Gettin' by digging gold

Fascinating article by Hez Holland on the artisanal mining business in South Sudan. The numbers sound kind of crazy but then South Sudan is a kind of crazy place. 

Leer Likuam sat on the edge of a shallow trench, puffed his pipe and boasted he once found a 200-gram gold nugget bigger than his thumb ...  

On the international market, Likuam's prize lump would fetch $11,000, an enormous sum in a country where the average teacher earns just 360 South Sudanese pounds, about $90, per month ... 

On an average day he might dig up six grams, worth around 1,200 South Sudanese pounds ($270), he said. "Some days you're lucky."

That seems far too high to really be an average day. Perhaps some more boasting. But then

In the last year alone, Likuam has bought 10 cows, each worth around 1,000 pounds.

Predictably the government is keen to get in on the action and get some big foreign companies in to do some real exploration that they can tax. Given the rather weak relationship between government revenues and public services, I'd like to see some research on the current scale of the industry and how many people are making a living with it, and then what we might expected to see from large commercial mining in terms of both revenues and local employment. One of the key messages from WDR2013: not all jobs are equal for development. 

Johannesburg in the 1890s

That's the verdict of South African journalists Kevin Bloom and Richard Poplak on arrival in Juba. Like Johannesburg in the 1890s. " We have never seen an aid orgy like this one - not in Kabul, not in eastern DRC, nowhere." 

↬ TH

The State of the Game between Juba and Khartoum

I continue to be fascinated by the nature of the strategic interaction between Juba and Khartoum, without really pretending to understand it very well. As it turns out, Juba's strategy seems to be push ahead with a Kenya pipeline whilst resuming export through North Sudan in the meantime, to give them an alternative option. So what is Khartoum's optimal response to such a move?

A friend suggests that Khartoum's strategy is to continue to create chaos in Jonglei (South Sudan) in order to disrupt future exploration, knowing that a Kenyan pipeline would not be economically viable without further discoveries.

I thought I'd also email someone who is an actual game theory expert, who makes the interesting point that - a little counter-intuitively - it may actually be in Khartoum's interest to encourage the development of a Kenya pipeline, as a way of credibly committing themselves to continued future cooperation on mutually favourable terms.

Paraphrasing the words of the great philosopher Sting, “If Someone Does Not Trust You, Set Them Free“.

The oil deal

I haven't read any coverage yet, so I've just had a quick skim of the actual agreement (available here, HT: Nicki Kindersley). 

As a reminder, pre-agreement North Sudan wanted to charge half of the value of the oil, or around $36 a barrel. South Sudan wanted to pay $1 a barrel. 

It looks like there is a 

- processing fee - $1.60 per barrel

- transportation fee - $8.40 per barrel for one oilfield and $6.50 for the other

- transit fee - $1 per barrel

so a total of $11 or $9.10

plus a Transitional Financial Arrangement (payoff) of an additional $15 per barrel until a total of $3.028 billion has been paid (at production of 180,000 barrels per day this would take just over 3 years).

So - whilst this seems like a good deal for North Sudan in the short run and a good deal for South Sudan in the long run, my main concern is the hold-up problem. What is stopping North Sudan ripping up the agreement in 3 years, demanding a higher cut, and just confiscating oil (again). Here is Tony Venables from Oxford in a paper on these issues;

Even if the purchaser and investor entered an agreement before the investment is undertaken, ex post the purchaser may act opportunistically, breaking the agreement and only offering a lower price ... 

The hold-up problem between states is radically more severe than that within countries because the whole domain of international law is fragile: essentially, the concept of national sovereignty constitutes a barrier to the enforcement of any contract entered into by states.

Thoughts?

What are the policy research priorities for South Sudan?

There was an interesting session at the IGC Growth Week at the LSE today on South Sudan, with speakers including the President's Economic Adviser Aggrey Tisa Sabuni (also doing a public lecture at LSE on 2 Oct), former Minister Luka Biong Deng, IGC Juba staff Peter Biar Ajak and Utz Pape, and trade economist Pierre Sauvé. You can read my notes on twitter under the hashtag #growthweek.

One thing that stood out for me were the suggestions for policy research priorities by Utz Pape; land rights, mobile money, the labour market, macroeconomic management, and oil management. For me, the economics of the macro and oil issues are fairly straightforward, the question is the politics of implementation. The questions on land rights (would improved private land titling increase agricultural investment?), mobile money (what is the best regulatory system to encourage development?), and the labour market (why is it so dominated by foreigners?) are all interesting.

