By Dr. Addis Ababa Othow Akongdit
Political stability is without doubt a key to growth, for a given and highly particular vision of what stability means. The rule of law, strong institutions, good governance, low corruption and a business climate that is conducive to investment are key factors of stability which important for economic development. Perhaps, the African states that have been able to achieve high growth rates are considered relatively stable.
Although Africa is arguably the richest continent in terms of natural resources, but it remains the poorest and the least developed region of the world. Simply, because some believe that the critical challenge for economic development and political stability in Africa today is centred on democratic governance.
Much of the existing literatures that have pushed for democracy discourse on the African continent show unequivocally to this stark reality (Huntington, 1991; Bratton & van de Walle, 1997; Ake, 1996; Hyslop, 1999; Ake, 2000; UNDP, 2002; Luckham et al, 2003). Although the entire world has witnessed impressive progress towards democratic governance following the collapse of the ideological bipolarity of the Cold War era on a global scale, and the demise of apartheid in South Africa specifically, enormous challenges for the nurturing and consolidation of democracy still persist. Even within United Nations (UN) circles, the issue of democratic governance is increasingly seen as a key pillar for sustainable human development (UNDP, 2002).
At the continental level, the newly established African Union (AU), which was formally launched in Durban, South Africa in 9 July 2002, has openly committed member states to democratic governance, which will be monitored from time to time through the African Peer Review Mechanism (APRM) (Cilliers, 2002; Matlosa, 2003a). However, the current development situation of Africa is seemed to be inconsistent, but recent years it has witnessed a significant improvement in its economic growth performance. The continent achieved an average growth rate of 5.2, 5.7 and 5.8 per cent in 2005, 2006 and 2007 respectively. Compared with a growth rate of 0.3 per cent during 1990-2002, real per capita income in Africa increased at the rate of 3 per cent over the period 2003-2007. The improvement in Africa’s growth performance has been due to a number of factors; internal and external. Internally, most African countries have created a conducive domestic environment for growth through the adoption and implementation of economic policy reforms and improvement of macroeconomic management. Privatization, greater fiscal discipline, and more realistic exchange rates have all contributed to macroeconomic stability that is essential for growth. On the political front, the increasing adherence by many African countries to the principles of democracy, rule of law, and good governance have engendered greater stability and reduced the incidence of conflicts. This paper examines the link between political stability and economic development, uses the Angola experience as a case study and draws conclusion on what can South Sudan learn from it.
Case of Angola
After 27 years of conflict that ended in 2002, Angola is now rebuilding its country. Fighting between the Popular Movement for the Liberation of Angola (MPLA), led by Jose Eduardo DOS SANTOS and the National Union for the Total Independence of Angola (UNITA), led by Jonas SAVIMBI, followed independence from Portugal in 1975. Peace seemed imminent in 1992 when Angola held national elections, but fighting picked up again by 1996. Up to 1.5 million lives may have been lost and 4 million people displaced in the quarter century of fighting. SAVIMBI’s death in 2002 ended UNITA’s insurgency and strengthened the MPLA’s hold on power. President DOS SANTOS held legislative elections in September2008 and, despite promising to hold presidential elections in 2009, has since pushed through a new constitution that calls for elections in 2012. However, the Angola’s economy is considered to be one of the fastest-growing economies in the world, with the Economist asserting that for 2001 to 2010, Angolas’ Annual average GDP growth was 11.1 percent (see table 5D below). Angola’s economy is still recovering from the civil war that plagued Angola from independence in 1975 until 2002. Despite extensive oil and gas resources, diamonds, hydroelectric potential, and rich agricultural land, Angola remains poor, and a third of the population relies on subsistence agriculture. Since 2002, when the 27-year civil war ended, the country has worked to repair and improve ravaged infrastructure and weakened political and social institutions. High international oil prices and rising oil production have led to a very strong economic growth in recent years, but corruption and public-sector mismanagement remain, particularly in the oil sector, which accounts for over 50 percent of GDP, over 90 percent of export revenue, and over 80 percent of government revenue. This section explores a brief historical background of Angola as well as the political and economic context.
