Enhancing Transparency: The necessity of aligning spending with national priorities
An analysis of the 2018/2019 financial year budget
A Presentation to the Specialized Committee of Finance and Economy in the Transitional National Legislative Assembly
24 July, 2018
National Legislative Assembly, Juba.
By Mabior P. Mach
South Sudan has been in the grips of brutal conflict since 2013, just two years after independence from Sudan on July 9, 2011. Thousands have been killed and millions displaced from their homes. Inflation is high and government spending on public services and social welfare is limited, given that most of its allocations in the previous budgets had been to salaries and operating costs. With the improving oil prices and a new emerging chance to improve collection of non-oil revenues, can the parliament bend the arc towards a better day for the ordinary citizens by investing in its people through peace and social welfare programs?
This presentation gives an appraisal of the key political and economic decisions behind the draft budget of the financial year 2018/2019 and provides suggestions about how funds can be redirected to areas of public concern.
Honorable MPs, top civil servants and country men,
It’s a pleasure for me to share views with you on this financial year budget. This attempt to subject the budget to public hearings is commendable. As a journalist, I covered the parliament since 2008 until the resolution on independence was passed in 2011. During this time, I rarely heard of public hearings on budgets. Hon. David Mayo and his team are showing some sort of bravery to listen to whatever kinds of appraisals that will be made. It’s a good break from the past. Thanks to the committee and the Ebony Center for Strategic Studies.
I would like to extend my thanks to the Minister of Finance and Economic Planning Salvatore Garang Mabiordit and his staff for the budget proposal. They have done a tremendous job. My role is to make a constructive critique of some allocations and provide suggestions as a means of collectively looking into the future of our nation. The discussion of the budget proposal comes a few weeks after entry into the new financial year, but it’s not very late.
There are many issues plaguing our country: conflicts, economic decline, mismanagement, geopolitical interests and food shortage. As such, my comments will cover a few themes as below:
- Removal of subsidies:
The budget proposes the removal of a major welfare policy of subsidies. The Minister passionately makes the appeal to do so:
“Critically, this national budget renews our commitment to limiting deficit financing from the Bank of South Sudan. The Council of Ministers had approved the removal of fuel subsidy and I am appealing to the August House to endorse their approval. If we succeed in removing fuel subsidy in 2018/2019, we will not be operating in a situation of budget deficit. We will have a balance budget and sufficient funds to make timely payment of salaries and state transfers.” Minister of Finance and Economic Planning, in his budget speech in Parliament, 20 June, 2018.
We all know that the policy of fuel subsidy was introduced to try to protect the people from the adverse effects of government’s own decisions, including devaluing the pound. Is it the intention of this budget to expose the people to the same problems they should have been protected?
Prof. John Akech has done a research about this, focusing on the winners and losers of removing fuel subsidy.
However, the analysis of the data from this research is deeply flawed that it can’t be a supporting evidence to remove the subsidies.
- His argument is that the beneficiaries of the subsidies are not those targeted, but the well connected. His research focused on public transport drivers in Juba, 31 percent of whom, according to the research, were getting subsidized fuel compared to 48 percent who weren’t. While I don’t have the reason to dispute his figures, the recommendation of that research took a purely activist instead of an objective approach. A government works for the people. As such, an objective approach would seek ways to maximize benefits of the subsidy. Also, from the rationality perspective, there is no convincing reason to forsake the 31 percent.
- It’s important to note that it’s been a long path through bungled social welfare projects to land on the policy of subsidies. It was a policy for grain reserves; it turned into the dura saga. Then came the auctioning of the US dollars; it turned into a mess. It was the LC system; it was mismanaged. Then we came the devaluation; it failed. All these failed undertakings had direct impacts on the citizens. Their chances to receive government services were denied. Their purchasing power was reduced. Their salaries were not coming in time. As a sign of responsibility, the government maintained subsidies on fuel after devaluing the pound in December 2015. What the recommendation to remove subsidies suggests is that the government should make the people bear the cost of its own mistakes by tapping into the people’s own purchasing power. This is not something the people will welcome and I don’t expect you to approve it, because doing so means complicity in further exposing the people to suffering.
