute dependence on the oil price and donor money is abetted by the fact that the division of Sudan’s substantial external debts (over 40 billion USD) between the two successor states has not been addressed and constitutes a stumbling block both to relations between the two Sudans and to South Sudan’s ability to access international credit
markets1313. Additionally, revenues from oil and donors create a strong disincentive to resort to the never-popular step of taxing the population1314. Extreme reliance on oil revenue to fund the budget has numerous knock-on effects. In the classical ‘Dutch disease’ scenario, oil exports lead to currency appreciation which in turn makes the rest of the economy less competitive on the regional and global marketplace (see Ch. 4.1.3.1). While in South Sudan there is certainly some potential for similar trends to develop in the future, given the country’s current lack of any export industries and, in fact, any manufacturing sector to speak of, the issue here is more on the fiscal side. Tax collection has been highly irregular for decades as SPLA troops relied on an incoherent and contingency-driven approach to collect duties, often in goods and livestock rather than money, whereas unpaid officials used a vague right of taxation for the purpose of personal enrichment1315.
For a whole range of reasons tax collection has remained very irregular and patchy in the CPA and independence eras and only contributes a fraction to the budget compared to oil and donor inflow.
Tax revenue is thus still far from sufficient to sustain the national budget let alone finance the country’s vast development needs. To begin with, personal taxation is a 10% flat rate tax that only starts from a monthly income above 300 SDG1316. More importantly, the lack of training for tax revenue staff, the lack of a computerized system and a general lack of oversight enable an
environment of collusion between taxpayer and tax collector – typically in a one-on-one connection – to bargain for a reduction in rates in exchange for some form of benefit to the official1317. South Sudan also lacks badly in trained tax and customs officials, which is critical since the majority of state
1311 Global Witness. Blueprint for Prosperity: How South Sudan’s new laws hold the key to a transparent and accountable oil sector. London, 29 November 2012, p. 20.
1312 The Transitional Constitution of the Republic of South Sudan, 2011, Ch. 4, §176 (3).
1313 Leo, Benjamin. Sudan Debt Dynamics: Status Quo, Southern Secession, Debt Division, and Oil – A Financial Framework for the Future. Washington: Center for Global Development, Working Paper No. 233, December 2010.
1314 Benson, Matthew, “Making tax work in South Sudan”, African Arguments, 14 November 2011,
http://africanarguments.org/2011/11/14/making-tax-work-in-south-sudan-by-matthew-benson/ (accessed: 21 September 2012).
1315 Blunt (2003), p. 134.
1316 The Personal Income Tax Act, 2007. Acts Supplement to The Southern Sudan Gazette, No. 1, Vol. I, 10 February, 2009.
1317 Gebre selassie, Zebru. Non-oil Revenue Study: Southern Sudan. Study for the Ministry of Finance and Economic Planning of the Government of Southern Sudan, October 2009, pp. 74-5.
185
revenue will be generated from import duties (including a general sales tax)1318. A World Bank survey also found massive under-reporting and under-counting of businesses:
In Yei River County against an official record of 1921 shops the survey revealed around 3500 shops and 2000 stalls. In Rumbek East against the official estimate of 40 shops the survey revealed around 200 shops and 500 stalls. In Juba trading licenses have been issued to less than 200 shops. The market survey in just two markets in Juba (Munuki and Gudele) revealed around 1800 shops and 3000 stalls.1319
Political will to change the status quo also appeared to be missing for much of the period under investigation as political decision-makers are very reluctant to pursue a stringent tax regime and thereby risk a drop in popularity1320, although a marked shift in attitudes has been felt after the oil cut-off in 2012 and the subsequent austerity budget. The UNDP in 2012 wrote that over the course of two years, tax collection had more than doubled across all ten states of South Sudan1321 and the GoSS in 2013 claimed that tax collection had again more than doubled in 2012/13 compared to the previous financial year1322. Likewise, the new finance minister after the cabinet reshuffle in August 2013 promised to increase non-oil revenue by almost 30% in the span of 100 days1323 but any gains have in all likeliness been undone by the civil war in 2014.