Brief historical background of Angola
Explored by the Portuguese navigator, Diego Cao in 1482, Angola was discovered by Portuguese explorers and became a link in trade with India and Southeast Asia. Later, it was a major source of slaves for Portugal’s new world colony, Brazil, and for the Americas, including the United States. By the end of the 19th century, a massive forced labour system had replaced formal slavery and would continue until outlawed in 1961. It was this forced labour that provided the basis for development of a plantation economy and, by the mid-20th century, a major mining sector.
Following World War II, independence movements began in Angola but were brutally suppressed by the Portuguese military force. Portugal, under the Salazar and Caetano dictatorships, rejected independence. Consequently, (three) independence movements emerged: the Popular Movement for the Liberation of Angola (MPLA), led by Antonio Agostinho Neto, with a base among Kimbundu and the mixed-race intelligentsia of Luanda, and links to communist parties in Portugal and the Eastern Bloc; the National Front for the Liberation of Angola (FNLA), led by Holden Roberto, with an ethnic base in the Bakongo region of the north, and links to the United States and the Mobutu regime in Kinshasa; and the National Union for the Total Independence of Angola (UNITA), led by Jonas Malheiro Savimbi, with an ethnic and regional base in the Ovimbundu heartland in the center of the country, and links to the People’s Republic of China (P.R.C.) and apartheid South Africa. From the early 1960s, these movements fought against the Portuguese. A 1974 coup d’etat in Portugal established a military government that promptly ceased the war and agreed, in the Alvor Accords, to hand over power in Angola to a coalition of the three movements.
Angola was finally granted independence on November 11, 1975 after guerrilla groups joined forces with the army and overthrew the Portuguese government in a military coup.
No period of peace followed, however, as the competition between different movements that were vying to lead the country descended into civil war. The Popular Movement for the Liberation of Angola “The Movimento Popular de Libertação de Angola (MPLA)”, a Marxist-oriented group that included urban intellectuals, nominally led the country. It was opposed by two factions; the National Liberation Front of Angola (FNLA), and the National Union for the Total Independence of Angola (UNITA). The MPLA bolstered its rule with oil revenues, Soviet military equipment, and Cuban troops. UNITA and the FNLA were fueled by black market diamond revenues, South African military advisors, Chinese weaponry, and covert military and financial assistance from the CIA. War between the two sides shook the country for twenty-seven years, during which an estimated 1.5 million people died, over 4 million were internally displaced, and another five hundred thousand fled the country. The war also destroyed the roads, railways, and bridges built during Portuguese rule, decimated agricultural infrastructure, and left much of the population with no memory of what life was like in peacetime.
With the fading of the cold war and the withdrawal of Cuban troops in 1989, the MPLA began to make the transition to a multiparty democracy. Free elections took place in 1992, with the serving president José Eduardo dos Santos and the MPLA beating Jonas Savimbi and Unita at the polls. There were four years of relative peace between 1994 and 1998. In 1997, it was agreed that a coalition government with UNITA would be implemented, but Savimbi violated the accord repeatedly by refusing to give up his strongholds, failing to demobilize his army, and retaking territory. As a result, the government suspended the coalition rule, and civil war spread across the country again.
In 2002, government troops killed Jonas Savimbi and on 4 April that year, rebel leaders signed a cease-fire deal with the government. This was the end of the civil war. Although peace finally seemed secure, more than a 500, 000 Angolans were facing starvation. Thousands of refugees returned to their country in 2003, but their prospects remained doubtful. Today, Angola is the second-largest oil producer in sub-Saharan Africa, yet its people are among the continent’s poorest.
With its first elections in 1992, Angola moved from a long and brutal civil war into an era of multiparty politics. This new era of ‘multipartyism’ in Angola paralleled the global ‘third wave’ of the early 1990s, in which more than 60 countries went through a period of political opening and democratic transition. Communism fell in the East Block, African regimes with similar ideology crumbled and other authoritarian governments on the continent opened up for multiparty elections. By 2011, all except two sub-Saharan African countries (Somalia and Swaziland) held multiparty elections.
