Africa Watch: South Sudan suffers huge reputation loss after civil unrest

Investment analysts have weighed in on the huge reputation loss suffered by the newly-independent state of South Sudan, a day after the return of former rebel leader Riek Machar back to the capital, Juba, after a restive two-year stint.

The conflict dimmed the young nation's reputation among-st existing and prospective investors, making it difficult to tap South Sudan's enormous natural resources.

James Alic Garang, Senior Economic analyst at Ebony Center and Associate Professor at the Upper Nile University (UNU), said the unrest reduced South Sudan's ability to trade internationally, becoming a net food importer and single-commodity (crude oil) exporter.

Alic said South Sudan's plans to immediately begin agriculture sector investments and industrialization as an optional entry point into the world markets all failed to take off.

The country planned to embark on fish exports, timber and bulk agriculture production.

The civil conflict widely displaced human labour, disrupting South Sudan's agriculture sector, forcing foreign donors to repeatedly declare a hunger emergency.

Alic said the unrest left enormous and largely untapped natural resources across the country. The country has vast oil reserves and several acres of relatively undeveloped oil fields.

The resumption of oil production in 2013 was projected to improve the economic viewpoint of the country with the Gross Domestic Product (GDP) rising as much as 40 percent.

The analysts said the civil conflict cast a shadow over the economic recovery prospects and overall development in the short-term period.

The South Sudanese pound, the biggest casualty of the political crisis that engulfed South Sudan, saw several foreign banks, mostly local subsidiaries of regional banks in Kenya, Uganda and Ethiopia record mounting losses as a result of the currency devaluation.

"The crisis piled pressure on the pound. It meant the exchange rate of the U.S. dollar to the South Sudanese pound was shooting up. This brought instability in the currency market which compelled the government to realign (devalue) the currency in December 2015, Alic told Xinhua in an interview on Tuesday.

"But due to improper measures put in place the alignment did not work," he added.

Analysts say the decline in oil revenue, negatively affected the national budget, which partly pushed the government to devalue the currency.

However, the devaluation of the currency also introduced parallel market rate of the dollar, which seemed to have overshadowed the official rate of 2.97 South Sudanese pounds (SSP) per hundred dollars to 18.50 SSP per hundred in mid-December 2015.

The devaluation of the parallel exchange rate fueled inflation of food commodities in the market as well scarcity of fuel, making life more devastating to the citizens, according to analysts.

David Thiong, Director of Economic Statistics at the National Bureau of Statistic, said the conflict has heightened inflation, sending the Consumer Price Index (CPI), a representative basket of goods and services consumed by each household in South Sudan, rising to 245.2 percent.

"The annual growth in the CPI for South Sudan increased by 245.2 percent in March 2016 compared to 13 percent for March 2015," Thiong said.

South Sudan plunged into a civil war in December 2013 when President Salva Kiir accused his arrival Machar of plotting a coup. The ensuing violence affected almost all household.

A peace agreement mediated by regional powers under the Intergovernmental Authority on Development (IGAD) saw the final return of Machar to Juba for the formation of a national unity government in preparation for the elections due to be held at the end of 30 months.

Investment analysts said the conflict damaged country's reputation and it's potential to woo and attract Foreign Direct Investments (FDI) although some analysts have considered the political risk brought about by the conflict to be short-term in nature with growth prospects still bright.

Spencer Kenyi, Environmental Economist and International Trade expert, said the investment climate in South Sudan has been dimmed by the militarized conflict at the expense of key services like health, education, roads and infrastructure.

Kenyi said youth manpower was used in the war and thousands others were killed, denying the country a key economic reconstruction resource.

The economist regretted weakened ability of the humanitarian agencies to effectively to respond to a further deterioration of the scenario.

"Providing service to our people is no longer course work because the money has already been used to purchase weapons that are non-beneficial to the ordinary citizens," Kenyi noted.

"The worst part of it is the use of our foreign currency for acquiring weapons and to sponsor the war."

The lack of sufficient foreign currency in the market continued to negatively affect food imports from the neighboring countries of Uganda, Kenya, Ethiopia and Sudan. This led to skyrocketing commodities prices in the market.

The conflict has had a significant financial impact on South Sudan. In 2014, the economy grew below the projected rate of 15 percent.

While economist view the resumption of oil production as a solution, the low global oil prices significantly had an impact on South Sudan's earnings.

Besides, the war saw significant drops in output over the same period, cutting gross oil revenue by more than half from 29.7 million dollars in December 2014 to 10.8 million in January 2015, according to the authorities. Enditem