UNLOCKING INVESTMENT POTENTIALS

FOR DEVELOPMENT

IN SOUTH SUDAN(ACHIEVING SDG 1 – NO POVERTY)

By

JOY SILLO

ContentsIntroductionPoverty in South SudanCurrent Obstacles Major Opportunities

Introduction

The new Sustainable Development Goals (SDG’s) are unique in that they’re broader in their scope of eradicating all forms of poverty by calling for action by all countries, rich and poor, to promote prosperity while protecting the planet by 2030.

Introduction cont…The World Bank defines poverty in absolute terms. The bank defines Extreme poverty as living on less than US$1.90 per day (purchasing power parity), and Moderate poverty as less than $3.10 a day. It has been estimated that in 2008, 1.4 billion people had consumption levels below US$1.25 a day and 2.7 billion lived on less than $2 a day.

Introduction cont…The proportion of the developing world's population living in extreme economic poverty has fallen from 28 % in 1990 to 21 %t in 2001, although much of the improvement has occurred in East and South Asia. In Sub-Saharan Africa however, the GDP/capita shrank with 14 %, and extreme poverty increased from 41 % in 1981 to 46 % in 2001Other regions have seen little or no change.

Introduction cont… Although poverty rates have declined in some regions, progress has been uneven; The reduction in extreme poverty between 2012 and 2013 was mainly driven by

East Asia and Pacific (71 million fewer poor) –notably China and Indonesia—and South Asia (37 million fewer poor) –notably India.

Half of the extreme poor live in Sub-Saharan Africa. The number of poor in the region fell only by 4 million with 389 million people living on less than US$1.90 a day in 2013, more than all the other regions combined. 

A vast majority of the global poor live in rural areas and are poorly educated, mostly employed in the agricultural sector, and over half are under 18 years of age. 

Introduction cont…The work to end extreme poverty is far from over, and a number of challenges remain.It is becoming even more difficult to reach those remaining in extreme poverty, who often live in fragile contexts and remote areas. Access to good schools, healthcare, electricity, safe water and other critical services remains elusive for many people, often determined by socioeconomic status, gender, ethnicity, and geography

Photo Credit – World Bank Group

Introduction cont…Moreover, for those who have been able to move out of poverty, progress is often temporary: economic shocks, food insecurity and climate change threaten to rob them of their hard-won gains and force them back into poverty.

It will be critical to find ways to tackle these issues as we make progress toward 2030.

Photo Credit – World Bank Group

Poverty in South SudanEconomic Overview:The negative impact of the war in South Sudan continues to be felt on the lives of the people and the quality of life they have access to, despite the end of the war years ago.

According to a recent survey undertaken by the Government of South Sudan, 50.5% of the population lives below the national poverty line which was defined as a level of consumption of less than SDG 73 per month ($31.60 per month, or about $1 a day)

In rural areas, the incidence of poverty is about 55%, compared with about 24% in urban areas (see Table 1.1).

Photo Credit – World Bank Group

IndicatorSouth

Low income

Lower middle

Sub-Saharan

 Sudan income income Africa

   countries

countries  

         Population (millions) 8,615 2 352 2 475 743Gross national income per capita ($) 1 050 585 1 923 746Population density (persons per km2) 13 83 63 31Incidence of poverty (% of population)        

National average 50.6     41.1Urban average 24.4      Rural average 55.4      

Demographic indicators        Total fertility (births per woman) 6.2 3.6 2.1 5.3Crude birth rate (per 1 000 people) 46 29 16 40Crude death rate (per 1 000 people) 11 10 7 17Life expectancy at birth (years) 59 59 71 47

         

Poverty in South Sudan

According to the International Fund for Agricultural Development, economic activity and market development has been stalled by conflict-related disruptions and inadequate infrastructure.

Map 1.1 provides an overview of the spatial distribution of poverty in South Sudan.

The incidence of poverty is highest in the states of Northern Bahr el Ghazal with 76% of the population below the poverty line.

The lowest incidence of poverty is in the Upper Nile with 26% of the population below the poverty line.

The much lower level of poverty in urban areas, to a considerable extent, reflects the presence of relatively well paid government employees and people employed under international aid programs.

Photo Credit – World Bank Group

Poverty in South SudanAvoiding protracted crisis requires recommitment to a political settlement and major fiscal adjustment.

Export revenues decreased due to declining oil prices and lower oil production, the decline in oil revenue has also had a negative impact on macro-budgetary indicators, requiring austere fiscal adjustments.

The South Sudanese Pound (SSP) depreciated on the parallel market from SSP 18.5 per dollar in December 2015 to reach almost SSP 80 per dollar by end September, 2016. South Sudan is now in hyperinflation.

Relative prices of food have increased and food shortages and hunger are the most alarming signal of the country's larger economic collapse.