In the 1992 elections, the ‘reformed’ ruling party won with a clear majority. Yet, the victory did not bring stability and peace. The defeated candidate Jonas Savimbi and most of his opposition party and guerrilla army UNITA returned to the bush and the armed struggle. Another ten years of civil war followed, until government forces killed Savimbi in 2002 and his army disintegrated. It took another six years for the government to re-establish control over most of the country and felt sufficiently secure to open up for elections. Thus, the second elections were held in September 2008. In these elections, the ruling party MPLA secured an even larger majority, and almost wiped out the opposition. MPLA won nearly 82 per cent of the votes and well above two-thirds majority in parliament. Thus, Angola moved into the trend of much of sub-Saharan Africa: the ruling party is consolidating its grip on power through multiparty elections. The parliamentary elections in 2008 were rated ‘credible and transparent. The elections were also deemed fair and transparent by international observers and its peaceful outcome marked an historical step towards democracy (see Figure 1.3). The main issues were the incumbency advantages: the absence of an independent election commission and the systematic use of state resources for the benefit of the ruling party.
Figure 1.3- Political Context
In 2010 and with the ruling party MPLA’s more than 2/3 majority in Parliament, the regime changed the constitution from direct presidential elections to indirect election. The new 2010 constitution solidified presidential rule in Angola. The president appoints the cabinet which is nominally accountable to an elected national assembly. The position of prime minister has been abolished and replaced with a vice president who is directly responsible to the president. The new constitution stated that the person who is named at the top of the party list of the winning party automatically becomes president. Thus the parliamentary and presidential elections happen simultaneously. These changes theoretically strengthen the role of the political parties which get to decide the sequence of the party list. More importantly, it minimizes the chance of shielding the presidential vote. Thus, according to the constitution, Angola is a multiparty democracy, with power separated between the executive branch (the President), the legislative branch (the National Assembly or Parliament), and the judiciary. The Assembleia Nacional da República de Angola (National Assembly of the Republic of Angola) is a 220 member unicameral national assembly, with 12 political parties represented. At the same time, Angola is a presidential system to an extreme degree. There is little to no Supreme Court influence on the government, and the Parliament has a very weak mandate, it has relatively little autonomy and it has a weak institutional capacity. Besides, the electoral system, the current party constellation, and the political culture are factors rendering support to presidentialism in Angola.
Presidential elections were scheduled to follow the legislative poll. However, under the new constitutional framework, presidential nomination was decided by the majority party in Parliament. Thus, the political system in Angola has become presidential which means that the President is the Head of State and Head of Government, Commander-in-Chief of the Armed Forces and President of the ruling party MPLA (Movimento Popular de Libertação de Angola). The President can appoint (and can remove) the government and a large number of government officials (including the Attorney General, the Governor of the Central Bank, the Generals and other commanders of the Armed Forces and the police, Chief Justices and all province Governors). The parliament has a little power and no impact on composition of the government. In fact, the president can, in practice, dissolve the parliament, but not vice versa. He has exclusive and unrestricted rights to dissolve the parliament and call for new election. With this change, Angolan President José Eduardo dos Santos, who has been in power since 1979, is expected to remain in Office at least until 2012.
All in all, Angola is still facing serious challenges with regard to good governance, although there are some positive signals. There are improvements in civil society access to information on public affairs and on accountability of the executive: Information on government policies, budget, other fiscal data and regular macro-economic information are regularly published in the Ministry of Finance and the National Bank of Angola “ Banco Nacional de Angola BNA” websites. The 2010 constitution reinforced also Parliament’s legislative control and oversight functions. It also reaffirms the independence of Courts. In spite of capacity constraints, the Court of Auditors undertook in 2009, 21 audits and 21 surveys on different administrative municipalities, hospitals, higher education institutes, public enterprises and consulates, all of which are accessible on the Court’s website. It has also improved procurement practices and regulated granting of concessions. A judicial framework for the management of state assets was also approved.
