Professor Alfred Sebit Lokuji served as the Deputy Vice-Chancellor of Juba University, South Sudan. He gained his Ph.D. at the University of Georgia (USA) and has taught at Dar es Salaam University, and at Moi University in Kenya, and served as a member of the policy advisory board at the Tanzania Centre for Development Cooperation, Arusha. He was a member of the Centre for Peace and Development Studies at the University of Juba.
In an exclusive interview with Radio Tamazuj, he analyzes South Sudan’s economic woes and sheds light on the recent economic discussions led by the president and their potential impact on South Sudan’s economic landscape.
Addressing critical issues such as currency depreciation, inflation, and the struggle to cover the wage bill, Prof. Lokuji provides a sobering analysis of the current situation and advocates for practical, local solutions to navigate the country through these challenging times.
Below are edited excerpts:
Question: Thank you for joining Radio Tamazuj. Recently, the president convened with the cabinet, economic cluster, the National Revenue Authority (NRA), and other entities in the country’s economic sector. They formulated resolutions aimed at reviving the economy, stabilizing the South Sudanese Pound, and addressing runaway inflation. Do you believe these measures will be effective?
Answer: Well, the crux of the issue lies in the fact that they have implemented similar measures in the past without resolving the ongoing inflation. It appears they may repeat this process in future forums. For instance, a focus on increasing input into agriculture might seem beneficial, but they fail to consider the fundamental issue. Pouring more money into the market without a corresponding increase in food production results in a classic case of inflation.
To illustrate, if you produce 100 dollars or pens and each pen costs 1 dollar, increasing the money supply to 1,000 dollars without a proportional increase in the number of pens leads to higher costs. We lack a basic balance between the supply of money and the demand for goods in South Sudan. Instead of addressing this, we continue to cry for dollars to support excessive imports. Achieving agricultural responsiveness and diversifying revenue sources beyond oil will take time. The effectiveness of these measures depends on the government’s commitment to sincere efforts, not just pleasant discussions around a table.
Q: The South Sudanese Pound (SSP) has significantly depreciated against the US Dollar in recent weeks. In your informed opinion, what caused this, and how can it be mitigated in the short term?
A: The drastic devaluation from the initial rate of 1 dollar to 2 pounds at the time of independence to the current situation is concerning. We are flooding the market with dollars without a corresponding increase in goods, leading to higher costs. This imbalance in supply and demand for dollars and goods needs serious attention, which, unfortunately, South Sudan lacks. The only short-term solution is an immediate halt to flooding the market with dollars.
The recent decision to stop the street sale of dollars is a positive step, but it is crucial to acknowledge that blaming those selling dollars is not productive. The real issue lies in discontinuing the auctioning of dollars. This practice contributes to the excess supply of dollars in the market, making people more inclined to exchange using dollars rather than the South Sudanese Pound. Stopping the dollar auctioning, coupled with creating reserves in dollars or gold, is essential. Temporary solutions involve securing donations, subsidies, or aid to ensure a sufficient supply of goods in the market, addressing the root cause of the demand for dollars.
Q: What are the immediate and long-term effects of the South Sudanese Pound’s depreciation in the market?
A: Well, currently, the South Sudanese Pound has depreciated to the extent that it is almost not a viable currency to carry in your pocket. This devaluation is a direct result of the excessive emphasis on dollars and oil, with people moving around using dollars as if they were the standard currency of the country.
To counter this, the government needs to transition to using bank transfers, credits, and other financial instruments instead of carrying large amounts of physical dollars. This shift will reduce the incentive to prefer dollars over the South Sudanese pound. Emphasizing the South Sudanese Pound’s value can be achieved by producing goods locally.
There are two categories of South Sudanese citizens; those in rural areas who rely on local resources for their needs and those in urban areas who often depend on imported goods. The key is to encourage self-sufficiency and local production to reduce dependency on foreign products. Although South Sudan has demonstrated the ability to produce items like Irish potatoes and cabbages, there is still a heavy reliance on imports, even for basic items like tomatoes. Local leaders should promote cultivation and production within their communities to enhance resilience in the face of currency fluctuations.
Q: In your opinion, considering the economic climate, how much further do you anticipate the SSP will lose value in the coming weeks?
A: There is no quick solution to the currency depreciation issue. Immediate steps, such as ceasing the street sale of dollars and encouraging transactions in South Sudanese Pounds, have been initiated. However, a significant shift requires a focus on short-term solutions, like producing high-demand products locally, such as tomatoes. Emphasizing areas with proven agricultural potential, like along river banks and in regions like Chukudum, Katire, Bor, Ayod, and Yei, is crucial. Ensuring security in these areas is paramount to boosting local production.
The recent removal of road inspections on goods is a positive move that allows free flow within the country. Encouraging cross-regional trade can stimulate gradual change. However, the South Sudanese Pound is likely to continue depreciating until the government takes substantial action, such as halting the sale of dollars, making the market more reliant on the SSP, and fostering the exchange of goods in local currency. This process may yield slow but steady results, offering a better alternative to maintaining the status quo.
Q: South Sudan is nearly a net exporter of oil but heavily relies on importing most food and essential commodities. This results in a high demand for hard currency. What steps can the country take to reverse this trend?