- The research suggests that beneficiaries are the few in Juba who use PSVs. This is not correct.
The fuel in those areas mentioned above come from Juba. Raising it in Juba means raising it in the country side – to essentially discourage such farmers. Therefore, fuel subsidy is helping support agriculture, as Dr. John Garang once said of using oil as the engine for agriculture.
- In the budget proposal, the Minister says the funds from subsidies will be used to pay salaries. While the purchasing power of the people is being weakened, there is no pay rise. The fact is that removing the subsidies will increase prices, starting from bus fares. You may be aware of how Bongo buses and PSV taxis are helping in this endeavor. That means the government would like the civil servant to pay more money to the taxi drivers, who will then pay it back to fuel firms and Nilepet, and the same money comes to the people through the government in the form of salaries. They are effectively paying their own salaries. This can never be a suitable game from a people’s government.
- Therefore, subsidies only need to be properly managed to achieve the desired outcome until it becomes feasible to channel the funds to a detailed, people-centered social service project in future.
As a takeaway under the removal of subsidies:
- Think of what it means to ask your secretary to pay more to go to the government office so that you can save enough money to pay him/her. In other words, it is the civil servant paying himself/herself. In effect, there is no government that is paying the salaries.
- Remember, the government cannot take South Sudan just as its business entity from which it can make profits. When others are busy delivering aid, the government should demonstrate its ratio of responsibility by mainstreaming social welfare into economic policies.
In fact, it is the government, in the form of Nilepet that is misdirecting the subsidies. This August House has the responsibility of safeguarding the public interest.
By addressing the abuse of fuel subsidy and redirecting it to the intended direction, this August House would have risen to the challenge our forefathers challenged us to inherit when they died while trying to set us free on the road to prosperity.
- Constant salaries and more support for operations cost:
While the draft budget proposes the removal of fuel subsidies, which were meant to help the people, it is redirecting funds into operations cost, to cover medical expenses. There is an imbalance between what would help the people and what is intended to help the elites. Medical bills should be treated as an insurance embedded into the salaries and not as a stand-alone pillar on which to spend public money catering for foreign trips of a few well-placed individuals. Switch a large percentage of the allocation for medical bills to improving services at the public hospitals, eg Juba Teaching Hospital.
- Supporting mismanagement:
“Salaries have not increased for the 2018/2019 budget. There is a substantial increase on operating budget for all spending agencies. Agencies need to allocate their medical services on Operating budget (Activity code 229) to cater for medical expenses rather than 214 (Social Benefits).” From the Minister of Finance and Economic Planning’s budget speech.
The draft budget is confirming, yet again, an unrealistic approach. An MP, for example, gets 9,000 SSP monthly. If he does his duties so diligently that he spends most of his time at work and thinking about government business and the benefits accruing to his constituency, then maintaining this official salary scale is a sign of lack of transparency. Can 9,000 SSP, at the current market prices, feed a family for a month? Where do government officials get the extra cash to make their living, fuel and maintain their fancy cars, and send funds abroad? What about that civil servant who has no second job or access to free cash? By approving the budget in the current form, we are formalizing mismanagement. I don’t think any honorable member here would like to be associated with this. Raise the salaries for all workers, from the top to the bottom and slash operations costs. At the end of the day, more government money is spent in one way or another without following the right procedures. It’s better to spend honestly.