The Economy of Angola is one of the fastest-growing economies in the world, with the Economist asserting that for 2001 to 2010, Angolas’ Annual average GDP growth was 11.1 percent( see figure 1.4 below). It is still recovering from the Angolan Civil War that plagued Angola from independence in 1975 until 2002. Despite extensive oil and gas resources, diamonds, hydroelectric potential, and rich agricultural land, Angola remains poor, and a third of the population relies on subsistence agriculture. Since 2002, when the 27-year civil war ended, the country has worked to repair and improve ravaged infrastructure and weakened political and social institutions. High international oil prices and rising oil production have led to a very strong economic growth in recent years, but corruption and public-sector mismanagement remain, particularly in the oil sector. Angola is also the fifth largest diamond producer in the world by value, although diamonds represent only 1.1 percent of GDP. Gold, barite, iron, copper, cobalt, granite and marble are abundant, but their extraction remains limited. Prior to independence Angola was self-sufficient in food and an exporter of cash crops, in particular coffee and sugar. According to FAO, Angola has the sixteenth largest agricultural potential area in the world. Yet it is presently not self-sufficient and all crops have declined to near insignificance, as a mere 10 percent of the arable land is cultivated. Agribusiness investments sponsored by foreign companies and international initiatives from IFAD and G8 are blooming. The sector is expected to grow above 11 percent in 2010/11. The extensive coastline provides an estimated sustainable catch of 450,000 tones/year. Yet, less than 50 percent is fished, of which only a third is by domestic fishermen, exclusively artisanal. With a thriving internal demand, stimulated by large public spending, nearly 80 percent of all consumed goods are imported.
Figure 1.4: Annual average GDP growth %
Angola’s high growth rate in recent years was driven by high international prices for its oil. It has became a member of OPEC in late 2006 and its current assigned a production quota of 1.65 million barrels a day (bbl/day). Oil production and its supporting activities contribute about 85% of GDP. Diamond exports contribute an additional 5%. Subsistence agriculture provides the main livelihood for most of the people, but half of the country’s food is still imported. Increased oil production supported growth averaging more than 17% per year from 2004 to 2008. A postwar reconstruction boom and resettlement of displaced persons has led to high rates of growth in construction and agriculture as well. Much of the country’s infrastructure is still damaged or undeveloped from the 27-year-long civil war. Land mines left from the war still mar the countryside, even though peace was established after the death of rebel leader Jonas SAVIMBI in February 2002. Since 2005, the government has used billions of dollars in credit lines from China, Brazil, Portugal, Germany, Spain, and the EU to rebuild Angola”s public infrastructure. The global recession that started in 2008 temporarily stalled economic growth. Lower prices for oil and diamonds during the global recession slowed GDP growth to 2.4% in 2009 and to 3.4% in 2010(see table 1.4 below), and many construction projects stopped because Luanda accrued $9 billion in arrears to foreign construction companies when government revenue fell in 2008 and 2009. Angola abandoned its currency peg in 2009, and in November 2009 signed onto an IMF Stand-By Arrangement loan of $1.4 billion to rebuild international reserves. Consumer inflation declined from 325% in 2000 to 14% in 2011. Higher oil prices in 2011, helped Angola climb turn a budget deficit of 8.6% of GDP in 2009 into an surplus of 7.5% of GDP in 2010. Corruption, especially in the extractive sectors, also is a major challenge.
Table 1 .4: Real GDP Growth Rates: 2003- 2013
Note: * Fiscal year July (n-1)/ June (n)
Sources: AfDB/ Africa Development Bank, Statistics Dept., Various domestic authorities and AfDB estimates 2007
Table 1.5 – Key Macroeconomic Trends
During 2011, Angola continued with its main macroeconomic policy of reducing inflation, deepening international reserves, and increasing capital spending on infrastructure to promote economic diversification and poverty reduction. The country continued to implement the IMF Stand-By Arrangement (SBA) program (USD 1.4 billion in liquidity), which was signed in November 2009. The SBA aims to increase fiscal and monetary discipline; reform the exchange rate system; improve public financial management; create a sound banking system and enhance fiscal transparency. In 2011, Angola took measures to overhaul the tax regime, establish a debt management unit and manage and track the flows from the oil sector to the budget. The Central Bank (BNA) moved away from a temporary rationing exchange rate system to an auction system. A comprehensive strategy for private sector development was also drawn up. A contraction in capital expenditure and better expenditure control during 2011, allowed the authorities to make domestic arrears repayment of the USD 7.5 billion, which it had incurred since 2009.
