Government to unveil hardship plan
Tuesday, 28 February 2012
As oil Talks with Khartoum fail Again
JUBA: The Ministry of Finance and Economic Planning will soon unveil austerity measures aimed at increasing non-oil revenue collection as no deal has been reached with the Sudan Government on oil transit fees and compensation.
The Minister of Information, Barnaba Marial, told journalists during the weekly government press briefing that the austerity plan has already been presented to the Council of Ministers.
South Sudan lost 98% of its Government revenues when it closed the oil taps earlier this month in protest of the confiscation of its oil by the Government of Sudan. Khartoum in December took
over ships loaded with South Sudanese oil worth $815m to make up for what it called unpaid fees for shipping the oil through its pipeline.
The Government of Sudan want $36 per barrel in transit fee while South Sudan is willing to pay less than $1 per barrel, which is close to the international norm. For a similar pipeline of comparable length that runs through Cameroon, the Government of Chad pays $0.41 per barrel. The African Union, as well as countries such as Britain and China, which gets about 6% of its oil from South Sudan, are trying to broker a settlement. But a second round of talks in Addis Ababa last week has not produced any white smoke.
“The gulf is still huge,” South Sudan’s foreign minister, Nhial Deng Nhial, said in a statement.
“I don’t know if it can be bridged.” The two countries did sign a non-aggression agreement
that is supposed to keep the peace until a broader solution is found. But the pact was broken
According to a Ministry of Finance press release posted on the government website, the Directorate of Taxation will soon launch a campaign aimed at expediting
the country’s transition to non-oil revenue and a more independent economy.
“Within six months, the campaign aims at increasing non-oil revenue collection by 300%,”
the statement says. “Right now, we are collecting about SSP13m a month in non-oil revenue, not including customs”, the statement quotes the Minister of Finance, Kotsti Manibe.
“In the next six months we want to increase that to SSP40m a month, which is still about 5% or less of pre-shutdown monthly expenditure by the Government, but it is enough for some essential services.”
The government is working to systematise taxes collection in all sectors that can make up for
the lost oil revenue. While assuring that no new taxes will be introduced, the statement adds: ‘The ministry is just enforcing regulations that have been on the books since the passage of the Taxation Act of 2009, but not enforced widely.”
The directorate plans to launch taxpayers’ education for business people and income earners across South Sudan about their right and obligations, through radio, print and training of education officers.
Estimates of how long the government’s monetary reserves will last vary wildly, from a few months to perhaps half a year.
For 30 months we will
definitely freeze our activities on
development - Riek Machar
Government officials promise to give priority to health, education and the army with the 2% of its revenue that remains. And the government says it has ambitious long-term plans to overcome the crisis. It signed a deal with Kenya last month for the construction of a pipeline to the port of Lamu at the Indian Ocean.
A second agreement was signed for a pipeline through Ethiopia and on to Djibouti at the Gulf of Adam, Mariel told journalists earlier this month.
South Sudan’s deputy petroleum and mining minister Elizabeth James Bol told Reuters it
would take around 11 months to build the pipeline to Lamu.
But analysts said a Kenya pipeline would be difficult to build across rough terrain hit by tribal violence and passing through bandit-stricken regions in western Kenya.
South Sudan has said it would cost around $1.5 billion, but analysts say a hefty insurance
premium would have to be added because of the security concerns.
Oil experts have questioned the economic viability of a pipeline in the medium-term
as output is expected to fall sharply in coming years because some fields were over pumped
by Khartoum in the run-up to South Sudan’s independence.
South Sudan output will decline to 200,000 bpd by 2016, to 160,000 by 2018 and further thereafter, according to estimates by the European Coalition on Oil in Sudan.
Some analysts say a pipeline would be viable only if new finds were made, but exploration
in the vast Jonglei state have been hampered by tribal violence. France’s Total holds a
concession in Jonglei which is largely unused due to violence.
Leading SPLA politicians have come out in recent days to support the decision to shut down oil production.
“Unfortunately Khartoum has not co-operated with us, so instead of Khartoum taking the oil, we’d better freeze it until we get alternatives to exporting oil, so that the people of South Sudan can enjoy their own resources,” Vice-President Riek Machar told BBC on Friday.
He said development would be put on hold for several years, but basic services would not
suffer. Machar assured that government salaries, including for those for members of the large
military, would be paid.
“For a period of 30 months we will definitely freeze our activities on development, but
we’ll provide basic services:
health, education, water and even some infrastructure projects will go on,” he said.
Luka Biong Deng, former Minister for the Presidency in Juba, called the decision a bold
but wise move. He said the crisis could offer a golden opportunity for South Sudan to trim the Government and develop scenarios of running the new nation without oil revenues.
“Salaries and operating costs constitute more than 80% of total expenditure, the highest level in the region”, he wrote in an opinion article to The New Nation.
“Simply, the Government is too big and the austerity measures should focus on how to slim the Government without affecting spending meant for the rural population, particularly in education, health, water and agriculture.”
Related stories on pages 5, 24, 27 and 30