Financing Infrastructure Projects: Conditions and Possible Options for South Sudan
By Garang Atem Ayiik, Juba
- Introduction
John Maynard Keynes, a British economist pioneered the role of government in term of using monetary and fiscal policies to keep the economy on track during 1930s great depression. His intellectual economic breakthrough provided comfort to economists about their ability to control the direction of economic growth till recent financial crises.
Recent financial crisis points to insufficiency of these tools, however, policy makers have learnt to combine private and public sector twin – interests in a complementary manner to achieve desired economic policy objectives for public and private sectors good.
South Sudan, a nation once described by its late founding father, Dr. John Garang ‘as never got a tarmac road since creation’ has recently got some pockets of costly tarmac roads in capital, Juba and 192 Km Nimule – Juba financed by USAID resulting in ‘peace dividends’ as commonly described in Juba.
Though these roads and other inter-states roads can be equated to ‘peace infrastructure dividends’, it is inadequate, costly and slow in delivery mechanism. With all states without tarmac road, rail, water, sewage and airport net-works, there is a great need to review infrastructure financing in South Sudan to accelerate infrastructure progress.
- Financing Conditions and Options
Monetary policy has evolved overtime, at each stage, economists, policy makers and independent analysts identified challenges and propose a policy prescription. The genesis for instituting and reforming many Central Banks around the World has been to make them independent in term of making their monetary policies with little influence from the politicians.
South Sudan requires creative, workable well thought financing mobilization, this can only happens with a strong regulatory and independent infrastructure financing environment. The first step is to conceive institutions, relationship and objectives manned by people competitively recruited.
These institutions’ objectives range from needs identification, financing mobilization, and implementation. It is important each key stage is assigned to an independent institution within infrastructure system to ensure internal control as it happens in the corporate World.
In corporate world, a case of Oil Company, production, processing, marketing and sales of oil are handle by independent wings of the same company to ensure results and successes are measured at each stage, remuneration and progress of individuals in charge is attached to progress of their units.
Key issue is whether to have institutions for need identification – Authority; Financing – Investment; and implementation – Need implementation run on corporate model. Thorough conceptualization, and sustainability studies are very important ingredients in conceptualizing these initiatives. Without independent procurement processes, and contracts enforcement mechanisms important international players can easily be ‘crowded out’.
Once you have infrastructure needs identified by an independent authority, these needs will reflect economic priority, otherwise, needs will be based on ad hoc non-economic relationship which affect national equity and harmony.
The next stage after independent needs assessment is to finance the project, in my view, South Sudan should have an independent investment wing, this institution, will mobilized funds from excess government source like Pension Scheme and Future Funds at agreed interest rate. At start, government and donors can put ‘seed money’ and thereafter, run as corporate organization. Where possible, it can be co-owned by private companies.
I am imagining electricity, water, roads, rails, airports and sewage supply as partially owned by private sector in commercial viable areas. Just to paraphrase, electricity supply will be owned by an independent company owned by South Sudan Electricity Corporation, Infrastructure Investment Authority and other private investors.
South Sudan Electricity Corporation roles will be limited to its ownership but more importantly as regulatory organization. The key issue here is not about which institution but the concept of independency to identify, finance and manage viable infrastructure projects.
In term of roads supply, need assessment will be done by government authority, financing will be done by Infrastructure Investment Authority in conjunction with other private financiers that will own the road and collect money from the users. This approach will apply to all infrastructure and utilities goods.
In areas where it is not economically viable for Infrastructure Investment Authority and other private financiers, the government can provide services in the interim, but at any time it is viable for private sector, the government, can always sell its investment.
Whether this is a wild thought in an environment of South Sudan, South Sudan got to think outside the box. Initiatives that encourage independency, and business environments are keys to having a robust economic progress. Private sector lead – economic growth was key model used by Asia tigers and South Sudan might want to try this path.
- Conclusions and Recommendations
Private sector lead infrastructure development with government influence might be a very important model. South Sudan needs to engage private financiers in a controlled and prioritized manner. Government investment wings in this sector will be key;
Economic growth depend on confidence and unleashing private sector potential in South Sudan is essential. Government has been the main employer because of limited private sector growth. Better infrastructure development, supported by good regulatory environment, will expand private sector in South Sudan and this will reduce un-employment pressure;
The natural resources potentials have high value in an environment of good infrastructure. Today an investor in South Sudan starts from the basic – water, sewage, electricity and costly transport network. This article call for reduction of this cost to the investors and citizens through a national investment these services;
South Sudan has Future Fund and Pension Scheme which have potential to hold huge sum of money if their operation and independency is institutionalized. It is only in an environment of strong private sector lead economic – growth model that this monies can be reinvest- as there is no capital market in South Sudan;
South Sudan got to be creative in financing and prioritizing infrastructure projects to make progress. Recently, LAPSSET project, a project conceived and developed by Kenya that the authors believe is meant to open up Northern Kenya but fashioned as regionally initiative, attracted the attention of everyone including South Sudan;
This is what happens in an environment without well-thought and continuous economic investment modelling. Without inter-states roads in South Sudan, South Sudan needs to prioritize inter-states road in South Sudan and lobby Kenya to tarmac Lokichar – Lodwar road to divert traffic from Uganda for goods destined to Eastern Equatoria and Jonglei states instead of LAPSSET;
Development is not resources given, Singapore and Malaysia demonstrated this. South Sudan got to sit and draw its intended economic path – resources aside, policy makers and citizens must and should add value for South Sudan economic progress.
Garang Atem Ayiik is an independent South Sudan Economic Policy commentator. He can be reached at garangatemayiik@gmail.com
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