South Sudan Business Struggle in “War Economy”

Since the eruption of conflict in 2013 between South Sudan’s government and rebel forces, the business sector is one of the most affected. Businesses struggle to stay afloat in what is considered a “war economy.”

Smart businesses would flee, fearful of what might transpire next. In a conflict-torn area, stories of businesses being ransacked or owners abducted are not taboo. They really happen. However, there remains some business owners that are brave enough to continue with their business, even establish new ones.

The number is expected to increase following the signing of the peace deal just last Wednesday. Of course, there are still jitters about it since the last seven peace deals have all failed. South Sudan President Salva Kiir maintains that though the conflict has killed thousands and displaced even more, there are still willing entrepreneurs who have risked to help the economy regain balance.

Let’s take a look at some of the problems these brave entrepreneurs face in South Sudan.

“Very Expensive”

Business is not stable if there’s conflict so you can expect prices to increase. In fact, the prices have soared so high that entrepreneurs decide to outsource their services. For instance, a printing company would choose to have their products printed abroad then shipped to location instead of printing locally.

You can attribute such soaring prices to the scarcity of hard currencies like the US dollar. You can’t rely on the South Sudanese pound either because it has fallen quite sharply already. The official exchange rate is coined at 2.96 South Sudanese pound per dollar.

But even the prices of the usual commodities have increased significantly. These days, you’ll have to pay almost double for the same lunch menu and public transport. That’s a lot of adjustment not only for business people but for the ordinary citizens too.

What happened to all the oil?

It must be remembered that before the war took place, South Sudan earned 98% of its government revenue in selling oil. But when the war broke out, the production has been halved when rebel forces took over some of the oil fields. Some even destroyed the infrastructure there, making harvesting oil impossible. And although there are an average of 160,000 barrels being produced, they won’t do much given the fall of the global oil prices.

Worse, part of the agreement reached dictates that the South Sudan government must pay for the oil transported using its pipelines. That’s additional expense without income in return. There is still hope, it seems, because officials will tackle this part of the agreement when the talks resume this month.

The seeming “resistance” to banks

Another problem existing in the war economy of South Sudan is that the central bank is not getting enough access to dollars. This is because many of the foreign workers and businesses prefer to send their remittances through centers, not commercial banks. It’s actually justifiable because the exchange rate in the black market is at 14 South Sudanese pounds per dollar, that’s 11.04 more than the official exchange rate.

But why do big businesses stick around?

Well, with so many other businesses afraid of the war economy in South Sudan, competition becomes weak. But of course, the government can’t celebrate for too long. Some big companies are already threatening to close down because the government has spent too much of its revenue fighting off the rebels than actually protecting businesses. Meanwhile, a big chunk of the government money has been fearfully corrupted.

The peace deal signed is a required by the IMF and World Bank for financial aid. With that, help could be coming and felt anytime soon.