Economic growth and fiscal sustainability are still highly dependent on the oil revenues. However, the oil sector is capital-intensive, lacks linkages to the real economy, and employs less than 1% of the total labour force. This constrains economic diversification and prevents much-needed job creation. The unemployment rate is estimated at around 26%, and the incidence of poverty remains high at 36%. Despite steady progress made in improving social conditions since 2002, the country still faces massive challenges in reducing poverty, unemployment and increasing human development. The government continues to allocate more than 30% of its budget to social spending. In 2012 budgeted social expenditure will increase by 1.6% to 33.3%, double what will be spent on defence, security and public order; and education and health budgets will be increased by 10%.
Overall, Angola is facing many challenges like economic growth highly dependent on oil sector. There is no diversification of economic structure, a deficient infrastructure network still being to be rebuilt (roads, railways, ports, etc…), reduce the high levels of poverty and promote better education and health system to the population. These challenges, weaknesses, strengths and opportunities can be summarized as follows:
Challenges: Oil revenues provide the long-term financing necessary for the country’s extensive reconstruction program and for the expanded provision of basic services needed to overcome the country’s human development deficits. However, Angola needs to reduce its dependency on the volatile oil revenues and industry. The major outstanding challenges are:
I. the creation of a robust non-oil private sector that can generate employment, increase population wellbeing, and produce the necessary fiscal revenue to a sustainable fiscal balance;
II. Efficient use of the non-renewable resources that calls on enhanced government accountability;
III. Oil-price shocks;
IV. Political succession risk;
V. Slowdown in China, Angola’s main export partner;
VI. Government programs co-opted by local connected elites;
VII. Growing inequality fuels social unrest;
VIII. Continued changes to regulatory environment could create business uncertainty and hinder private sector investment;
IX. Mismanagement of influx of oil revenues into the local banking sector leads to an appreciation of the country’s real exchange rate that affects the competitiveness of the non-oil sector.
Weaknesses: The post-conflict fragile state that emerged from 27 years of civil war has profound social handicaps. An entire generation was adversely affected, deprived of access to basic services (e.g. education, health, among others) and infrastructure vital for social development and economic growth. The resulting widespread poverty and the low institutional capacity of the state apparatus are a major constraint for a sustainable and rapid development of the country. The two major weaknesses hindering the country’s development are:
I. A weak institutional framework;
II. Low human development conditions;
III. High economic dependency on the oil sector;
IV. Shortage of skilled labor;
V. Weak education system;
VI. High cost of doing business;
VII. Challenging business environment;
VIII. Inefficient legal regime;
IX. Weak judicial system;
X. Unequal distribution of wealth;
XI. Rural-urban divide;
XII. No stock market;
XIII. Limited access to credit;
XIV. Banking sector’s low appetite for risk;
XV. Lack of reliable/accurate statistics;
XVI. Corruption, excessive bureaucracy and red tape;
XVII. Infrastructure deficit;
XVIII. Unreliable energy supply.
Strengths: After 27 years of conflict, political stability was achieved in the country. Besides the considerable diamonds and oil & gas reserves, the country has other extensive mineral and natural resources and a vast agriculture land mass. The two major strengths in favor of the country’s development are:
