What a strike by bank workers demanding a 500% pay rise tells us about the state of South Sudan

The political freedom was hard-won, now a reeling economy is the latest threat to Africa's youngest nation.

EQUITY Group, Kenya’s biggest bank by market value, said employees at its South Sudan unit have began a strike to demand a six-fold pay increase after the devaluation of the war- torn nation’s currency caused consumer prices to spiral.

The lender declared a dispute with the nation’s labour authorities and will seek a quick resolution to the issue, Paul Gitahi, managing director for the bank’s South Sudan unit, said in an interview with Bloomberg news wire in the capital, Juba.

The employees strike action highlights how Africa’s youngest nation has struggled with both self-inflicted wounds and a volatile global oil market that could harm its hard-won freedom even further.

South Sudan devalued its pound currency by 84% in December, allowing the currency to trade freely. The central bank adopted the black market rate of 18.5 per dollar, compared with a previous fixed rate of 2.96. 

Annual inflation surged 110% the same month as food prices increased, stoking fears of hyperinflation.

The country’s economic woes are a result of a civil war that begun again in December 2013 after barely two years of independence, and the crash in oil prices, widening an already weak trade deficit.

The conflict has left tens of thousands of people dead and forced more than two million others to flee their homes. Aid groups say they need $1.3 billion this year to help some 5.1 million people.

Oil disappears

But the fighting also cut oil output by a third to the current 160,000 barrels a day in a country that has the continent’s third largest oil reserves but which are seen at risk of petering out.

The country is the most oil-dependent country in the world, with the commodity accounting for almost all its exports, and 60% of its Gross Domestic Product (GDP), according to World Bank data. Analysts estimate that using current oil reserve estimates, there will be a steady reduction in output, with production almost negligible by 2035.

Investors are feeling the heat. South Sudan Breweries Ltd, the country’s main non-oil investor and which is run by SABMiller, last week announced it would close shop, as the lack of forex for months curtailed its ability to import raw materials.

Some 176 jobs will also be shed by the end of March, managing director Carlos Gomes said of a firm that was once seen as a symbol of freedom. “We had large South Sudanese pound deposits in the bank at the time the devaluation was announced. The end result is that we incurred a loss of ‘tens of millions’ of dollars, placing South Sudan Breweries in an even worse position than it was,” he told Bloomberg.

But even ordinary South Sudanese are feeling the crunch. The average government worker’s monthly salary is 1,000 South Sudan pounds, while a 30-kilogramme bag of the staple maize flour sells for nearly 300 pounds.

A five-litre bottle of cooking oil sells for 200 pounds, compared with 80 pounds before the devaluation.

“This cannot take me anywhere,” Suzie Gobi, a Ministry of Labour official, said of her monthly salary of 1,400 South Sudan pounds ($75.68). “I spend 100 pounds a day. It is really bad, very difficult and we are really suffering.” 

Poverty worse after independence

Some 85% of its population is engaged in non-wage work—with agriculture accounting for three quarters of its citizens employ. With a nominal per capita GDP of $1,081 fuelled by oil, its citizens would theoretically be the 30th richest in Africa, ahead of countries such as Tanzania, Ethiopia and Uganda. 

But the incidence of poverty has actually worsened since independence, from 44.7% in 2011 to more than 57.2% in 2015, and is set to get worse as general prices worsen.

Analysts say the inflation rate was driven by food and non-alcoholic beverages, which are mainly imported and account for nearly three-quarters of the consumer price index. But it could feasibly be worse—the inflation data was collected from only two towns.

The return or stay of investors will in part depend on the return to political normalcy. A new unity government is set to be up by the end of January, after it was agreed in August as part of a 30-month journey to elections.

The conflict begun when president Salva Kiir accused his deputy, Riek Machar, of seeking to depose him. 

The new deal will see Kiir’s administration nominate 16 ministers, while Machar, who will resume as deputy leader of the interim government, will pick 10 ministers. four other positions going to a group of influential former political prisoners.

But with a population estimate of between 8 million to 12 million in the absence of a proper census, the country has a very young demography, with two thirds of its population aged under 30, and has a median age of 18.6.

This young population is finding economic opportunities harder to come across, and opening them up to recruitment in a country with at least 25 armed groups, further imperilling an already fragile peace process. 

Additional writing by M&G Africa. The article’s headline was amended to reflect an accurate percentage figure.

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