Admission of Southern Sudan to EAC Could Boost Regional Resources Pool-UNECA Report

 The idea that East Africa is a ‘resource poor’ region may be about change with the possibility of the community getting a new member – South Sudan a new report shows.

Last year, the EAC’s head-of-states summit deferred application of the newly-independent state of South Sudan to join the regional bloc for further scrutiny.

Despite its natural beauty and fertile agricultural land, most economists consider the East African region (traditionally conceived as excluding DRC) to be ‘resource poor’, in the sense that it does not possess large natural endowments of fuel or minerals.

 In addition, given high population densities and fast expanding populations, in some countries in the region the amount of arable land is also quite restricted.

However, according to a new report by the United Nations Economic Commission for Africa (UNECA) titled ‘Tracking Progress - Report for the Intergovernmental Committee of Experts on Macroeconomic and Social Developments in the Eastern Africa Region 2011’ released recently , the possibility of South Sudan being admitted to the community next year could boost the regional resources not only by contributing oil but also its enormous amount of agricultural land and plentiful supplies of water.
 “The story of the contribution of South Sudan to regional resources does not stop at oil… Potential fertile lands upon which large-scale commercial farming could be established, again helping to reduce the region’s dependence on food imports.

In short, the full integration of South-Sudan into the regional economy could bring   enormous mutual benefits to the whole region,” the report says.
According to Andrew Mold, the Head Macroeconomic and Social Policy Analysis Cluster at UNECA based in Kigali, the region is heavily dependent on the import of fuel and oil.

“In terms of oil imports, the region imports approximately 64 million barrels of crude a year. This has enormous implications on the region’s current accounts.  For instance, approximately 30 per cent of Kenya’s import bill is made up of fuel. Similarly, Ethiopia spends 19 percent of its import bill on fuel,” Mr Mold said. 

However, he added that the admission of South Sudan would enhance the region’s resource potential as it brings with it the enormous potential of its natural resources.

According to the United States’ Energy Information Administration (EIA) data, South Sudan is currently exporting 187 million barrels a year.
“That is to say, it exports almost three times the imports of the rest of the East African region. At present, the lion’s share of South Sudanese exports (approximately 70 per cent) is exported to China, which has taken an active lead in the exploration, development, and exploitation of Sudanese fields. However, it would not require a major reorientation of Sudanese oil export markets to start to satisfy regional demand.” Mr Mold said.  

But according to the report, because of political instability, South Sudan is currently producing under its full capacity.

The countries analyzed in the report include 13 countries in the region – Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, Tanzania and Uganda.

South Sudan seceded from Sudan in July last  year after voting in a referendum granted under the 2005 peace deal which ended more than two decades of civil wars between the north and the south.
Expanding the region’s Comparative Advantage – the potential role of South Sudan’s Oil Production and Natural Resources
Despite its natural beauty and fertile agricultural land, most economists consider the East African region (traditionally conceived as excluding DRC) to be ‘resource poor’, in the sense that it does not possess large natural endowments of fuel or minerals. Given high population densities and/or fast expanding populations, in some countries in the region the amount of arable land is also quite restricted.

 Above all, the region is heavily dependent on the import of fuel and oil. Ethiopia produces oil on a very small scale, and only recently have significant oil deposits been found in Uganda – these are not expected to come on tap until 2014 at the earliest, according to recent declarations by President Museveni.

However, the idea that East Africa is a ‘resource poor’ region may be about to change. In July2011, South Sudan became independent – the first country to do so since 1993, with the independence of Eritrea. As a new member to the East Africa region, South Sudan brings with it the enormous potential of its natural resources. In terms of oil imports, the region imports approximately 64 million barrels of crude a year. This has enormous implications on the region’s current accounts.

For instance, approximately 30% of Kenya’s import bill is made up of fuel. Similarly, Ethiopia spends 19 percent of its import bill on fuel.
According to the United States’ Energy Information Administration (EIA) data, South Sudan is currently exporting 187 million barrels a year. That is to say, it exports almost three times the imports of the rest of the East African region. 

At present, the lion’s share of South Sudanese exports (approximately 70%) is exported to China, which has taken an active lead in the exploration, development, and exploitation of Sudanese fields. However, it would not require a major reorientation of Sudanese oil export markets to start to satisfy regional demand.

In addition, because of political instability, South Sudan is currently producing under its full capacity. These facts suggest an important impetus for a regional energy strategy. The story of the contribution of South Sudan to regional resources does not stop at oil of course. The country has an enormous amount of agricultural land and plentiful supplies of water.

These are potential fertile lands upon which large-scale commercial farming could be established, again helping to reduce the region’s dependence on food imports. In short, the full integration of South-Sudan into the regional economy could bring   enormous mutual benefits to the whole region.

  • Posted 4th April 2012

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