I. the mid-term political stability,
II. Extensive endowment of multiple natural resources;
III. Rapid and sustained GDP growth;
IV. Macroeconomic stability: inflation is near single digits and the exchange rate is stable;
V. Abundance of natural resources e.g. oil, gas, minerals, water resources, etc.
VI. Petroleum wealth is available to finance growth in the non-oil sector.
Opportunities: Angola seeks to assert itself as a logistical and economic hub and acquire a regional status commensurate with its military and financial might. Despite its poor infrastructure network, the completion of the national transport corridors rehabilitation, will potentially allow the full integration of Angola in the regional transport grid. The same applies to hydro-power whose potential could be unleashed once connected to the DRC and Namibian grids. With 45 percent of its 18 million inhabitants aged bellow 15 years, Angola has a potentially huge labor force capable of generating a strong domestic market. The two major opportunities to be seized by the country are:
I. A privileged geographical positioning with favorable competitive growth factors;
II. Abundant, dynamic and young population to supply the job market, and drive domestic demand;
III. Gradual liberalization of economic sectors;
IV. Infrastructure improvements enhance economic viability of agriculture and mining sectors;
V. Greater efficiency in the collection of tax revenues decreases informality and reduces over-reliance on oil sector revenues;
VI. New exchange regime for the oil sector helps to increase and expand the range of financial products available;
VII. Emerging middle class with disposable income;
VIII. High population growth provides a base for rising domestic consumption;
IX. Special Economic Zones promote industrial development;
X. Investment in information and communications technology improves labor productivity;
XI. Government strategy and support programs create opportunities for M-SMEs;
XII. Potential to supply the internal market which relies on imported goods and inputs;
XIII. Potential for mobile banking to increase people’s access to finance.
Acquired Experience for South Sudan
Angola case and many studies confirm the general understanding about the relationship between economic growth and political stability. The concept that says, “Democracy and political stability foster economic growth relative to instability and non-democracies in a given country”. On the other hand, this theory has been supported by many economists, who point out that countries such as Hong Kong, Singapore and Taiwan, which achieved ‘super growth’ regardless of the fact that the governments of these countries are authoritarian in nature, but politically stable (Nelson and Singh 1998).
In regard to macroeconomic stabilization efforts, Angola has been commendably successful in terms of political and economic stability under its longest serving president. Its oil resources have provided a steady influx of funds into government coffers, but they also create significant challenges for macroeconomic stabilization and economic diversification. The booming oil industry creates wealth in related sectors finance, hospitality, and other industries that service oil companies, but it also makes it more costly for everyone to do business. The revenue from oil exports has given the state tremendous resources with which to develop the economy and has given Angola the semblance of a rich, thriving economy. This is a facade, however, because after 27 years of civil war with its concurrent high defence expenditures of 20 percent of the GDP, the Angolan economy is in shambles.
Oil revenue contributed 41.5 percent to the total GDP in 1991 and 79 percent to the total revenue in the 1992 budget. In spite of Angola having a 1993 GDP of $8.4 billion, and being placed in the middle-income group of countries in the world, the state has not been able to promote economic development. In 1993, for example, its external debt amounted to $10.9 billion, accompanied by the highest mortality rate in the world of children under five years (292 per 1000), severe food shortages, infrastructural destruction, and little diversification into manufacturing.
Although the civil war has been the most important factor in diverting resources from development, socialist centralized planning, subsidies, price controls, collectivization in agriculture, control of infrastructural facilities, and corruption have also contributed to the crumple of the Angolan economy. The civil war, waged since independence in 1975 to the present, between the ruling Movimento Popular de Libertacao de Angola (MPLA) and Uniao Nacional para a Independence Total de Angola (UNITA), has denied the state the peaceful environment necessary for economic development. In 1993, the government mortgaged three years of future oil revenue (on very unfavorable terms) to purchase military supplies, to finance the war against UNITA, resulting in further loss of revenue for development. However, in fairness to the government, it is difficult to ascertain whether or not Angola would have experienced successful development in the absence of civil war, because there are other equally important impediments to its development. The civil war negatively impacted on diamond mining when the mines were bombarded by UNITA forces and mining was temporarily halted as large diamond areas were seized. The war and smuggling of diamonds have deprived the state of revenue from diamond mining. The war has also caused serious destruction of infrastructural facilities including bridges, roads and railroads, making it difficult to transport supplies to producers and commodities to the market. Similarly, the war has reduced production in agriculture as farmers have abandoned the sector, fleeing war and the risks associated with land mines. The production of both food export crops (e.g. coffee) has been reduced causing severe food shortages resulting in famine. Angola has become dependent on expensive food imports and food aid to avoid famine conditions and the food shortages have given rise to a thriving black market.