Any other ideas for important research questions?

War and Peace

Presidents Bashir and Salva Kiir met in Addis yesterday to finalise a peace deal.

Just two days earlier, Sudanese planes airdropped supplies, possibly weapons, to an anti-government militia deep within South Sudan. UN troops provided confirmation that planes dropped packages in the area. The Small Arms Survey also confirm the pattern through 2009-2012 of Chinese-made arms being supplied (in contravention of a UN embargo) by Sudan to militia in Darfur and South Sudan. 

Either Bashir is not serious, or perhaps more likely, he is not in control.

Doing governance is hard #163826353

First the good news: a new evaluation report from a community driven reconstruction programme in Eastern Congo (HT: Sarah Bailey) shows yet again that it is possible to evaluate messy hard-to-measure governance interventions using rigorous quantitative methods. IPA and JPAL have an evaluation of a similar programme in Sierra Leone.

Now the bad news: this kind of design only works with interventions at the local level because you need a large sample size of units - in this case villages. National-level interventions give you a sample size of one, not very conducive for quantitative analysis.

And the worse news: these local level governance interventions don't seem to work. Both this Congo study and the Sierra Leone study find no improvement in local governance.

Now for some better news: we actually already know what a lot of the national-level governance interventions that need to be done are. They are boring. Things like audits of government accounts. South Sudan has finally just published the audit of the 2007 accounts, to apparent astonishment and outrage by parliamentarians. It's pretty grim reading. Though I'm not sure how anyone is actually honestly surprised. Still, it's probably not totally outlandish to think that audits done a bit quicker than 5 years after the fact might improve budget governance.

And now for the worst news of all: much of this easy, boring, national-level governance stuff is around accountability - which means the national leadership intentionally putting in place limits on its own power. Binding its own hands. You have to be an incredibly enlightened leader to purposely reduce your own power. The whole point of the politics game is increasing your own power. Which means that you need people to demand accountability and force leaders into action. And despite all the talk about governance from the international community, we aren't really interested or able to be the ones doing the demanding.

Social safety net bleg

A friend writes;

Do you know any good, short reads on “social safety nets”?

The context for this is that the South Sudan oil shut-down made all the donors panic and want to divert lots of development programming back to humanitarian programming. All of the advice to the government in response has been to continue to focus on building government systems so that they are stronger and more funds can flow through them when the oil is turned back on.

I think there can and should be a stronger response on the humanitarian side as well, that is institutionalised. Every year, there are going to be parts of South Sudan that are food insecure, even if just due to bad rains or floods. So we need a sustainable system that can address these needs, and to ensure households don’t become chronically food insecure, not the current system of panicked international fund-raising and dumping tonnes of food aid on the problem every year.

So do you know a good, short briefing paper that summarises country experiences and evidence on these sorts of programmes?

I second all of that. So - any suggestions?

South Sudan: Failed or fragile?

This is a guest post by Aggrey Tisa Sabuni, Economic Advisor to the President, Republic of South Sudan. 

Foreign Policy magazine recently ranked South Sudan the fourth most "failed state" in the world in its 2012 Failed States Index, which ranks countries according to a list of 12 "state vulnerability" indicators. There are numerous concerns with this index; however, I would like focus my attention on the term "failed state". To fail implies you cannot learn, improve and eventually succeed. Although I do not dispute that South Sudan is fragile, I take issue with the idea that we will never prosper as a nation. Instead of labelling South Sudan as a lost cause, we should be working to identify the roots of our fragility so that we are able to turn around our fortunes. In this regard, I wonder if the readers of this post and the public at large truly understand what "fragility" actually means?

The term "fragile state" conjures up a number of different images, but ultimately it means a country is susceptible to a crisis, whether it is a natural disaster, an economic catastrophe or a security threat that cannot be easily dealt with. Fragility tends to be caused by the absence of a strong and effective government apparatus capable of dealing with crises as they develop, exacerbated by a lack of relative social harmony across different societal groups. Symptoms of fragility include regular outbreaks of internal insecurity, a weak justice system that fails to resolve disputes as they arise, a shortage of qualified and skilled personnel to staff key government institutions, and a lack of basic services to meet needs of the population.