A: Yes, it is a stark reality where the SSP struggles against the dominance of dollars. To address this, we must prioritize domestic production. Recognizing and leveraging production centers across the country, including regions, counties, and states, is crucial. We need to empower these areas to expand their potential and produce goods without hindrance. Currently, unnecessary taxes at multiple points, such as entry points to Juba, hinder the free flow of goods, contributing to a challenging economic situation. This taxing system, if not rectified, could lead to the collapse of the country.
For the immediate future, given the current dire situation, accepting aid is vital. It is essential to acknowledge the gravity of the food crisis and facilitate the free flow of aid by removing obstacles and unnecessary stoppages. This will enable goods and assistance to reach various parts of South Sudan without hindrance. In the long term, there is a need to encourage and support local production. Removing obstacles to free trade is an immediate solution while promoting self-sufficiency can address the root cause of dependence on imported goods.
Q: In your analysis, why is the government struggling to cover its wage bill, and what solutions do you recommend?
A: The challenge of covering the wage bill is a question for the government to address. It seems they are relying on obtaining more dollars, potentially from oil exports. However, recent events, such as those in Port Sudan, indicate that this reliance might not be sustainable. As oil resources remain, the means to transport and sell them pose challenges. Increasing taxes on local goods is not a viable option due to the lack of sufficient local goods.
The government needs to urgently explore alternative options for selling oil, such as considering agreements with Kenya or Ethiopia. Focusing on securing the means to get oil to the market is critical. While the rural areas may be relatively unaffected, the overall stability of the country is at risk without addressing food scarcity and providing security, contributing to ongoing conflicts in various parts of South Sudan.
Q: One of the resolutions from the president’s meeting with the economic cluster is to increase non-oil revenues. Do you believe this will lead to a heavier tax burden on ordinary citizens?
A: Well, it is a positive move to discuss increasing non-oil revenues, but the practicality of each resolution needs careful consideration. Agriculture, for instance, may take a considerable amount of time to yield results, perhaps a year or longer. The process requires tools, equipment, and investment, which may include funds for items not produced locally. In essence, the most critical solution for South Sudan lies in boosting local production. This is a recurring theme and a crucial step in addressing the challenges faced by the country.
Q: With the escalating inflation and the South Sudanese Pound losing value, coupled with civil servants not receiving salaries, how long do you think the economy can sustain itself?
A: The situation is dire, and it will not be long before people seek alternative means to survive. Soldiers, for example, might resort to other income-generating activities. The key to addressing these complex issues is a sustained, daily effort to find solutions. A single meeting or legislative session will not be sufficient to tackle the multifaceted challenges South Sudan is currently facing.
Q: Some traders have already closed their shops. What measures do you think the government can take to alleviate their concerns?
A: The government may be working on theories, but shopkeepers are dealing with the harsh reality of their businesses. The absence of goods and a lack of buyers are compelling reasons for shops to close. Rational economic actors, recognizing the threat, may choose to close to protect their remaining goods. This trend is likely to continue as people perceive threats to their safety and property.
Q: Where does the ongoing economic downturn leave the disposable income of ordinary families in the Republic of South Sudan?
A: Disposable income for common citizens is virtually non-existent. Even civil servants and soldiers often go for months without income. The lack of a credit system compounds the issue, making it challenging for people to access necessities.
Q: What are your predictions for the South Sudanese economy in the next couple of months?
A: While the country may sustain itself in the short term, the future appears bleak. The escalating inflation, daily increase in prices, and the depreciation of the South Sudanese pound do not bode well. Engaging international partners and organizations for short-term relief is crucial, but long-term solutions require decisive government action. Unfortunately, past experiences indicate the government’s limited capacity to address such complex issues.
Q: Finally, Prof. Lokuji, if there is a final message you’d like to share with the people of South Sudan, what would it be?
A: I regret having to convey a pessimistic outlook for the people of South Sudan. If the current trajectory continues, a collapse is imminent. The increasing daily prices, driven by the rising value of the dollar and the depreciation of the South Sudanese Pound, pose a serious threat. If we persist in our daily market activities without cultivating a culture of storing food in refrigerators, it will exacerbate the situation.
While those in rural areas may endure, any conflicts arising from economic factors will affect them, as evidenced by cattle thefts and property crimes.
In the coming months, unless the government acknowledges its failures and seeks urgent assistance from international entities such as the World Food Program, the United Nations, the European Union, the United States, the Soviet Union, China, or any willing supporter, the outlook is grim. We must engage in practical, hands-on efforts to produce essentials for ourselves, with the government actively participating. The individuals clad in suits and roaming with documents will not provide solutions; rather, it’s the individuals managing cattle, cutting firewood, and living the everyday reality in South Sudan who hold the key to solving economic problems.
The government needs to reassess its approach and acknowledge the limitations of its processes. Pretending to have miraculous solutions, akin to the biblical feeding of 40,000 people with two loaves of bread and fish, is not realistic. Creativity is essential, and the government must be open-minded, recognizing the expertise of those who have dedicated their lives to finding solutions and keeping society safe from various dangers.