South Sudan and China on oil for road deal: More questions than answers in the oil for development deal
The politics of road building in South Sudan: There are more questions than answers in the oil for road deal between the Republic of South Sudan and the People’s Republic of China
By Mamer Deng Mamer, Bor, South Sudan
Thursday, May 23, 2019 (PW) — At the end of March, President Salva Kiir Mayardit witnessed the signing of a contract for construction of roads from Juba to Terekeka and onwards to the Bahr Ghazal region. The contract was signed by officials from the Ministry of Petroleum and Chinese firm, Shandong Hi-Speed Group Co. ltd (SDHS).[1] Given that similar ceremonies did not progress beyond the signing of documents or pronouncements in front of the media, I am doubtful that this latest event for the “oil infrastructure” project will make any difference.
How did we arrive at “oil for infrastructure” project?
The March 25, 2019 ceremony was a culmination of a new strategy adapted by President Kiir’s administration to use oil revenues for road construction, which he announced in 2018 during a trip to the Forum on China-Africa Corporation (FOCAC) in Beijing. Chinese President Xi Jinping told Kiir that China was “ready to strengthen cooperation with South Sudan in areas such as infrastructure and to encourage more Chinese enterprises to participate in the country’s economic and social development.”[2] President Kiir also told his Chinese counterpart that infrastructural development was his priority.
President Kiir expanded on reasons behind his strategy when he told a Catholic congregation that “I decided that the infrastructure or whatever that we want to be done by foreign companies has to be done in exchange for crude oil because our people don’t want to see money. If they see money, their hands start shaking,”[3] implying that corrupt officials were likely to siphon off money earmarked for projects.
President Kiir then started the process of legalizing the “Oil for development” Project. The Deputy Minister of Information Lily Albino Akol announced after a cabinet meeting on February 1, 2019 that the Council approved the allocation of 10,000 barrels of crude oil per day to China Exim Bank. “This will be used for infrastructure development especially the roads as it was agreed in China by the President [Kiir].”[4] Ms. Akol also said the roads will run from Nadapal at the border with Kenya to Torit, Juba and then on to Rumbek and Wau.[5] Ms. Akol said the work was starting “immediately within the month of February” 2019.
But as noted above, the signing ceremony only occurred on March 25, 2019. Road construction was slated to start within two weeks from March 25 but had not commenced by May 8. The Minister of Roads and Bridges, Rebecca Joshua Okwaci, then commenced a tour to inspect road construction equipment South of Juba after the signing ceremony to ascertain that the work begins on time. “We believe that roads are peace, roads are stability, trade, connectivity of the people and country,” Okwaci told reporters.[6]
From 10k to 30k bpd: What is missing in the “oil for development” project?
The number of barrels jumped from 10,000 to 30,000 in a space of two months.
The Minister of Information, Michael Makuei Lueth, who doubles as the official spokesman of the government, announced on April 5 that the money from the sale of 30,000 barrels will be deposited directly into an account in China on a daily basis. “As you know very well we have adopted the policy of oil for development. This is why last time we approved the value of 10,000 barrels per day to be deposited into an account in China. The cabinet approved additional 20,000 barrels to make it 30,000 barrels per day to be deposited into an account in China for the infrastructure, especially for the roads and other development projects,” Makuei told reporters in Juba after a weekly cabinet meeting on April 5.[7]
There are more questions than answers on this beautiful project. The contract is simply opaque. For instance, what are the other “development projects” covered in the contract? Second, for how long will the government be allocating 30,000 barrels on a daily basis to SDHS in China? How long will the road construction project last? South Sudanese do not know the price of one barrel of crude oil that has been used as the basis for the contract. Does the figure account for the fluctuation of oil prices on the global market?
As well, there is no information on whether the contract adheres to South Sudanese law, especially stipulations in the Petroleum Act 2012, which spell out obligations to disclose oil deals to the public. The Petroleum Act 2012 article 79 (1) (a) reads: “The Minister shall make available to the public, both on the Ministry website and by any other appropriate means to inform interested persons [about] all key oil sector production, revenue, and expenditure data, petroleum agreements and licenses.”[8]
Since Minister Ezekiel Lol Gatkuoth took over the helm of the petroleum ministry in August 2016, the public has not been updated on oil revenues, expenditure or petroleum exploration agreement(s) beyond news reports that lack depth and context. It appears the Ministry of Petroleum does not have a website because an ostensible website for the Ministry appears to be “fake.”[9] It says the Ezekiel “Lul” Gatkuoth was appointed on April 28, 2016. Lol is the correct spelling of his name and he was appointed on August 2, 2016.[10]
In June 2014, former Minister of Petroleum Stephen Dhieu Dau revealed that South Sudan received $3.5 billion between June 2013 and May 2014.[11] The Sudd Institute, a think tank in Juba, concluded in a report published on May 22, 2018 that “there is a serious inadequacy of transparency of the expenditure of resource revenues at subnational levels, a phenomenon that is also prevalent in South Sudan.”[12] Most significant in this opaqueness, is the fact that the relevant committees in the National Legislative Assembly seem not to be involved in scrutinizing the deal as mandated by law.
