South Sudan To Expedite A Shift To Non-Oil Income Collections

This article was last updated on April 16, 2022

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The move comes after the newly born country lost 98% of its Government revenues when it closed the oil oozing valves in protest of the oil’s confiscation by the Government of Khartoum resulting into blows between Juba and Khartoum administrations. 
  
The two countries; South Sudan and Sudan, despite talks, have never reached an agreement over how much the south must pay as the pipelines run from South Sudan to refineries in Sudan. 
  
This provoked South Sudan to shut down her entire oil production of 350,000 barrels per a day in January 2012, after the Sudan started seizing south’s oil to compensate for what it called unpaid transit fees. 
  
According to reliable reports gathered by Gurtong from trusted sources in addition to the previous press release published on the Republic of South Sudan through (RSS)’ official website by National Ministry of Finance & Economic Planning, the RSS Directorate of Taxation under the Ministry Finance, has announced that it will soon commence a campaign whose intention is to accelerate the country’s transition to non-oil revenue and other more self-sufficient cost-cutting measures. 
  
Aiming at increasing non-oil revenue collection by 300%, the campaign will be made public, within six months, the statement read. 
  
“Presently, from non-oil revenue, we are still collecting up to about SSP13 million per month, exclusive of customs… In the next six months we want to increase the non-oil revenue collection about SSP13 million to SSP 40 million each month, which is still about 5% or less of pre-shutdown monthly expenditure by the government, but it is enough for some essential services,” the RSS’ official statement quotes the Minister of Finance, Hon. Kosti Manibe.

While clarifying that no new taxes will be introduced, the official government’s public statement states that the national government is working to systematize tax collection in all sectors as an alternative for the lost oil revenue.

The statement adds that the ministry is just enforcing regulations that have been on the books since the passage of the Taxation Act of 2009, but not enforced widely.

In order to be acquainted with their right and obligations, the statement further reveals that the Directorate of Taxation is expected to launch a taxpayers’ education for business people and income earners across South Sudan through radio, print and using the Directorate’s trained experts, media outlets across the country have reported. 
  
The austerity measures already approved by South Sudan’s cabinet on 20th February 2012, will not affect salaries for the civil service or the security services, the Finance Minister has clarified adding that it will be effective upon signing by the President. 
  
While describing the government austerity measures as swift and deep cuts, Hon. Kosti Manibe in the statement said that no layoffs of government’s civil servants neither organized forces personnel nor the army (SPLA) would be executed. 
  
The cutbacks are effective immediately and will ensure that the necessary funds are available to sustain government and security forces operations.

The country’s Vice President, Dr. Riek Machar Teny estimates that the South Sudan government’s monetary reserves will momentarily continue to unstably rise and fall in anticipation to stabilize after about 30 months when the country certainly solidifies her activities on development. 
  
A week ago, Dr. Machar who supports the decision of temporarily shutting down the country’s oil production, told British Broadcasting Corporation (BBC) that development would be put suspended for a number of months or few years, but basic services would not suffer and he assured the public that Government salaries, including those for members of the large military, would be paid. 
  
“Unfortunately Khartoum has not co-operated with us, so instead of Khartoum taking the oil, we’d better freeze it until we get alternatives to exporting oil, so that the people of South Sudan can enjoy their own resources,” expressed Dr. Machar and promises, “for a period of 30 months we will definitely freeze our activities on development, but we’ll provide basic services such as health, education, water and even some infrastructure projects will go on.” 
  
Like Dr. Machar who maintains his government has ambitious long-term plans to overcome the crisis, his other high profile government officials also promise to give priority to health, education and the army with the 2% of its revenue that remains.

While briefing the media also last week in Juba during a weekly government press, the National Minister of Information, Dr. Barnaba Marial confirmed that the austerity plan was already endorsed by the National Council of Ministers now pending the promising president’s signature for execution.

In December 2011, Khartoum administration evidently took seized ships loaded with South Sudanese oil worth $815 Million claiming to account for unpaid fees for shipping the oil through its pipeline.

The Government of Sudan want $36 per barrel in transit fee while South Sudan is willing to pay less than $1 per barrel, which is close to the international norm. For a similar pipeline of comparable length that runs through Cameroon, the Government of Chad pays $0.41 per barrel. The African Union, as well as countries such as Britain and China, which gets about 6% of its oil from South Sudan, are trying to broker a settlement. But a second round of talks in Addis Ababa last week has not produced any white smoke.

