Draining the Swamp: Tough Test for New Finance Minister to Curtail the Cartels in South Sudan

By Ater Garang Ariath, Juba, South Sudan

Friday, 11 August 2023 (PW) — First and foremost, the Minister’s first tough test upon assuming the office is to rule the roost over this challenging institution and look at workable ways to insulate key economic priorities from our current economic instability and volatile politics. There is no peace and rest in the Ministry of Finance and Planning, but with a pure heart of dedication and commitment to serving the South Sudanese people and the appointing authority, morning and evening prayers will allow him to rule the roost and penetrate heaven and hell.

He has impeccable academic credence to have what it takes to reform and reorganises the Ministry of Finance and Planning, but some economists and other commentators have been arguing that the economic and financial crisis that we are facing will not allow comrade Chol to showcase his expertise immediately. He confidently convinced most of the South Sudanese doubting Thomas upon his appointment, but through his office-taking speech, he spoke their minds beyond doubt. As the young South Sudanese generation he represents, we must all wish to implement and raise the correct taxes and reduce the wrong ones.

And reduce overall expenditure while raising expenditures targeted at the poor and development and cutting other expenditures by a lot. The proper taxes mentioned in this context are property tax and taxes on real estate, agricultural income tax, and taxes on the income of traders and other groups currently not in the tax net. At the same time, indirect taxes should be reduced, like flat taxes on services, sales tax and imports. The idea, clearly, would be to increase direct taxes on those who can pay while reducing them for those who cannot and, therefore, should not be paying taxes.

On the expenditure side, the idea would be an overall reduction in expenses by moving to more targeted subsidies for the poor, removing subsidies, many of which are for the rich, and removing inefficiencies on the expenditure side. The overall thought is that if, by doing the above, the government can remove the fiscal deficit, over time, as we run surpluses, the problem of twin deficits (foreign currency and domestic fiscal deficit) will become more manageable.

The economic and political crises are not isolated events. Sound simple enough. But we have known all this for decades now. Economists and policymakers have been talking about agricultural income tax, taxes on real estate and property, and taxes for traders for many years. And we have also been talking about making government efficient and re-prioritizing expenditures for the poor and for development in general and human development in particular for a long time.

But all this has not happened. Clearly, it is not so easy to do it then. The real question is, why have we been unable to do what has been mentioned here? When we raise taxes and do it all the time, why is the focus on indirect taxes, usually in presumptive or advanced mode? Why have we not been able to reduce subsidies for the rich? We currently face a political crisis as well. Democracy is limping badly; the decentralized governance arrangements, once a stable equilibrium for the elite, have been destabilized due to the entrance of new players. It is not known what the new arrangement will be and when it will become clear, if at all.

The economic and political crises are not isolated events that have come simultaneously by coincidence. The two are connected. At the root of it are political economy factors that have been and are driving these dynamics. Our polity has been ‘rule of the few, by the few, for the few’. Those ‘few’ have been called the ‘elite’. It is the rule of those who have had the resources and the power, supported and bolstered by aspirants to those resources and power. It includes the top tier of politicians, bureaucrats, the military and judiciary, business folk, and the landed: resources and power.

The elites make sure that the rules are made to enrich them further and to confirm the entrenchment and continuation of their interests, and it will be so complicated for Hon. Minister to ignore the backseat drivers. This may sometimes be done illegally, but it is mainly done using the law. Judges, bureaucrats and army officers get plots and land legally. At the same time, the structures have worked hard to control society and undermine the development of all institutions and movements that have or could threaten their control. The development of political parties, grassroots mobilisation, democracy, media and civil society have all been undermined again and again in our society.

Student unions in some public universities are banned even today. This has made the mobilisation or organisation of the masses a lot more complicated. It has also made the development of strong institutions that are needed to underwrite democratic development in a country much harder. Is it any wonder then that governance has broken down? And we have not been able to implement ‘simple’ solutions that could solve our current economic problems. It is naïve to think that solutions and their implementation are ‘simple’.

The structures that have given rise to these problems cannot be the ones that provide us with the solutions. For change to take place, something has to give. As the crises deepen, the elites and the institutions that protect them might start fighting amongst themselves for scarce resources. That may break down the current equilibrium. The current economic and political crisis might be an early sign of the coming battle. This may bring about the change in structures that we need. Many other countries have faced similar crises, and some have also resolved them successfully.