6.3.1.3. Land grabs & land sales
The only resource other than oil that South Sudan has in abundance is arable land. In Sudan, the 1970 Unregistered Land Act enabled the state to massively expand mechanized farming as part of the infamously unsuccessful ‘bread-basket strategy’ which enriched private investors while expropriating pastoralists1324. The 1990 Investment Act had the similar consequence of dislodging communities from their settlements and forcing migration to the urban centres1325. In the South, contrary to the Northern Islamist government’s concept of land belonging to God (and by extension the state), land is traditionally a community resource and land rights are communitarian in so far as local communities de jure own much of the available land1326. The GoSS acknowledges traditional communal land rights both in the Interim Constitution of 2005 and in the Land Act of 2009, which, in Alden Wily’s estimation, borrowed substantially from revised land legislation in Uganda (1998) and
1318OECD (2011), p. 32.
1319 World Bank. Southern Sudan - Enabling the state: estimating the non oil revenue potential of state and local governments. Washington D.C., June 2010, p. x.
1320 Benson, Matthew, “Making tax work in South Sudan”, African Arguments, 14 November 2011,
http://africanarguments.org/2011/11/14/making-tax-work-in-south-sudan-by-matthew-benson/ (accessed: 21 September 2012).
1321 UNDP, “South Sudan one year after independence: Increasing non-oil revenues”, 6 July 2012,
http://www.undp.org/content/undp/en/home/presscenter/articles/2012/07/06/south-sudan-one-year-after-independence-increasing-non-oil-revenues/ (accessed: 20 February 2013).
1322 Wudu, Waakhe Simon, “35% increase: Minister presents annual budget to South Sudan's parliament”, The Niles, 5 July 2013, http://www.theniles.org/articles/?id=1924 (accessed: 21 August 2013).
1323 Sudan Tribune, “New S. Sudan finance minister vows to raise 90m SSP in 100 days”, 9 August 2013, http://www.sudantribune.com/spip.php?article47604 (accessed: 27 February 2014).
1324 Komey, Gunda Kunda. Land, Governance, Conflict and the Nuba of Sudan. Oxford: James Currey, 2010.
1325 Ayoub, Mona, “Land and conflict in Sudan”, in Simmons, Mark and Dixon, Peter (eds.) Peace by piece:
Addressing Sudan’s conflicts. London: ACCORD Conciliation Resources, Issue 18, 2006, pp. 14-15.
1326 Ibid.
186
Tanzania (1999)1327. In spite of legal recognition, however, there is intrinsic conflict between communal land ownership favoured by rural populations and traditional authorities and private ownership of land advocated by the GoSS, local government and some development
practitioners1328.
The GoSS itself is not overly content with the present Land Act, which it treats as a provisional document, because the government is extremely keen to invite foreign investors into the country, above all into the agricultural sector which has been identified as the best hope to diversify the economy and by extension the state’s revenue stream. But a major obstacle to convince investors – apart from the volatile security situation – has been insecurity of land rights1329. A high-ranking official involved in drafting what is supposed to become the new Land Act pointed out that the fact that land belongs to communities does not mean that they are free to do what they want with it: “If you don't use it [the land], then the government can appropriate the land and lease it to foreign investors”1330. His proposal is to give the national government authority over public land and to carry out zoning in order to define how the various parts of the land ought to be used.
At the same time, the almost complete lack of institutional capacity at community, county and even state level as well as the fact that many South Sudanese are not fully aware of their rights could lead to abuses of the system. First of all, as ownership is based on customary law and tradition, most land has not yet been officially registered. There is also the problem of enforcement of ownership rights.
In a case that is more the rule than the exception, armed herders refused to return land they had seized from farmers by threatening the county commissioner with the cattle-owner’s name, a
In a case that is more the rule than the exception, armed herders refused to return land they had seized from farmers by threatening the county commissioner with the cattle-owner’s name, a