- Funding the East African Community Secretariat:
The government has taken the political decision of joining the East African Community. There is no debate around that anymore. But the South Sudanese people are not getting any benefits and are destined to get nothing from it in the foreseeable future. Why? Even stable economies now look at regional economic integration in terms of sharing benefits. South Sudan has no commodity of her comparative advantage, because we don’t have a functioning economy for which we should seek an expanded market. We, in fact, are offering ourselves as a free, easily accessible market just to gain nothing in the end. Committing ourselves to fund the secretariat while our people are suffering is a case of misplaced priorities. Why should South Sudanese pay to have Kenyans, Ugandans etc sell their goods inside South Sudan; to have the jobs meant for locals grabbed; to be outcompeted in business, etc? A suitable case is Ethiopia, which has now started partially opening up after stabilizing her economy. That allocation to the EAC secretariat can be used to pay bills for medical doctors and teachers at government hospitals, and to buy medicines. Visit al-Sabah Children Hospital and the Juba Teaching Hospital and you will hold your breath and decide to channel funds to this direction.
- IMF recommendations:
There is a clear indication that the budget proposal is underpinned by a desire to suit the recommendations of the International Monetary Fund. Well, South Sudan’s situation is quite complex that it can’t be easily addressed using a “one-size fits all” strategy. IMF and the World Bank were designed within the context of Cold War, and it has been receiving negative appraisals since the 1990s.
Abdalla Bujra, in his paper on African Conflicts:
“The immediate effects of SAPs (Structural Adjustment Programs) are now accepted, even by its authors, to have sharply increased poverty and economic inequality without necessarily improving the economic performance of the African countries.”
Barack Obama, the Audacity of Hope (p.316), 2006:
“Under the leadership of Washington, the International Monetary Fund, designed after World War II to serve as a lender of last resort, has repeatedly forced countries in the midst of financial crisis like Indonesia to go through painful readjustments (sharply raising interest rates, cutting government social spending, eliminating subsidies to key industries) that cause enormous hardship to their people – harsh medicine that we Americans would have difficulty administering to ourselves…
Indeed, countries that have successfully developed under the current international system have at times ignored Washington’s rigid economic prescriptions… The IMF and the World Bank need to recognize that there is no single, cookie-cutter formula for each and every country’s development.”
If this parliament decides to rely on recommendations of international institutions without customizing these advices to fit the local context, then we are in the middle of the selfish international political and financial contradictions.
If there is anything people needed to have happened a long time ago, it is lasting peace. While implementing peace agreements and the National Dialogue need funds, lasting peace also come through development. Surprisingly, its allocation is just 3.7 percent of the “domestically financed” expenditure. South Sudan should extend its sovereignty responsibilities to bringing about lasting peace. Relying on others even on critical issues of peace is not encouraging. The allocation to the security sector, which stands at 40 percent, should be slashed to secure more for peace processes such as the National Dialogue. Now that the US administration, the largest donor to South Sudan, is reviewing aid to South Sudan, and now that the US has expressed serious doubt about peace under a government run by President Salva Kiir and Dr. Riek Machar, this parliament has one choice: either demonstrate the government can restore lasting peace – and push it to do so – by funding (and honestly) implementing peace processes such as the National Dialogue or …
There is no way peace can be allocated an amount similar to the contingency, as if lasting peace is a contingency and not a priority.
Honorable members, some of us are providing you with the true feelings of your people. The decision is yours. But always remember every decision you take goes to a corresponding page as we write our history.
Thank you very much.
 Mabior P. Mach is an independent media consultant in Juba, South Sudan, and the author of the Broken Promise: The Legacy of War and Hypocrisy. He has written extensively on Sudan and South Sudan over the past decade, and, as a journalist, won media awards: the Energy Awards 2014 in Nairobi and the Nile Media Awards 2017 in Kigali. By asking the question ‘Where is the War?’ Mr. Mabior is privately researching South Sudan’s ailments that don’t easily meet the eye.
 Trump is assessing aid to South Sudan. Its government says cuts would be a disaster. Washington Post. https://www.washingtonpost.com/news/worldviews/wp/2018/05/11/trump-is-reassessing-aid-to-south-sudan-its-government-says-cuts-would-be-a-disaster/?noredirect=on&utm_term=.739a1179ab11
 White House Press Release, covered in the story: http://www.osundefender.com/white-house-expresses-doubts-over-south-sudans-president-and-rebel-leaders-ability-to-bring-peace/