By Ngor Arol Garang
February 25, 2012 (JUBA) - A South Sudanese opposition group has criticised austerity measures introduced by government to adjust to the loss of oil revenues, after the young country stopped exporting its oil through north Sudan.
- A man from South Sudan displays new currency notes outside the Central Bank of South Sudan in Juba July 18, 2011. (Reuters)
The dispute over transit fees means that until a deal is reached - or South Sudan builds an alternative pipeline to Kenya or Djibouti - the seven month old country will have to cope without 98% of its income.
Opposition groups have also said South Sudan’s ruling party - the Sudan People’s Liberation Movement (SPLM) - should not allow some foreign companies to avoid paying taxes to the national treasury.
This week South Sudan’s cabinet imposed austerity measures amid the oil dispute with neighbouring Sudan, raising concerns from local people and political leaders, with many speaking about its negative impact on a population already suffering from poverty, lack of infrastructure and weak institutional capacity.
On 17 February South Sudan’s Council of Ministers approved a 50% cut in non-salary expenditure and later in the week the president established an austerity committee to recommend further cuts.
The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) said this week that: ’Humanitarian agencies are concerned that the loss of export revenues from oil could add to an already complicated humanitarian situation.’
Agencies including the World Food Programme (WFP) have already called for financial assistance to cover the food gap for more than 3 million people expected to face severe food shortages this year.
Various organisations attributed the food shortages in South Sudan to erratic rainfalls in 2011 in some parts of the country and tensions with neighbouring Sudan severely affecting trade, after the secession of South Sudan in July last year.
The country’s ministry of agriculture has projected that this year’s cereal deficit will be around 470,000 metric tons, raising fears that many, possibly, 4.7 million people, may face severe food shortages.
WFP says it is preparing to assist some 2.5 million people but says this may increase.
The austerity measures will take effect once president Salva Kiir has signed them into law. South Sudan’s cabinet has pledged that the cuts will not affect the size of the government nor will it reduce the number of public employees. Defense and security spending, which takes up 40% of the annual budget, will also be exempt from cuts it is understood.
South Sudan has an extremely high ratio of national MPs in comparison to its relatively small population of 8 million.
Minister of Finance Kosti Manibe pledged to exert all efforts to enforce the 2009 Taxation Act, hoping this will triple non-oil revenue collection within a six month period.
Reacting to the minister’s non–oil taxation drive, Clement Juma, the chairperson of opposition group the United South Sudan Party (USSP) on Friday said his party commended government’s decision to shut down oil production because of what he described as the constantly “disturbing” behaviour of neighbouring north Sudan.
Khartoum claims it is owed over $1 billion in unpaid fees and had begun siphoning off oil from South Sudan and impounding shipments of southern crude before it could leave Port Sudan.
South Sudan denies it has not been paying fees and accuses its northern neighbour of "looting" some 6 million barrels, worth around $815 million.
South Sudan’s decision has been described as economic suicide by north Sudan and some analysts. The country is one of the poorest in world and is struggling to address insecurity, tackle corruption, provide public services and respond to humanitarian emergencies within its borders.
However, the oil shut down has been largely supported in South Sudan.
“The decision of the government to shut down oil production was credible. It must be supported but the government also needs to tie belt and cut [down] on unnecessary expending”, USSP leader Clement Juma told an audience at a public debate hosted by Bakhita Radio on Friday in Juba.
Several speakers also expressed discontent over the use of public funds to purchase vehicles often seen being used for private business and for the families of government officials.
“Taxation system needs to be improved because we have seen that there are foreign business companies which enjoy tax exemptions. They do not pay taxes. The government needs to improve on these practices so that we do not have a situation where other companies are exempted from paying taxes to the national treasury”, Juma emphasised.
The opposition figure made the remark a month after the ministry of finance issued a letter exempting Vivacell telephone operating company from paying taxes to the South Sudanese government.
The letter dated 22 January 2012, addressed to Ayom Mach Ajok, Director General of Taxation, carries signature of Amine Mardam Bey, managing Director of the Vivacell, and cited senior government officials as having authorised the exemption.
The letter extended to Sudan Tribune on Friday, claims South Sudan’s Ministry of Telecommunications and Postal Services had signed an exemption letter valid for up to ten years:
"With reference to your letter date January 18, 2012, concerning payment of excise tax returns, we would like to bring to your attention that, in accordance with the terms of the license signed between the ministry of Telecommunications and Postal Services, and Network of the World (NOW), Vivacell is exempted from all taxes as clearly stated under article 9 of Amendment 2 of this license”.
Bey quoted the letter of the agreement as saying that:
"the licensor hereby ensures to the licensee that the license is granted tax exemptions for a period of ten years at least, such tax exemption include custom duties, income taxes, sale taxes, etc. or any other taxes which may be imposed in the near future such as Value Added Taxes and the Licensor undertakes to indemnify the license in full in that respect. As such, the excise tax is not applicable on Vivacell”
Many public figures have voiced concerns over why the ministry came to the agreement to make the company tax exempt.
“I do not see any genuine reason why Vivacell should not be taxed", a senior government official with the ministry of finance told Sudan Tribune on Friday.
Vivacell "must be pay", the official said.
Corruption is a major problem in South Sudan with billions of dollars of public funds going missing since the SPLM took power in 2005 as part of peace deal with north Sudan. Despite the government acknowledging the issue no official has been prosecuted for corruption in the last seven years, despite the country having a commission mandated to investigate graft.