Another significant information that is not disclosed is the length of roads that will be constructed; how many lanes and how much will they cost, are some of the questions that require answers. The closest the public has come to hear anything about the cost and the length of the road was when South Sudan’s Ambassador to China, John Andruga Duku, was quoted by the Juba Monitor newspaper on April 12 saying thus: “The road is costing us [South Sudanese] 711 million United States Dollars because we have to be very transparent and clear here,” he said.[13] Duku said the $711 million is required for the construction of 392 km of road from Juba to Rumbek.
In other words, one kilometer of road will cost 1.81 million U.S dollars. In comparison, the Juba-Nimule highway (192 km) was estimated at 220 million dollars (that is $1.146 million per kilometer of road) when it was built more than 10 years ago.[14] The road was initially estimated at $87 million before the cost increased to $163.8 million[15]and finally $220 million. It is therefore possible that the cost of this new road project will increase.. The fact that the contract was negotiated without public scrutiny means that any exponential increases in cost will once again occur without the public knowing, increasing the prospects for corruption and undermining processes to hold officials accountable.
Conclusion
There is no limit to what South Sudan crude can purchase since the country has one of the largest reserves of crude in Sub-Saharan Africa and is currently pumping about 140,000 bpd.[16] South Sudan had 3.5 billion barrels proven oil reserves as of January 2017 according to BP’s Statistical Review of Word Energy.[17] What is required is strict transparency and accountability in the management of oil revenues. There is little oversight on how money from oil sales is managed and the role of parliament is vital here. That is why the architects for the “oil for development” project need to answer some questions on how this awesome strategy to convince South Sudanese that it’s not another “saga.”
A lot of projects with supposedly good intentions have turned into scandals. For instance, the dura saga was a culmination of a strategy to set up grain reserves—sorghum and maize—that could be sold to the public at lower prices when there is food shortage. The “Letter of Credit” saga ensued from a plan to stem the shortage of hard currency through the provision of US dollars to businesses in vetted financial transfers to suppliers. For a viable “oil for development” project, the level of transparency ought to increase quickly.
There is no doubt that South Sudan needs to invest in infrastructural development using petrodollars. There is little infrastructural development to show for the huge revenues generated from oil partly due to lack of investment in the roads, airports, bridges and health centers but another reason is lack of transparency, accountability and oversight. For this latest ambitious project to succeed, South Sudanese leaders must learn from the past and avoid repeating the same mistakes.
And this is not the first mega road project being proposed by the government because there was a $4 billion road network project that collapsed in 2012 before being implemented.[18] If there are difficulties in the implementation of this project, the public deserves to know as well.
The author, Mamer Deng Mamer, is a concerned South Sudanese citizen who resides in Bor, Jonglei State, South Sudan.
The opinion expressed here is solely the view of the writer.
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[1] SSBC TV March 25, 2019 evening news cast
[2] Xinhua News August 31, 2018 : http://www.xinhuanet.com/english/2018-08/31/c_137434222.htm
[3] Nyamilepedia September 10, 2018: https://www.nyamile.com/2018/09/10/south-sudan-to-exchange-oil-with-china-in-return-to-developmental-projects/
[4] Gurtong news February 4, 2019: http://www.gurtong.net/ECM/Editorial/tabid/124/ID/21768/Default.aspx
[5] The North Africa Post February 6, 2019: http://northafricapost.com/27723-oil-for-roads-south-sudan-allocates-10000-bpd-to-chinese-companies.html
[6] Belt and Road Portal March 28, 2019: https://eng.yidaiyilu.gov.cn/qwyw/rdxw/84114.htm
[7] Radio Tamazuj April 5, 2019: https://radiotamazuj.org/en/v1/news/article/government-raises-crude-oil-allocation-to-china
[8] The Petroleum Act 2012, Article 79, page 36.
[9] Ministry of Petroleum and Mining South Sudan: https://mpmrss.org/about/
[10] Gurtong August 3, 2016: http://www.gurtong.net/ECM/Editorial/tabid/124/ctl/ArticleView/mid/519/articleId/19737/President-Kiir-Reshuffles-Ministers-of-TGoNU.aspx
[11] S&P Global Platts: https://www.spglobal.com/platts/en/market-insights/latest-news/oil/060214-south-sudan-receives-35-bil-from-oil-sales-over-june-2013-may-2014-oil-minister
[12] The Sudd Institute, May 2018: The Petroleum Revenue Sharing Arrangement in South Sudan
[13] Juba Monitor newspaper, April 12, 2019. Pages: 1 and 2.
[14] Mahr, Krista, Time newspaper October 2011: http://content.time.com/time/world/article/0,8599,2096605,00.html
[15] DIPLOPUNDIT September 2009: https://diplopundit.net/2009/10/05/were-building-the-juba-nimule-road-in-sudan/
[16] Reuters news agency April 14, 2019. https://www.reuters.com/article/us-sudan-politics-southsudan-oil/sudan-political-turmoil-not-affecting-south-sudan-oil-flow-minister-idUSKCN1RP0KY
[17] BP’s Statistical Review of World Energy https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
[18] Reuters: Road-starved South Suda eyes a $4 billion road network. https://www.reuters.com/article/us-southsudan-roads/road-starved-south-sudan-eyes-a-4-billion-road-network-idUSBRE87915220120810
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