What you need to know:
- There is always suspicion that every policy decision South Sudan makes is modelled on, if not entirely copied, from another country within East African neighbourhood.
- This is not to say that learning and borrowing from others is a bad thing.
- Essentially, South Sudan is broke. Its economy continues to be nearly 100 per cent import-oriented.
- What set this avalanche of economic collapse in motion is the civil war that is raging since 2013.
Part of the challenge of being a new country is that whatever policy action such a country pursues is likely to be scrutinised from the point of view of whether the said policy is an original idea or copied from the neighbours and for what reasons.
There is always suspicion that every policy decision South Sudan makes is modelled on, if not entirely copied, from another country within East African neighbourhood. Sometimes, it is about surmising over the stark similarities between its flag and Kenya’s flag. Other times it’s the change of the name of its national army, from SPLA to SSPDF, perhaps borrowed from Uganda’s UPDF?
Even Sudan, from which South Sudan broke away after nearly two centuries of liberation struggle, is sometimes seen as the country from which South Sudan has copied the most, if only begrudgingly so, and to negative ends. This is especially true with regards to issues related to the structure of the security apparatus and the state violence executed by this apparatus, the use of Arabic to conduct government business in a country where the constitution speaks of English as the official language. Even the style of corruption is Sudanese to the core. It is quite ironic that South Sudan would wage such a protracted war of independence only to become a mirror reflection of that which it did not want to be part.
The discussion around the source and the factors influencing the borrowing of public policy initiatives came to a head last week, when President Salva Kiir’s cabinet announced that it had decided to retire the country’s currency, South Sudan Pound (SSP), in favour of a new banknotes.
The main reason given for this abrupt decision was that people were hoarding the banknotes and the banks have no money to honour depositors’ requests for payment. The government has since formed a committee to come up with the most efficient way to get South Sudanese to return the money to the banks.
But how true is the claim that hoarding of cash is the real reason for this decision? What other problems is the decision envisioned to tackle? Will it work? What were the reasons why people kept their monies at home in the first place? How will the government stop people from taking the new banknotes home in the same way? Is South Sudan copying what Kenya did with its currency a years ago?
This is not to say that learning and borrowing from others is a bad thing. On the contrary the beauty of South Sudan’s coming into existence at such an opportune moment in human history is that it is able to avoid reinventing the wheel, and instead, leapfrog into the future by picking what has worked in the sisterly countries in the neighbourhood and avoid the traps that have hamstrung many a post-colonial African country.
However, key to learning from others and to borrowing some practices and tools from them rests in the correct identification and understanding of the problem one wants to solve using borrowed tools. But the suspicion and heated debate surrounding South Sudan’s method of copying derives from the fact that the country seems to behave as if it can successfully apply a tool that has worked for another country without adapting it to its unique circumstances. A tool that one country has applied to solving one type of problem is necessarily going to help the borrower solve an entirely different problem.
Essentially, South Sudan is broke. Its economy continues to be nearly 100 per cent import-oriented and has depleted its foreign currency reserves, all of which have accelerated the depreciation of the South Sudan Pound, sky high commodity prices and ordinary people have just about reached the end of the road with regards to survival.
What set this avalanche of economic collapse in motion is the civil war that is raging since 2013 and it is yet to be settled. It is also caused by fiscal irresponsibility and a monetary policy that has run out of ideas. Theft of public resources, which is mainly known as corruption, as a way to blur the gravity of it, is also a big factor. Other practices, including the siphoning off of foreign exchange from oil proceeds to foreign countries, where the families of the most politically established reside, the bleeding of revenue collected from non-oil sources and lack of controls on movement of capital out of the country, are all to blame for the country’s bankruptcy. Covid-19 has also weighed in significantly.
How then is a new currency going to be the panacea for these problems? Or is it that the government is merely deflecting from the real issues by making a big deal out of a non-starter? Or perhaps South Sudan is emulating Kenya’s decision to change its currency over fears of money laundering, mistakenly thinking it would also rescue South Sudan’s dying economy? Will it work for South Sudan? Well, there is a big difference between Kenya and South Sudan, which is that the hoarding of cash in Kenya was mainly because of corrupt practices by very wealthy people, and so this intervention was designed to smoke them out of their hiding, where billions of Kenya Shillings had been stashed away in some peoples’ safes and out of circulation.
In this case, the change of currency was meant to prevent these corrupt individuals from laundering these amounts. It worked for Kenya because the reasons for it were clear and precise. Kenya was cracking down on embezzlement and to tackle a wave of counterfeit 1,000 shilling notes. It was not a policy to address issues of foreign reserve, unemployment, commodity prices and inflation. Instead, it was an anti-crime tool. Whereas in South Sudan, the hoarding is done by ordinary people because the commercial banks often refuse to pay depositors on account that there is no fluidity. Therefore, changing the currency in this case is not going to stop people from keeping their monies at home if the commercial banks are allowed to maintain their current systems that do not serve the depositors well. The people will just hide the new notes.
Without any fundamental reforms in fiscal and monetary policies, procurement, revenue collection, management of the Central Bank, the government will just keep printing money and the inflation will be on a highway to Zimbabwe. What South Sudan needs is not to toy with the currency. It needs to invest massively in food production, as food imports are unsustainable long term; in education so as to reduce the number of South Sudanese seeking education in the neighbouring countries and needing foreign exchange to pay fees, rents and food; in healthcare, road infrastructure and electricity generation. These are the five major areas of service that will always eat the most into the country’s foreign exchange reserves.
The country can accomplish much of this if the oil revenue is managed responsibly to fire up the engine of the economy by investing in sectors outside oil. After all, oil is finite and it is not a job creating industry. Agriculture would be the lifeline of South Sudan.