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May 16, 2013

South Sudan 'Failing' at Resource Management

by Jill Craig

A new report says one billion people could have their lives transformed with better governance and management of their countries’ natural resources.

The study by Revenue Watch, which was released Wednesday in Washington, D.C., says that less than 20 percent of the 58 countries studied "embraced openness and accountability.” These 58 countries produce 85 percent of the world’s petroleum, 90 percent of the world’s diamonds, and 80 percent of the world’s copper, according to Revenue Watch.

Revenue Watch is a New York based non-profit that, according to its website, works to reduce corruption and improve governance in resource rich countries.

The 58 countries in the study were evaluated on four factors – institutional and legal setting, reporting practices, safeguards and quality controls, and general governance environment. 

Revenue Watch says that most of the worst performers depend almost exclusively upon revenues from natural resources as their main source of income. South Sudan, the most oil dependent country in the world, received a failing grade, ranking 50th out of the 58 countries.

Revenue Watch analyst Marie Lintzer, an analyst with Research Watch, worked on the project. 

“They don’t have an open and transparent oil sector," she said. "By that, we mean that they do not publish a lot of information about the oil revenues that they get, and their checks and balances are weak."

“And actually the only part where South Sudan scores really high on our index is regarding the institutional arrangements," she continued. "They have laws in place and since 2011, they have issued some laws regarding transparency in the oil sector. And South Sudan has a very high score in that respect.”

But, Lintzer added that while South Sudan may have laws on the books, such as the 2012 Petroleum Act, implementation of the laws is a problem.

“For now, none of the government agencies have been publishing information, so you can’t really find anything,” she said. “Whether it’s reports that have been published by ministries, or online, that was the main difficulty. Because you don’t have any information on the sector.”

South Sudan’s dependence on its oil sector makes better governance a priority, according to Lintzer.  
 
“Their entire economy is based on oil. And therefore, managing well your oil sector and having an accountable and transparent oil sector is important for the economic development of that country and for the sustainability of the economic growth that would go with that.”

Revenue Watch President Daniel Kaufmann agreed, saying the issue is not only important for South Sudan, but also for other countries ranking poorly on the index.

“But in terms of a development challenge of this decade, for these countries, it is the management, the better governance, anti-corruption in natural resources,” he said. “Because that is basically where their domestic resources lie.” 

However, the Revenue Watch report states that being wealthy is not a precondition for good governance of resources. The report said six of the top 11 performers on the index are middle-income countries, including Mexico, Colombia, and Peru.

“The silver lining is that some are performing satisfactorily, and that shows that it can be done, that there’s no such thing as a deterministic resource curse,” Kaufmann explained. Those countries that are doing satisfactorily are not all rich industrialized countries. And that’s very interesting news from this data report.”

Revenue Watch said the future of sub-Saharan African countries will depend on how well they manage their oil, gas, and mineral resources.