But this does not mean that all can. It just shows that it can be done, though the solutions for each country tend to be context-specific. We will have to forge our own path here. At the moment, this looks like a challenging climb. The world is burning as headlines of economic meltdown and political turmoil dominate the news. South Sudan is no exception, as it has remained in the grip of a severe political and economic crisis for several years after its independence.

Market confidence erodes amidst weak macroeconomic stability and continued political uncertainty. It is nothing but natural for businesses to fear unpredictable changes and uncertainty of profitability. Therefore, reshaping the country’s economic institutions in accord with our needs and desires needs collective political efforts for the new Minister of Finance and Planning, Hon. Baak Barnaba Chol, to have a giant leap and has more powers at his elbow.

However, addressing real economic dangers without understanding the political context is like treating a heart patient without analysing the family history. Data on per capita income, inflation and growth can be quite misleading in mitigating real risks in a politically unstable economy. Examples of political risks are broadly defined as the impact of politics on markets, the passage of laws, the follies of leaders, and the rise of popular movements. The emerging political and economic scene in South Sudan is terribly risky and doesn’t inspire confidence in the future direction, whether one is appointed today or tomorrow.

The macroeconomic fault lines will hit us hard as the revitalised government failed to address structural issues and relied on short-term, unsustainable solutions. The fundamental point is to learn from others and immediately install filters to mitigate imminent dangers to funding the current account deficit, the upcoming budget, which is still in Revitalized Transitional National Legislative Assembly at the third reading waiting for its passage, meeting IMF prior actions and rolling over loans from China and other friendly countries.

The point is to learn from others to mitigate economic shocks. On a personal note, the risk of reversing subsidies to the people and increasing oil prices will yield a significant political cost for the current government. The politics of the parties to the Revitalised agreement always poses challenges of competing ideologies, conflicting interests, and different approaches to policymaking. This will not work for a country struggling with macroeconomic imbalances and the challenges of providing jobs to hundreds of thousands of young South Sudanese labour market entrants every year. Additionally, the most important and strategic Sudan and South Sudan Economic Corridor will continue to suffer due to the ongoing war in Sudan.

The political flux is likely to continue in South Sudan; uncertain politics halts timely decision-making, and risk-averse bureaucrats shy away from implementing material interventions. The ultimate sufferers are the poor South Sudanese people who lose hope of escaping the poverty trap after independence. There are jurisdictions that have developed institutional responses to deal with uncertain times. Even developed economies, for example, have faced frequent political shifts but have managed to let the market function and sustain economic growth. So, what can we learn from global experiences to mitigate some of the shocks to an already fragile economy? In such a politically tense situation, expecting politicians to develop a ‘charter of economy’ is a far-fetched dream.

The current structure of the Presidency is more of a social tea club with too little value or accountability to offer substantive policy advice. It will be prudent to set up an economic reform commission with representation from all states and administrative areas to focus on one or two key reforms are needed to ensure macroeconomic stability, cutting down the government’s and its enterprises’ wasteful expenditure. This should be the focus of the upcoming economic conference initiated by the former Minister of Finance and Planning, Hon. Dier Tong Ngor. The members of the proposed set-up Economic Reforms Commission should have a tenure of five years with oversight powers, and their advice would have to be binding on the government. The finance minister should convene the commission meetings with complete support from the President.

At this point, the current structure of politics and bureaucracy is neither competent nor ready to implement the required structural changes to revive the economy. Failing to put our house in order may lead to a very difficult phase with harsh political and economic conditions by multilateral and bilateral lenders. The other filter that could give private investors confidence is to convert the Board of Investment into a corporate body on the lines of our constitution. This space will comfort local and international investors in terms of facilitating business processes, financing and dispute resolutions. The new set-up should be legally empowered and professionally governed with little interference from the government. This setup should regulate all economic zones.

The ownership of structural reforms is critical for political parties and private sector leaders. The country is facing a severe balance of payments crisis and battling a situation where the country’s foreign exchange reserves have fallen beyond recovery. All political parties and power brokers in South Sudan should work together with the new Minister of Finance and planning to stabilise and revive the economy. For that, an independent technical space will have to be created to ensure the credibility and continuity of structural reforms.  Making the same mistakes repeatedly and relying on rent-seekers and the forces of the status quo will only make the economic scene more chaotic.

The writer is a South Sudanese journalist, former Secretary General of Defunct Aweil East State, living in the Republic of South Sudan, Juba Reach me at atergarang452@gmail.com.

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