However, fragility is also an opportunity. It is a chance to start over, to build from the foundation up. What is required, however, is patience. When you are building a house the foundation is the first and most important step. It takes more time to complete than the rest of the house. In South Sudan we are building the foundation.

The year since our independence on the 9th July 2011 has been a turbulent one. The Government and our population have been operating under very challenging circumstances and we are learning how to address these challenges. On January 20th the Government made the decision to shutdown of oil production, in response to repeated provocation from the Government of Sudan and the theft of South Sudan’s oil. As a result, we are facing the prospect of losing 98 per cent of our revenue. We have also seen a resurgence of open hostilities in the border regions, rising domestic prices for basic commodities, insecurity from cattle raiding and limited provision of services.

We did not expect it to be an easy year.

Despite these challenges, we have begun to see the fruits of our labour in other important activities. National and State governments have adopted constitutions and are abiding by them. In Jonglei State, we have witnessed a peace accord that has stabilised relationships between the various groups in that State. These actions have undoubtedly helped improve the level of internal security and has promoted an increasingly strong sense of nationhood amongst the population.

In the area of economic policy, we have implemented significant public financial management reforms, which have led to an increase in non-oil revenue collections of over 250 per cent since July 2011. A new currency was successfully introduced under extremely challenging circumstances, but with minimal disruption to the South Sudanese. All of these successes have been achieved under the framework of the South Sudan Development Plan, our first ever national plan, which outlines how best to use Government and donor funds for the development of the country.

These are not insubstantial achievements. They are a direct reflection of a country determined to ensure that its people benefit from improved security and economic prospects.

Despite these successes, we have continued to receive a significant amount of negative press over our actions, particularly the decision to halt oil production. While there is no doubt that circumstances have slowed down our progress, the fact remains that the complex nature of our negotiations with the Government of Sudan disguises their unwillingness to negotiate and compromise a settlement. Until the political challenges with Sudan are resolved, we will continue to be hampered in our efforts to build a solid foundation for South Sudan. As such, this is the precise moment where we need our friends in the international community to stand up, to acknowledge our successes and failures, and to actively support the efforts of the government in dealing with its challenges.

South Sudan is not a failed state. We are a country rich in potential but hampered by short term fragility. Managing the challenges we face is not a simple task. I strongly believe that South Sudan can utilise its abundant resources for the benefit of the population and the region if an adequate foundation is built. However, this processes requires the patience and sustained support of the international community. We will undoubtedly make mistakes along the way, but with the support of our friends, we will be able build a strong and prosperous nation.

Secretaries without borders

Secretaries without borders is what a colleague joked that the government in Juba needed a few years ago. My friends and colleagues Ben French and Nick Travis have a great post up on the new ODI blog beyondbudgets.org making this point in a bit more detail;

Investment is not just needed in getting the policy ‘right’ but also in making the ‘paper move’. Money needs to be spent on building the capacity of governments to maintain basic administrative and management processes, on training administrators and establishing functional IT systems. No matter how good policies are, without the basics in place - and the people to administer them - implementation will continue to be hindered by chaotic and ineffectual management.

Well worth reading in full. They have also just published a couple of briefing notes on the new government Aid Strategy in South Sudan and the 2009 Donor-Government compact. 

Is a little balance too much to ask?

Perhaps I'm being overly sensitive and demonstrating a heavy bias, but I feel a bit like the mainstream media's coverage of South Sudan's first birthday was a pretty unrelenting torrent of negativity. As ever, John Ashworth puts it well;

I have deliberately refrained from circulating articles about the first anniversary of South Sudan's independence because, quite frankly, I think most of them are rubbish. They buy in to and reinforce the international community's current negativity about South Sudan, a negativity which stems from a lack of understanding of the hopes and aspirations of the people and the actions of their government in the face of intransigence and aggression (military, political and economic) from their northern neighbour.

I would be the first to call for more criticism and scrutiny of the Government of South Sudan, but can't we have just a little balance on their first birthday celebrations? And where has all the criticism been for the past 7 years since the peace agreement?

• Non-oil revenue has increased 250 percent since July 2011 (Aggrey Tisa Sabuni, economic advisor to the President of the Republic of South Sudan). 

• Child and infant mortality are down 20% since the peace agreement (Erin Polich). 