In his opinion he wrote, the former Minister in the office of the President, the then Southern Sudan, Mr. Luka Biong Deng described the decision taken to shut down oil as a bold and wise move saying this crisis could offer a golden opportunity for South Sudan to trim the government and develop scenarios of running the new nation without oil revenues.

“Salaries and operating costs constitute more than 80% of total expenditure, the highest level in the region. Simply, the government is too big and the austerity measures should focus on how to slim the government without affecting spending meant for the rural population, particularly in education, health, water and agriculture,” he expresses in his opinion.

The South Sudan ruling party’s Secretary General, Mr. Pagan Amum who is currently a leading negotiator on RSS Government’s behalf, said the oil negotiations took place in light of the shutdown of the oil operations in South Sudan because the Sudan government kept stealing and imposing blockade on RSS oil export.

He said South Sudan’s negotiation team he leads, had carefully studied the Khartoum’s proposal which presented to Juba Government attempting to charge $36 per barrel as transit fees.

Amum disclosed to RSS a well-argued analysis and made a presentation concluding that the Khartoum’s ill presentation was littered with false statements and incorrect figures, and that these charges are discriminatory, a violation of international law and existing contracts.

He said the RSS has been paying in full for the use of infrastructure located in Sudan but the Government of Sudan has consistently made counterfeit claims that the government of Juba has never paid for the use of infrastructure located in Sudan.

The Vice President has also disclosed that the oil companies had orally and in writing affirmed to Sudan and to African Union High-Level Implementation Panel (AUHIP) that the RSS has in fact been paying all of its processing and transportation fees since July 9, 2011.

He said that the value of the transit fees has been the only outstanding issue saying the RSS has repeatedly committed itself to pay a transit fee to the Government of Sudan in accordance with the State practice.

The leading negotiator added that according to international law and State practice, transit fees should be cost based and non-discriminatory.

Terming the $36 charge is undeniably discriminatory, RSS protests that usually transit fees are basically a small nominal fee for instance the Azerbaijan-Georgia transit fee is $0.18 per barrel and for the Azerbaijan-Georgia-Turkey route $0.25 per barrel is paid. Both parties have decided to use the Chad – Cameroon pipeline as a reference point: The transit fee for that pipeline is $0.41/barrel. If this would be adjusted for the lengths of the GNPOC and Petrodar pipelines, this would be at $0.69 and $0.63 per barrel respectively, which the Government of South Sudan would be willing to pay.

Activists have also observed sovereign power always comes with a solemn responsibility to uphold international law and norms –Sudan has gone far astray and the South hopes its leaders will see this before it’s too late.

They say RSS proved and demonstrated that their claims have no basis in international law and State practice saying Khartoum’s proposal is a clear violation of international law.

On Friday 3, the March 2012, at Lamu port in Mombasa, Kenya, two countries of Ethiopia and Kenya signed 8 MOUs to open oil pipeline and refinery in Lamu of Kenya, the move President Salva Kiir of the Republic of South Sudan commented that it would help his country break free from the yoke of dependence on Sudan.  

Prior to this latest move, South Sudan last month signed a deal with Kenya for the construction of the pipeline to the port of Lamu at the Indian Ocean. 
 
Fears 
South Sudan’s Deputy Petroleum and Mining Minister, Hon. Elizabeth James Bol told Reuters that it would take around 11 months to build the pipeline to Lamu. The statement does not concur with the latest one which says the completion will be in 6 months time. 
  
But analysts say the Kenya pipeline would be difficult to build across rough terrain hit by tribal violence and passing through bandit-stricken regions in western Kenya.

They have advised for a large insurance premium be added to the previously South Sudan’s cost of around $1.5 billion because of the security concerns to successfully complete port construction.

Oil experts have also queried the economic viability of a pipeline in the medium-term as output is expected to drop sharply in coming years because some fields were over pumped by Khartoum in the run-up to South Sudan’s independence, reported the New nation and added, “South Sudan output will decline to 200,000 bpd by 2016, to 160,000 by 2018 and further thereafter, according to estimates by the European Coalition on Oil in Sudan.”