South Sudan Businesses Fear Oil Shutdown Fallout

Pipeline linking northern and southern Sudan. In the aftermath of the partition of Africa's largest geographic nation-state, problems have developed over the country's most valuable export., a photo by Pan-African News Wire File Photos on Flickr.

February 08, 2012

South Sudan Businesses Fear Oil Shutdown Fallout

Gabe Joselow | Juba, South Sudan

When South Sudan decided to shut down its oil production to protest against alleged injustices from the north, the country was also cutting off 98 percent of its revenue. Businessmen in the south are particularly concerned about the economic consequences of the shutdown.

Mustafa Ayoo runs a small hardware store at the Jebel market on the outskirts of the capital. Like many other business owners here, he has been closely following news of the oil shutdown, a two-week process begun late last month which should be nearing completion.

“Well, I'm concerned for sure, because it's like even foreign exchange is going to be a problem," said Ayoo. "Because mostly here the things we sell are coming from another country - mostly from Uganda and Kenya. Here I'm sure it's going to affect my business.”

Ayoo says he typically buys his materials using U.S. dollars. But the dollar and other foreign currencies that had been brought into the country through the oil trade are getting harder to find since the shutdown.

South Sudan's central bank, trying to conserve dollar reserves, has ordered that wire transfers to Kenya and Uganda be conducted using only the South Sudanese pound.

Michael Toma, originally from Uganda, has been selling household goods at the Jebel market for the past year.

“Yeah, I'm so concerned in that I believe it's already has impact as of now. Though we are worried if the impacts are going to be a long term impact definitely we the common man will have to suffer," said Toma. "But however, I overheard the president say 'it's for the better' and in hearing what he said I have reason to believe that he was right in ordering the shutdown of the oil. It's affecting us, right, but we believe its a better decision for the future.”

South Sudan depends on northern pipelines to send its oil to international markets. The south cut off its oil trade with the north after accusing Sudan of stealing $815 million worth of oil. Khartoum says it took the oil to compensate for unpaid transit fees.

An African Union panel led by former South African President Thabo Mbeki put forward a proposal to settle the dispute in which South Sudan would pay the north some $5 billion over the next five years to make up for the lost revenue.

South Sudan rejected the proposal. Toma says he supports that decision.

“I believe in that, because given the provisions that were drafted by the AU and trying to peruse through them I have the feeling that South Sudan as a nation was being cheated," said Toma. "Its sovereignty was being tampered with and it was being reduced [from] an independent country to a dependent country.”

South Sudan also faces enormous development challenges. The United Nations estimates that only a quarter of the population is literate and about the same percentage has access to health care.

Some traders, like Dayo King, think the nation may still be too fragile to sacrifice so much of its economy.

“This is still a country that has just begun, in fact was trying to do development just from the start, so if there's no oil maybe when the oil even stops maybe like one week it affects people terribly," King said.

Others like Simon Gatdier Yieh support South Sudan at all costs. Having witnessed years of war, Yieh says the south, as an independent nation, is in the right to stand up to Khartoum.

“The people of the Arab side like Omar al-Bashir they've not forgotten the war; it's not good," said Yieh. "So we're very happy for our president to shutdown the oil because oil belongs to the south. It does not belong to the north.

The government of South Sudan is preparing to announce austerity measures to reduce spending in order to make up for the economic shortfall.

But with so many people in the country lacking basic services, and many others kept alive through emergency humanitarian interventions, any significant cuts could be painful.

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