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Ambassador Richard S. Williamson argued in The American that failing to secure a fair oil deal between North and South Sudan could severely destabilize the region. Focusing exclusively on short-term stability, however, may undermine South Sudan’s viability in the long run.
Since 2005, Sudan’s oil revenues have been split 50/50 between the North and South. The South has received about $10 billion in oil revenues over the past five years, which accounts for nearly 98% of its revenue. Without this critical income in the short term, the government would collapse and unpaid soldiers would likely reignite regional conflict.
Yet the long-term stability and prosperity of the South depends on the new government’s ability to raise income levels for its citizens by cutting corruption and removing constraints on business. Worryingly, the recruitment of top opposition leaders into the main political party indicates that South Sudan may be moving towards yet another single-party state. This shift would allow politicians to wield power through payoffs and patronage networks rather than being accountable to the populace. Raising taxes by an average of 17.5% annually—as the new government proposes—would exacerbate the problem, encouraging bureaucratic corruption and pushing even more citizens into the informal sector. With per capita GDP at a meager $90 annually, the effort to diversify government revenues by heavily taxing the population would result in a desperately difficult business environment, hampering long-term growth.
This fate is not inevitable for landlocked, dry, resource-rich, and initially human capital poor African countries. Botswana, for example, has sustained impressively high per capita GDP growth rates for nearly a decade. The country has also succeeded in suppressing corruption and making significant gains in literacy and overall poverty reduction, distributing the benefits from the diamond trade equitably across the country, and placing Botswana solidly in the ‘middle-income’ category. Botswana likely owes its success to strong governing institutions, a well-functioning police force, and low levels of corruption.
Though the oil deal will likely determine whether the region relapses into war, the South Sudanese government must look further down the road if it hopes to make the South a viable state. The greatest long-term challenge facing the South Sudanese government will be combating corruption and resisting the urge to use oil revenues to insulate itself from accountability to its populace. The second hurdle will be equitably translating oil revenues into public goods. The final challenge will be creating a business environment which encourages entrepreneurship rather than pushing even more citizens into the informal sector.
Plus Jay Cost on the US Constitution, a burgeoning new political philosophy in Britain, and why there are no good arguments against high-skill immigration.
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