• Frankly, many people are happy to have survived a year without Khartoum invading (Gill Lusk, Africa Confidential)

There has also been almost no reflection on the state of the North, on what specifically the Juba government should be doing better, or on what the international community should be doing better (for instance, have the American or any European governments responded to Salva Kiir's letter requesting assistance in retrieving the stolen funds which are held in American and European banks?).

99 problems, but Bashir ain't one

Daniel Kahneman wrote his new book, a popular exposition of the behavioural economics research that won him a Nobel Prize, in part because he thought that popularizing some of the core concepts and allowing them to enter our vocabulary might improve the quality of our thinking and our public debate. Quite sadly I feel much the same about a lot of the basic concepts in economics and statistics that have been around a lot longer than behavioural economics. For instance, the core of impact evaluation; the counterfactual. Imagine what would have happened if the event we are examining had not happened. So let's imagine for a second what would be happening in South Sudan if there had not been independence. Peace and prosperity? New schools, roads, and hospitals? There are a couple of approaches we might use to think about what would have happened. We could look at the history of South Sudan pre-independence. We could look at all of the sterling development initiatives led by indicted war criminal Bashir in the South between 1989 and 2005. All of the schools and hospitals that he built. Or we could look at some of the people still living in the North. Perhaps those who have fled their homes to hide in caves from Bashir's bombers. Or the 100,000 who have fled to the South from Blue Nile. The counterfactual for South Sudan is not flowers and kittens, it is rule by a man wanted for five counts of crimes against humanity; murder, extermination, forcible transfer, torture and rape. Happy Birthday South Sudan. 

Why South Sudan is winning the oil pipeline stand-off with Khartoum

Adam Hyde has a new piece up arguing that it's time for the international community to increase the pressure on South Sudan's leaders to make a deal on oil with Khartoum.

I'm still not convinced that it has to be Juba to blink first. Look at the reaction to austerity; Sudanese students are protesting against the regime in Khartoum. South Sudanese students are collecting money to send to the SPLA. Communities around the South are donating cows to the SPLA.

I want a deal as much as anyone, but I want a deal that is fair, one that is closer to the $1 a barrel it actually costs to run a pipeline than the $36 a barrel that Khartoum wants to charge - half of all revenues.

Governance conditionality in South Sudan

Howard French makes the case in the Atlantic for governance conditionality in South Sudan.

In South Sudan, in fact, the major complaint is that the West failed to impose conditions on the country's fledgling leadership when it clearly had the power to do so. These conditions might have included strong press and freedom of speech laws, a powerful independent audit agency, signature of EITI, guarantees for political opposition, a limitation on presidential mandates, etc. 

All of which sound like pretty sensible ideas to me. 

He quotes Nhial Bol, editor of Juba-based newspaper the Citizen

"Why can't the West learn from its previous mistakes? Why have they supported us and imposed no conditions?"

Actually the West has learnt from its previous mistakes. It has just learnt the wrong lesson. Giving aid with conditions attached is pretty thoroughly out of fashion these days, following the widespread backlash to structural adjustment programmes in the 1980s and 90s.

But that nasty 80s conditionality was all about which particular policies to pursue. Governance conditionality isn't about imposing particular policies, but demanding democratic government.

As Paul Collier put it a few years ago (here and here):

"The essence of governance conditionality is that aid is being used to increase accountability not to donors, but to citizens." 

And the final word to Michela Wrong:

If you cut all aid to Kenya, people are going to die. So I don’t think that’s a solution. But I will say that aid donors have to look very closely at what they do. If you have a government whose ministers are setting out to steal the equivalent amount of money that they receive in aid, then you have to wonder why western donors are continuing with that relationship. I don’t think the answer is to cut them off, but the answer lies very much in doing what Edward Clay, the British high commissioner of the day, was doing. Which is to be very confrontational, to humiliate these people in public, to call them to account, to deny them visas. The aid relationship needs to be less automatic, less lazy, less complacent, and much more abrasive.

Sudan Links

Or rather, John Asworth's Sudan links:

1. An important statement from the UN recognising that the basis for demarcating the border is the 1956 border, not the current de facto border that Khartoum has been pushing as a basis for negotiation.

2. "Has the AU become a pawn in the hands of the Khartoum regime?" A question apparently on the lips of many South Sudanese.

3. An excellent open letter from South Sudanese to Salva Kiir on corruption. Really well written. Members of the international community concerned about corruption might want to start here.