In addition, socialist economic policies that encourage state participation in the economy have hampered rather than facilitated the process of economic development. The state’s involvement in the economy has meant a heavy role by bureaucrats. The lack of economic discipline among top leaders has resulted in a lack of congruence between plans and budgets, thus making it hard to realize the goals of development. Furthermore, state control of ports and shipping has led to their collapse because the Portuguese colonialists trained very few Angolans at the time of independence and the MPLA state was unable to retain expatriate personnel. Public services like education, health, water supply, sewage, and electricity also ground to a halt in the late 1980s due to lack of funds, and bureaucratic impediments. State companies such as utilities and those in productive areas have operated at a loss, primarily because of a lack of managerial autonomy to set profitable prices and economic production levels and political control by ministers. Subsidies given by the central government to companies to cover their losses are one example of the inefficient use of public resources. Corruption by top MPLA political and military leadership has resulted in state resources being used for personal aggrandisement or allocated inefficiently. In most cases there was duplication of purchases because of a lack of co-ordination and accountability for use of state funds among senior government officials. Undoubtedly, corruption goes on unabated because of the government’s inability to prosecute the offending officials. Fourth, the fall in world oil prices in the 1980s worsened the economic situation especially in the absence of government savings during the time of high oil prices. The government’s earnings from oil exports declined from $2,000 million in 1985 to $700 million in 1987. To resuscitate the economy, the government was forced to introduce economic reforms. In 1987, the government announced the Economic and Financial Restructuring Program, also known as the Saneamento Economico e Financeiro (SEF). Unfortunately, the reforms were not implemented because of a lack of commitment by top MPLA officials sympathetic to a socialist pattern of development, and the dismissal of the Minister of Finance, the architect of the SEF program. Persistent economic problems and poor results from its socialist policies forced the government to resume the SEF in 1990. However, the resumption of the war with UNITA in 1992, following UNITA’s refusal to recognize the electoral results, again blocked implementation of reforms as the MPLA was primarily preoccupied with defense matters. Finally, in 1994, SEF was launched in an effort to revitalize the economy. Some reforms were undertaken. For example, in 1984, the government embarked on a program to increase food production to achieve food self-sufficiency by converting state farms into small-holder peasant associations in rural areas. Through agricultural stations, the government provided support in the form of fertilizer and seeds to peasants with limited success. Similarly, in 1990, the government embarked on the privatization of state-owned coffee plantations to boost output by selling 33 plantations to foreign companies. The sale proved expensive due to the old age of the trees and unattractive due to the war.
Like Angola, the democratic experience of independent South Sudan is untested as the country has yet to hold its first elections as a sovereign nation. The Sudan People’s Liberation Movement (SPLM) led South Sudan to independence and, by virtue of its legacy, exercises significant control over government, the political space and the economy. Similar to Angola, South Sudan can use its oil to increase its international standing and stimulate high growth rates, particularly in the non-oil sector, which may well see the country through the coming lean years. One of more concern is the socio-political situation in South Sudan in terms of human development indicators that show how oil wealth is concentrated in the hands of a few political elite and their alliances, leaving the majority of the population to languish in severe poverty. The last elections had served to entrench the ruling party’s position. While this may encourage political stability and allow the incumbent SPLM government to formulate long-term development plans, it does not bode well for political accountability, particularly given that the country’s oil-rich government was not dependent on a tax base for its revenue.
However, the country has vast and largely untapped natural resources and opportunities abound for visible improvements in the quality of peoples’ lives, but there are many challenges also. GDP per capita of South Sudan in 2010 was equivalent to USD$1,546, while the preliminary estimates for 2011 indicate a GDP per capita of US$1,804 which is much higher than its East African neighbors, mainly due to oil production. Above all and despite the economic shocks due to the oil shutdown, South Sudan’s inflation fell to just 25% in December 2012 compared to the 41%, registered in the month of November 2012 and 80% in April 2012, The decline in inflation, according to South Sudan National Bureau of Statistics (NBS), resulted from a fall in food prices by 26% between December 2011 and 2012. Prices for alcoholic beverages and tobacco, NBS said, increased by 54.1% over the same period the relevant figure for restaurants and hotels was an increase of 18.8%. Despite the substantial achievements of the last eight years, the development challenges facing the new nation remain significant. The civil war that lasted over 21 years took an enormous toll and left South Sudan impoverished. Over half of the population lives below the poverty line, and human development indicators are among the worst in the world. There has been also a significant increase in South Sudan’s population since independence. However, now that the “grace period” for South Sudanese in Sudan to sort out citizenship status has expired, the high growth rate is likely to drop. Yet, without the infrastructure in place to handle the larger population, access to resources and public services is likely to deteriorate. Moreover, a predominantly young population places further stress on the limited infrastructure and state resources.
