South Sudan Becomes EAC Member State Officially But At What Cost?

By Matai Muon,

March 05, 2016(Nyamilepedia) —– On the 2^nd of March 2016, an economic blunder had been committed yet again by South Sudan’s Salva Kiir. Following a long-protracted series of requests for the young Nation seeking economic marriage “integration,” that dream was transformed into reality on Wednesday during the 17th Ordinary EAC Heads of State and Government Summit in Arusha, Tanzania. South Sudan finally can now breathe at the EAC Headquarters in Arusha, this time not as an attention seeker but as a decider. According to Citizen TV (2016), the entry of South Sudan into the East African Community will go a long way in helping consolidate the economic stability of the region through trade. “Economic stability of the region” quite interesting there!

As a young fragile economy, South Sudan has so many critical priorities to address. The debate to join any regional block should have been the last resort. Even in the Old Testament there is a verse that correlates to this argument, “remove the speck in your eye first to see the speck in your friend’s.” The campaign to join the economic block of EAC had been there since the attainment of South Sudan’s independence. However, as a country, not much had been accomplished to that effect, largely due to countless domestic engagements. The question is: Has the homework been done? If yes, to what degree? According to Nyantung (2012) South Sudan should conduct a careful analysis of the implications of joining the EAC and, with its findings in hand, astutely negotiate the terms of its EAC membership. He goes ahead to stress that it should carefully study the pros and cons and develop a well-considered strategy to optimize the benefits and mitigate the costs of EAC membership. That argument is intellectually rich, and economically well-informed. As a country, there is need for a pragmatic debate on any fundamental issue. The habit of going regional too fast when the domestic calls are still at large is absolutely nerve-racking.

So where did South Sudan go? South Sudan went to an economic zone but also a hotbed of dictators and at the same time, using a line from Prof. Lumumba, where corruption remains “tragedy of gigantic proportion.” The East African Community, born in 1967, collapsed in 1977, then reborn in 1996, 1999, and finally inaugurated in 2001 has been nothing but a bloc of thieves and dictators. Rwanda’s Kagame and Burudi’s Pierre joined the marriage in 2007, largely due to its accommodative nature of dictators. According to Nyantung and colleagues (2012) the Community represented a single market of around 133.5 million people with a total output of 74.5 billion USD. That sounds pretty awesome but how fair is it if the only economic beneficiary in terms of increase in GDP per annum has been one country, Kenya.

Economic integrations across the world show that regional balance in terms of economic progress has always remain at large (BBC, 2013). In the Eurozone, the Greece unemployment and financial downturn is a live example. Spain continues to pay the price of a large economic union while big economies like Germany, France, and Switzerland enjoy the ride. In the Southern African Development Community (SADC), South Africa, and Botswana, owing to their well-established economies benefit more at the expense of the rest. In the Economic Cooperation of Western African States, (ECOWAS), the current economic giant of Africa, Nigeria continues to boost its domestic output while the smaller economies like Benin, Togo, and Niger go up in flame. For short, economic unions require that a country first develop itself i.e. ensures that its economic volume is more diversified, and that its political landscape is conducive for domestic growth before considering joining any integration.

Nyantung (2012) argues that South Sudan being highly dependent on oil (98%) does not fit the criteria to join any economic union unless it has its economy diversified, say, agriculture. Pursuant to “Dutch Disease” process he argues, a massive influx of oil revenues can cause real exchange rate appreciation and thus cause a shrinkage in the domestic tradable goods sector (i.e., export), while increasing the country’s reliance on imports.  This is detrimental to the country’s trade deficit and to economic diversification. Oil dependence also exposes the economy to international commodity price volatility, negatively impacting South Sudan’s ability to engage in long-term fiscal planning. Ter (2015) points out that in a country where illiteracy rate is as high as 75%, infrastructure development is low. There is no room for integration because the citizens will be exposed to high competition. Dependence rate on productivity will be high and domestic jobs will be lost to the more skilled foreign nationals.

Nyantung (2012) put up another argument on the economic side saying, “Economic theory and evidence underline the importance of export-led growth. Such growth is most effective when it centers on sectors in which the country has a competitive advantage, meaning it can produce those goods at relatively lower opportunity cost than its trading partners.” The comparative advantage South Sudan has over the EAC member states is oil but Nyantung forgot to mention that, Uganda could be a potential competitor in the near future given the recent oil discovery around the Lake Albert, and additionally, its massive agriculture output within the region. Ter (2015) and Nyantung (2012) have all agreed that real exchange rate appreciation due to oil dependence, poor transportation infrastructure inside South Sudan and between South Sudan and neighboring countries, and South Sudan’s poor capacity in value-added production are some of the challenges that disqualify it from joining the economic bloc. Nyantung particularly argues that poor transportation infrastructure, increases the cost and time required to export goods abroad. Outdated capital stock and shortages of skilled labor currently hinder development of competitive industries.

On the other hand, politics plays a crucial role within the EAC member states, this, according to Nyantung, complicates and frustrates the intended objectives of the regional bloc as dictators fight over political influence. Secondly, trade diversion rather than trade creation, and limited gains from trade characterizes the EAC trade integration as the member states’ economies are neither very complementary nor competitive. South Sudan being a young kid in this bloc might be susceptible to such issues. Thirdly, owing to its nascent economy, South Sudan will be critically harmed while trying to adjust and adopt the EAC trade standards. Research shows that member states within the EAC had to lose billions of shillings in an attempt to fulfill the required standards of the bloc.

In conclusion, the author argues that joining the EAC now is the right decision at the wrong time, and with the wrong intention, mainly political in scope but economic in disguise. While concentrated heavily on the cons of this decision, the author clearly understands that there are pros in joining EAC. This economic union for instance offers South Sudan a chance to improve its competitive and trade investment edge in the region as it learns from the rest, the tariffs and quota charges will be reduced, there will be more information sharing in regard to critical intelligence, there will be export of knowledge to many parts of rural South Sudan, there will be improvement in financial investment, and finally development in infrastructure will be enhanced. However, all of these merits come at a cost. South Sudan does not look ready to pay that cost. It is financial, human, and economic in nature. The author believes more time was required to prepare for that union. The stakes are high. The economy stands on one leg, and analysts’ projections for the future do not give anyone any hope at least, for now.

Matai Muon is a South Sudanese blogger, student of economics and corporate law, and also writes on political affairs. The views expressed here do not represent that of Nyamilepedia, or any other media outlet that might publish them but that of the author himself. For any comments, questions, suggestions, and criticisms, interact with the author on:mataimuon@yahoo.com/www.facebook.com/matai manuoi muon.

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