4. The Budget Speech. Including details on financing plans. Of a total SSP 6.4 billion budget, 10% is expected to come from domestic non-oil revenues, 15% from reserves, 15% from domestic borrowing, and the remaining 60% from yet to be negotiated international loans and oil/mineral concessions. So, er, good luck with that (and let's really hope that Khartoum will be pressured into making a fair deal on oil soon).

The Khartoum regime is the obstacle to peace in Sudan

International observers often underestimate the extent to which the Islamist military regime in Khartoum is the single most important obstacle to peace in and between the two Sudans. South Sudanese (and the people from Darfur, Nuba Mountains, Blue Nile, Abyei, eastern Sudan, Nubia in the far north, and indeed ordinary citizens all over Sudan) know the nature of the regime with which they are dealing, which is why they are circumspect about negotiations and steadfast in their military resistance. To point at weaknesses, failures and even abuses by any or all of these parties misses the point that they all feel they are locked in a life or death struggle with a ruthless, sophisticated, patient and very clever adversary (an adversary, incidentally, which can and does run rings around most western politicians, diplomats and analysts).

--John Ashworth

Fuel protests coming in Khartoum?

The Sudanese Minister of Finance Ali Mahmoud told parliamentarians on Wednesday that the austerity measures the government is currently applying are a reflection of the level of “bankruptcy” in state coffers.

In a related context, a Sudanese political analyst has predicted that the ending of fuel subsidies will almost certainly lead to a popular uprising. 

According to Omer Abdel Aziz, a professor of political sciences, there is a likelihood of 95 percent that the decision will spark a popular uprising when it comes into effect. 

Sudanese opposition parties have already vowed to protest against the ending of fuel subsidies.

Sudan Tribune

The size of the fuel subsidy about to be cut in Sudan is $2 billion a year. To put that in context, with a population of about 35 million people, the subsidy is roughly the same size as the one the government tried to cut recently in Nigeria, which was $8 billion a year across 158 million people. The abrupt removal of the subsidy in Nigeria led to widespread protest.

I really don't think it is at all clear that the Southern leadership is facing any more popular pressure than the Northern leadership over the economic implications of the oil shutdown. Hopefully a demilitarized border zone would allow an oil deal to be made.

Also told that a deal on demilitarized border zone not out of question at next round of talks, starting next week #Sudan
— Alan Boswell (@alanboswell) June 15, 2025

South Sudan oil revenue shutdown starting to bite

Here's the latest inflation figures for South Sudan from last Friday - prices jumped 30% between April and May.

I'd be interested to see the figures for Northern Sudan, but last time I checked the Northern stats agency had a much longer delay on releases.

I don't think its necessarily clear yet that the South is feeling the pressure any more than the North (though I'm open to persuasion). In any case, I'm still hopeful that as both sides gradually run out of options (boosting tiny non-oil collections, begging corrupt elites to give back the money they stole...) they will be forced to make that deal and get production going again.

War we can believe in?

Andrew Natsios, a former US envoy to Sudan and former administrator of USAID called on Friday for the US to arm South Sudan with anti-aircraft weapons.

We need only make sure that, for the North, attacking the South is a little bit harder than shooting fish in a barrel.

Maybe providing weaponry inherently built for self-defence is something that a few more people can get on board with than bombing Sudan's air bases or all-out war?

Douglas Johnson on international engagement in Sudan

Douglas Johnson literally wrote the book on the "The Root Causes of Sudan's Civil Wars," which is considered to be the most authoritative account. 

Writing about Abyei, in May last year, he said;

The international community — particularly the United Nations and the United States — have been spectacularly ineffective in getting the Sudanese government to honor its own agreements.

...

To prevent the Abyei crisis from igniting other conflicts, the international community must stop pretending that both sides are equally at fault. Carrots haven’t worked. Washington will need to wield sticks, such as canceling debt relief talks or suspending normalization of diplomatic relations, if Sudan does not withdraw its forces quickly. But ultimately, Washington has limited leverage over the Sudanese government, having reduced both its diplomatic and economic ties during the civil war. 

The key player will be China.

There was a time though when Washington did have leverage over the Sudanese government, which it used to help broker the 2005 Comprehensive Peace Agreement.

In early 2002 Khartoum was frightened of being bombed by the U.S. It had been bombed once before, and with its past support for Osama bin Laden, world opinion was against it [Douglas Johnson, again].

Just saying.