As we all know, South Sudan, as a new country, encounters multiple challenges, but also holds opportunities, and it may be premature to predict which direction the country is headed in terms of governance and political stability. Key impediments are the less inclusive political space and corruption. The opposition complains of their inability to hold the government accountable and ethnic groups express feelings of exclusion. There is one opposition party, Sudan People’s Liberation Movement for Democratic Change (SPLMDC), with limited influence. Broad-based inclusion of all South Sudanese remains a challenge. South Sudanese have constitutional rights to form political organizations and engage in politics. Civil liberties are enshrined in the Constitution and incidents of rights’ violations were reported. South Sudan lacks the capacity and resources (human resources and administrative infrastructure) for checks and balances to fully operate and for the rule of law to prevail.
In conclusion, eight years after signing peace agreement (CPA), South Sudan is possibly in the strongest political and economic position it has ever been in. its Economic performance was before oil shutdown unquestionably positive. Its oil Industry constitutes a major source of income and occupies a strategic position in its economic development. The industry has been playing vital and dominant role to its economic growth, both in foreign exchange earnings and domestic income generation. Therefore, we believe that through the experiences of Angola, South Sudan can learn the following:
I. Stability has a clear impact on a country’s general economic performance. This would seem to demonstrate that despite whatever specific development strategies that country may pursue at different times. It is the country’s level political stability that had the most conclusive effect on the economy;
II. The oil industry can be the backbone of the economic development. The oil sector has been the dominant sector to the Angolan economy as well as the South Sudan economy and will most like remain that way. However, as dynamic linkage affects of this sector are diffused to the rest of the economy, South Sudan should focus on other economic sectors to boost its development process;
III. Oil industry is the main source of energy and shapes the political, socio-cultural, technological and economic destiny of the country;
IV. Because oil is an exhaustible resource, South Sudan needs to develop a production structure that can take full advantage of the dynamic external affects that rise from oil production and enable it to transform its supplies of oil funds into human and physical capital in an optimal way over time. This will help ensure that South Sudan succeeds in establishing a firm basis for self sustaining growth wile the oil reserves still last;
V. Oil wealth, human and natural resources must be properly managed and used to support the key national institutions such as power, energy, road, transportation, political, financial, socioeconomic, legal, investment environment systems etc . Accountability of oil income, its profitable investment and the diversification of the economy are very crucial for economic development;
Generally, Angola has relied on oil revenue to finance their development programmes since the government has a very narrow capabilities for generating domestic savings through conventional fiscal measures. Therefore, the Government of South Sudan should be alerted on the followings:
I. It is imperative for government to start with fair and most equitable reallocation of oil revenue on the basis that will ensure even distribution and balanced economic development;
II. Government should focus not only on oil revenue generation but should also re-direct its attention to proper management of the non-oil revenue and effective control of necessary expenditure;
III. Government should avoid budget deficit and ensure that balanced budgeting is the norm in the country;
IV. Government should invest oil revenue more on the economic sector that has significant and direct bearing on the economy in order to improve the value of GDP, per capita income and reduce inflation;
V. The government should use oil revenue to diversify the economy in the critical economic sectors such as agriculture and manufacturing sectors that would impact the per capita income positively;
VI. Natural resources are generally associated to negative effects on the political environment of a country. Based on previous literature, there is a relationship between oil revenues, political instability (conflicts). Under certain circumstances, a process of full democratization is argued not to represent an optimal choice for the oil-rich authoritarian nations. Therefore, the government should not favor to remain nondemocratic in violating its constitution, in order to prevent internal conflicts from occurring. It is importance to encourage socio-ethnical fragmentation in determining the political transition of oil producing nations.
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