The Economic Effect of Coronavirus on South Sudan
By Angelo Bambura Arkangelo
As the COVID-19 pandemic spreads at accelerating speed, people across the world face the devastating impact it is having now on families, friends and communities. The greatest worry is the rapid spread of the virus on the African continent that is characterized by weak and poor health systems. While countries around the world try to take swift measures to contain the spread of the virus, this has also include rolling out new economic plans to ensure their economies do not descend in to recession. World powers such as the United States, United Kingdom have already rolled out their economic response plan to mitigate the economic effect. In East Africa, countries are also responding swiftly with Kenya developing and rolling out a comprehensive economic response plan to face the pandemic and ensure its citizens and economy does not suffer the impact of the pandemic much.
However, though South Sudan and Burundi remained the only countries in the region that have no reported cases of the Covid-19, the government has stepped up measures to prevent the virus from entering the country. This article attempts to analyze the response of South Sudan government to prevent the virus from entering the country. Special focus will be put on the economic effect of the measures and response plan of the government.
South Sudan economy is heavily dependent on oil revenue and with little coming from its high dishonest tax department. The economy that has been struggling to recover from the effect of the six years catastrophic civil war had a growth rate of 3.2% in the fiscal year 2018/19, from a contraction of 3.5% during FY2017/18 according to the World Bank, will now have to face a sharp hit by the coronavirus pandemic. The deadly virus has led to the disruption of the global supply chains, which is likely to cause input shortages causing most manufacturing plants and retailers to suspend operations all over the globe. The demand for oil has also slowed down since the outbreak of the virus with major manufacturing hubs such as China and the US either shutting down or slowing down production causing the oil prices to plummet.
Oil prices fell below $30 a barrel on Monday March 23, 2020 after the worldwide coronavirus outbreak worsened over the weekend, exacerbating fears that government lockdowns to contain the spread of the disease would continue. There is a great fear that the coronavirus will have a severe impact on the world economy which will highly affect the economy of the wealthiest countries such as the G20 and shall affect their effort to extend financial assistance in the form of donations and even loans to poor countries such as South Sudan. Raising the question, what happens if the virus persists for more months or a year? The government of South Sudan will potentially not deal only with the virus affecting public health but funding the current peace deal and also contagion effect on the fragile economy.
With the formation of the Revitalized Transitional Government of National Unity, South Sudanese had a great hope that things are getting to normal as there was a remarkable improvement of South Sundanese Pounds against USD but the hope seems to have died again with the outbreak of the pandemic. Things are changing drastically towards the worst. The exchange rate which was 250SSP to 1$ from the effect of the new government is now 300 SSP in the black market.
Though there is no reported case of Covid-19 in South Sudan, the government like many other governments around the world has announced several drastic measures to prevent the virus from entering the country. These measures include the ban on all social gatherings and events, closing all entry points into South Sudan including air space with exception of trucks that supply goods and other essential commodities and the same for flights. The government also announced that these measures will not affect the inflow of goods into the country as it gets assurance from Uganda that its border will remain open under strict conditions for trucks entering South Sudan with goods. In a statement read on Tuesday March 24, 2020 by the First Vice President Dr. Riek Machar on behalf of the committee tasked to tackle the corona outbreak in South Sudan stated that, “all vehicles going out and coming to South Sudan are ceased, except those bringing food stuff into the country shall be allowed to enter.” But the statement failed to address how those goods shall be ordered given the communication infrastructure in the country. For instance, how will traders in Yambio, Wau, Rumbek, Bor Towns order goods from outside given that there are no facilities for e-commerce in the country? The government has continued to issue more measures as of 28 March, law enforcement agencies have been directed to enforce the ban of gatherings in tea places among others. The temporary shutdown of this small businesses means the citizens who are already in a dire economic condition will find it hard to put food on the table. There is high likelihood that more of these measures will continue to be issued as coronavirus continues to spread with high possibility of entering South Sudan.
The measures are already proving difficult for the citizens to cope up with. As a country that is almost entirely depending on imports from the neighboring countries prices of the basic commodities have almost doubled within a week. On Thursday, residents of Yei River County in Central Equatoria State accused traders of hiking prices in the markets after South Sudan closed its border with Uganda. Bako Selwa, a buyer at Dar es Salam market, told Radio Tamazuj on Thursday she was shocked to find a sachet of salt being sold at 200 SSP, while the price of a bar of soap increased from 150 SSP to 180 SSP. Traders in the market claimed the increase in the prices was a response to the recent order by the government closing down the border between Uganda and South Sudan without stating how the businessmen/women shall trade.
In the absence of government economic response plan there is much worry now among the citizens who are already facing economic hardship due to the impact of the civil war. South Sudan economy is already in a weak position and if the virus hits the country like it is doing in Italy, Spain and elsewhere in the world, for South Sudan, it will not only be a health catastrophe but economic disaster as well. Though it is necessary for the government to put its economic response plan like other countries are doing the question that remains is whether South Sudan has the financial capacity to mitigate the economic effects of coronavirus. The government is finding it difficult to fund the Revitalized Agreement and civil servants have gone for more than two months without salary. Therefore, it remains unclear how the government economic response plan will look like if at all it will be there. While it will be a good idea to table other economic responses, the other question to ask is, will it not be logical to first pay the areas immediately rather than announcing new economic packages that may not be fulfilled?
While the economic effect of the virus is likely to be felt all over South Sudan, some parts of the country will severely be affected than others. For example, States from the Greater Upper Nile which have been heavily affected by the civil war and are now receiving tens of thousands of returnees are likely to have more economic crises than those from Equatoria and parts of Bahr El Ghazal region. There is high likelihood that the death toll from starvation will be competing with coronavirus fatalities if more urgent measures are not put in place by the government. The humanitarian agencies will need to preposition food ration as soon as possible if the situation is to be change.
Here Are Nine Things South Sudan Government Must Do Immediately
- The Government has to continue strengthening the preventive measures that could ensure the virus does not enter the country.
- Immediate Appointment of state governors to go and take care of the states
- Roll out new economic plan and budget to mitigate the economic effect of the preventive measures on the already desperate citizens. This should include among the immediate things the lift of taxes on water suppliers in juba. The Ministry of Trade, Finance the Central Bank and to ensure an emergency importation plan for essential goods is prepared and the Chambers of Commerce at the National and state levels are supported to supply these goods as soon as possible.
- Grant tax breaks to businesses seeking to increase their capacity to produce, import substitute goods, which could even mean zero-rating.
- Encourage banks to give concessionary loans at low rates to facilitate businesses
- Announce and provide for a Business Stabilization Fund to cushion the impact of the coronavirus, especially for Small & Medium Enterprises (SME’s).
- Consider reducing corporate tax for industries that have been highly affected by the outbreak of the virus such as the aviation industry or transport industry in general, or waiving corporate tax as well as a reduction in payroll tax for at least three months.
- Strengthen the local supply chain for traders to be able to access imported substitute goods.
- Encourage agriculture sectors especially in the areas which are experiencing rain season now as this will see production of basic consumable items within two to three months
In conclusion, while corona Virus presenting a severe negative effect on the country as a whole, the government must act immediately before things run out of hand. If the government does not act well and quick the economic effect of the pandemic will cost more lives than the virus itself and in the absence of a functioning government at state levels South Sudan will likely lose the fight against the virus in a short possible time thus resulting to more loss of lives than in any Country in the world.