Photo Credit – World Bank Group

The Government, Private Sector and Institutional Investors Interest

Despite the fact that South Sudan is blessed with abundance of Natural resources and vast area of fertile agricultural land, they remain one of the poorest countries in Africa with the second worst literacy rate in the world. Only 27% of its total population above the age of 15 is literates. The country is also one of the highest HIV/AIDS killing zones in the world.Apart form this dreadful disease; quite a number of other deadly diseases which can result to a pandemic incident continues to threaten the lives of the citizens.

The Government, Private Sector and Institutional Investors InterestAbout 70% of the total public development and humanitarian programs of South Sudan are financed by Oil export income, with the international donor community funding most of the balance of the program (Table 1.2).Government revenues from non-oil sources of revenues finance less than 2% of the programs. This heavy dependence on oil revenues and donor assistance raises a number of basic issues for macroeconomic management and for key development programs in the country.

Funding sourceAmount ($ mill)

Share (%)

     

Oil revenues 2 365.7 69.7Non-oil revenues 53.2 1.6Donor assistance 973.9 28.7

Total funding 3 392.7100.0

Less budget operating surplus 75.9 2.2Total expenditures 3 316.8 97.8

     

Table 1.2: Sources of Funding for Public Development Programs in South Sudan, 2010

The Government, Private Sector and Institutional Investors Interest

South Sudan has vast and largely untapped natural resources, beyond a few oil enclaves; it still remains relatively undeveloped, characterized by a subsistence economy. South Sudan is the most oil-dependent country in the world, with oil accounting for almost the totality of exports, and around 60% of its gross domestic product (GDP). On current reserve estimates, oil production is expected to reduce steadily in future years and to become negligible by 2035. This should be a cause for concern to the Government to diversify by exploiting other untapped potentials and natural resources of the country.

The Government, Private Sector and Institutional Investors InterestAvailability of natural resources, cheap unskilled or semi-skilled labor, creative assets and physical infrastructure promotes resource-seeking activities.

Historically, the most important host country determinant of FDI has been the availability of natural resources, e.g. minerals, raw materials and agricultural products.

For Private sector and institutional investors, there are many untapped potentials in the Agricultural, Extractives, Educational and health sector in South Sudan. Institutional investors are interested in diversification (uncorrelated assets) and investing where there are opportunities such as this, given the proper investment environment.

The Government, Private Sector and Institutional Investors InterestThough there is the presence of IDA and ODA, there’s need for more impact to be felt. For example The South Sudan Rural Road Project (SSRRP) was closed since April 12th 2012 and the South Sudan Private Sector Development Project was also closed on Jan 10th 2 012. These two projects would have attracted huge FDI and project financing.It would encourage the development of private businesses and in turn strengthen private public partnership. Also it will create jobs and reduce unemployment and as a result of paid wages, poverty level will drop. There is need for more Project financing.

Current ObstaclesKey ChallengesThe South Sudan economy faces a number of challenges to sustained rapid growth and increasing prosperity. The following are key among them:

The legacy of long years of internal violent conflicts.

Unstable macro economic framework Economic Instability and Poverty. Ineffective Tax policies and Bad Tax

administration. The economy needs to become more diverse. Corruption. Lack of diversification. Absence of well functioning public and private

institutions. Lack of developed basic infrastructure. Lack of a healthy and literate labor force.

Major OpportunitiesThe list of challenges seems to be long but there are opportunities available to South Sudan for tackling these challenges, Unlocking financial opportunities and achieving sustainable growth and poverty reduction. These include:

Ensuring adequate peace and security required for a sustainable and strong economic development and the improved well being of citizens.

Aggressively tackling the issue of illiteracy by ensuring education is accessible to all, as this will enable a healthy labor force.

Major Opportunities Promoting a broad-based economic growth to

reduce the current heavy dependence on the oil economy, by diversifying into other sectors, The new nation has a very important and promising asset—vast amounts of uncultivated, arable land with excellent potential for agricultural productivities and can increase its revenue through exportation of cash crops, the extractives industry can be another source of revenue as the South Sudan is blessed with various natural resources.

Developing targeted programs that will result in a sustained reduction in the current very high levels of poverty in the country.

Major Opportunities Crafting a major program of infrastructure

development (as it is a key component to economic development) to overcome the current major bottlenecks to business activity and cost-effective delivery of basic services throughout the country.

Addressing a range of issues related to the gradual adjustments in public expenditure policies that will be required in the medium- and long-term in response to changing domestic needs and requirements for public service provision.

Designing and implementing programs that will address the current institutional and human capacity constraints that confront South Sudan.

Major Opportunities Improving the investment climate by

1. Maintaining a stable macro economic environment.

2. Reducing the red tape impediments for international and domestic business.

3. Making Tax administration work properly.4. Encouraging good governance and

maintaining a high level of transparency in the economy and establishing the rule of law.

5. Ensuring economic stability for the people of South Sudan

Sources and Links www.worldbank.org/en/country/southsudan/overview CIA United Nations Financing For Development week two video by Ngozi Okonjo Iweala –

Improving the Investment Climate World Bank photo collection World Development Indicators. www.afdb.org African Development Bank Huffington post

The END