The Question of South Sudan’s Accession to the East African Community (EAC)–Part 3
By David Mayen Ayarbior, Juba, South Sudan
August 5, 2015 (SSB) — In the previous two articles we have seen outlines of the main issues South Sudan’s accession to the EAC is likely to entail. Part-2 considered structural and institutional areas that could be seen to be the concerns of the camp against joining the regional block. These include questions of giving up some features of national sovereignty to the block in promotion of a bigger dream of regional and, ultimately, continental unity.
We may now flip the debate over to the benefits South Sudan is expected to reap from accession. These benefits are essentially economic in nature because countries worldwide create inter-state relations with enhancing their citizens’ welfare as an overall objective.
One of the main issues to be analyzed is refuting the argument that income repatriation will have negative effects. This holds that, since it might take a decade or so for it to reach halve the level of industrial output found in the other EAC countries, South Sudan’s status of exclusive importer means a sizable part of its oil revenue shall be “lost” to buying commodities from neighboring countries. However, this contention might be somewhat misleading and unreasonably antagonistic towards joining EAC.
The issue of income repatriation is often a concern for countries that lack sizable mineral resources from which to generate foreign currency (normally valued in U.S. Dollars). Such countries often depend on industrialization as a means of earning foreign currency and improving their balance of trade. They earn more foreign currency through selling/exporting value added goods than what they incur as cost of imports.
Being among the major oil producing countries in Africa, the balance of trade argument may not apply to S. Sudan as it applies to non-mineral exporting countries. For some intermittent episodes since 2005, S. Sudan’s balance of trade has been positive because of one import commodity, which is oil. It has generated tens of billions of U.S. dollars to the country’s coffers, monies that are hard to come buy even for industrializing countries on the continent. Hoping that the country may regain its sanity and become peaceful before acceding to EAC, assured revenue from oil will be a great buffer to keep its balance of trade positive until such times when structural adjustments are made.
As a member of EAC, S. Sudan shall continue to have the needed money to undertake both internal economic structural adjustments as-well-as purchase industrial outputs from EAC to help accelerate its economic growth. In fact, assurance of foreign currency shall make the country attractive to big regional and international manufacturing industries that will want to establish manufacturing and assembly firms. Such firms will make the country start exporting value added industrial goods to EAC countries, thereby structurally adjusting its non-oil related balance of trade.
To make sure that the country benefits from expected revenue that shall accrue to those firms, S. Sudan might have to start advocating for being privileged with sunset exemptions for national laws requiring firms to be 20% owned by citizens, or a similar arrangement. Since it is often the case that EAC laws governing companies’ registration shall be uniformly enforced in all member states, requests for ten to fifteen year exemptions from certain EAC economic provisions may be allowed for the new nation as a matter of recognizing its unique status as a new nation-state.
Furthermore, being an exclusive importer of industrial goods may not be an economic disaster as the camp against joining EAC believe. Because EAC is not a Free Trade Area, at least not yet one, S. Sudan’s import tax revenue from EAC countries may increase exponentially. Even if a strictly uniform tax code is passed by the EAC Parliament, there will still be tariffs to be collected by countries at their ports of entry. S. Sudan’s ports of entry shall surely collect more money from industrial goods coming from EAC as compared to what shall be collected on goods it exports.
In addition to increase in revenue from tariffs at ports of entry, S. Sudan’s tax base will also increase given the rise in the volume of internal trade caused by being a vibrant economic destination. Such tax base will increase because the country’s internal markets shall be having all goods demanded by consumers; the origin of these goods is economically immaterial once internal circulation begins. This is a consequence of the expected money velocity (the speed of money exchanging hands) when internal markets have sufficient quantities of demanded goods.
It is ironic, thus, that the main area on which S. Sudan’s government ought to focus would be creating vibrant internal markets that shall absorb and circulate EAC goods. In other words, the most important economic structural arrangements for EAC accession with which the country should grapple is creating permanent and cost effective connections to link its internal markets. In other words, it seems that building inter-state rail and road linkages within South Sudan is what is required in preparation, rather than fearing accession to EAC.
Mayen D.M.A. Ayarbior is the Press Secretary in the Office of H.E. the Vice President of South Sudan, James Wani Igga. He could be reached at dmayend@yahoo.com
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