News Analysis: Crisis hit S. Sudan needs trade diversification to boost investments

Despite once experiencing an oil boom, South Sudan needs to invest more in trade facilitation, production and building access to external markets to create jobs and reduce on imports, experts have observed.

Oil exports dominate the economy and government revenue. They generated large revenues of about 20 billion U.S. dollars from 2005 to 2014, equivalent to 98 percent of the annual government budget, but weak governance has meant that these have not been used to invest in building productive capacity.

The country's trade surplus is largely a result of its oil exports, and increased from 3.99 million dollars in 2009 to 6.93 million dollars in 2012, reflecting the increase in oil exports.

However, since outbreak of the December 2013 conflict and the recent renewed clashes, South Sudan imports have been greater than exports resulting in trade deficit.

Oil production plummeted from 350,000 barrels a day to less than 160,000 bpd due to conflict and drop in global oil prices.

The undersecretary Ministry of Trade, Industry and Commerce Biel Jock Thich told Xinhua in Juba on Tuesday that the country has for the past three years been having a trade deficit and that it is incumbent upon them to diversify the economy.

"For all this time we have a trade deficit because we import everything from outside," he explained.

He added that to facilitate trade, they plan to eliminate the persistent Non-Tarrif Barriers (NTBs) despite having joined the East African Community in April and even set up a one border stop post at main Nimule border with Uganda.

"We are working to eliminate NTBs. Most of them are on our side and we are working on that with support from Trademark East Africa," Biel revealed.

The government recently put restrictions on export of timber, charcoal and steel products in a bid to widen the narrow non-oil tax base.

Top of these it prioritized investments in gum Arabic, a soft drink emulsifier, fish, mining and embarking on agriculture to give the country competitive trade edge in the region.

Undersecretary Ministry of Mining, Andu Ezbon, told Xinhua that they have gold, copper, uranium, iron ore in abundance but due to lack of developed infrastructure like roads and energy, the mining sector is redundant.

"We have the gold, iron ore but transporting it to the market is still very hard because we don't have roads and power for example extraction of iron ore, copper require power in abundance," Andu explained.

The Secretary General South Sudan Chamber of Industry, Agriculture and Commerce, Simon Akuei, said that much effort must be geared toward cutting expenditure on manufacturing, agriculture and transport to help ease cost of doing business.

"More investments must be put toward funding agriculture at local level and transport that helps in subsidizing rural agriculture," Akuei revealed.

Meanwhile, economists Alic Garang and Yurendra Basnett in their paper: Exiting the cycle of conflict in South Sudan, diversifying trade for sustained and inclusive prosperity, argue that producers in South Sudan face many constraints, including lack of infrastructure, finance and poor governance.

"This includes simplifying documentation requirements, training of Small Medium Enterprises (SMEs) in best business practices and resolving issues of land title deeds," the two experts said.

"The financing of SMEs can be through embracing a financial inclusion agenda, strengthening the current institutional regulatory framework and channeling parts of the oil revenue to the economy through the banking sector," they added.

They observed that 99 percent of all firms in South Sudan are classified as SMEs and that building private sector capacity will be essential for the functioning of local markets and for trade diversification.

"The business environment in South Sudan is unfavourable to trade. One problem is the issue of tax multiplicity at legal check points and extortion at illegal road blocks which adds extra cost of transport," it noted.

According to the World Bank, it takes for entrepreneurs in South Sudan 12 documents, 130 days and 9,300 dollars to import a standard container of goods, and 10 days documents, 55 days and 5,400 dollars to export one.

"Increasing production will require an active role by government in addressing infrastructure, credit, land tenure system and corporate governance," it said. Endit