Petroleum revenue distribution to Local Communities in South Sudan
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The risks of last-minute changes in the new Bill
By John A. Akec and Kathelijne Schenkel
June 5, 2013 - South Sudan oil production has resumed in April 2013
after stoppage for nearly 15 months. Assuming problems with Sudan over
the implementation of the 27th September 2012 Agreements will be
resolved, it is expected that the revenue from the first sale of South
Sudan’s oil will soon start to flow again into the South Sudan’s
budget. Chief amongst new beneficiaries of oil revenue will be
governments and local communities of oil producing states; namely,
Upper Nile and Unity states.
The Petroleum Producing States shall receive two percent of the net
petroleum revenue and the local communities within the Petroleum
Producing States shall receive 3%. The Petroleum Revenue Management
Bill which sets out the framework and management system fort these
percentages is scheduled to be passed into law in Parliament coming
Monday. Based on recent field work and examples from other countries,
we think that some last-minute changes in the Bill on the three
percent distribution are worrisome.
The Bill now proposes that: “the three percent of the Net Petroleum
Revenue for Local Communities shall be allocated proportionally to all
Communities in the Petroleum Producing State according to the
following ratios: 45% to immediate communities, 30% to the
neighbouring communities, and 20% to all other communities”, with 5%
reserved for the management structure. We think these amendments can
potentially create conflict amongst communities.
First of all, our field work in Upper Nile and Unity states between
April and June 2013 showed that a majority of the people in the
petroleum producing states want the three percent revenue shared
equally amongst all the counties. We visited several counties, payams,
and bomas; conducted focus group discussions and surveyed the opinions
of more than 290 individuals including government officials, faith
leaders, chiefs, business people, women and youth groups, and ordinary
citizens. Our objective was to understand community perspectives and
aspirations about the three percent. Especially ordinary citizens,
also those living close to the oil-producing areas, feel that all
counties are in need for development and all deserve an equal share. A
female tea seller in Bentiu commented; "When war broke out in Panthou,
people from all over the state participated. Many people from
different places died here... this oil belongs to all people of Unity
State and all should get an equal share." A resident of Paloic in
Upper Nile commented; "all the society should abandon selfish
individualism and share our resources equally because we are all in
need and no one should feel left out."
But some local officials, especially from Upper Nile’s oil-producing
counties, do not share that position. They feel they have suffered
most impact and thus are entitled to most or all of the three percent.
Although this is understandable, officially impact should not be
mitigated by channelling revenues back to the areas. Impact should be
compensated at the time the impact occurs. Unfortunately history has
shown that this has either not happened at all, or in a very
unsatisfactory way.
The difficulties with the ´ratio system´are;
• A definition of “immediate”, “neighboring” and “other” communities
is needed, which will not be easy as these terms embody concepts that
are contestable and could be a cause for rivalry and dispute over
counties and communal borders; each of which will be vying to maximize
their share of revenue. These terms supposedly describe the distance
of communities to petroleum facilities; what kind of operations/
installations are then considered? Field Processing Facilities; pump
stations; pipelines, roads or other infrastructure?
• Communities “immediate” to petroleum operations might be found
across county boundaries; e.g. communities in Melut, Renk, Maban in
Upper Nile. The 45% then has to be split among the respective
Community Development Committees (CDC) as those are organised at
County level. But what if one County has a higher amount of
“immediate” communities to the same infrastructure than another
County? Then yet another ‘ratio’ has to be included in the
calculation.
• Also, a CDC (as a county level structure) likely will have to deal
with allocating funds to “immediate“, neighboring” and “other”
communities at the same time – which might prove not to be very
practical; is one area really entitled to more schools for example
than another area within the same County? This could lead to
frictions.
• Another serious issue could be that “neighboring” or “other”
communities start moving into an area which is considered “immediate”
if more development is realised there.
• What is more, as new facilities are constructed, and others
abandoned, the amount of share of revenue accruing to each beneficiary
community will have to change with distances of communities from the
new the facilities. How to deal with that?
>From the above it follows that the stratification of communities in
oil-producing states doesn’t make practical sense. The CDCs will have
to deal with allocating funds to a bewildering array of “immediate’,
‘neighboring” and “other” communities at the same time –presenting
tremendous implementation difficulties. This is likely to engender
inter-communal conflicts and dissent in oil producing states. An
extreme bad example is that of the oil-rich Niger Delta; states in the
Delta receive 13% oil derivation money and stand to benefit from a
further 10% of government royalties from joint venture companies. This
has not resulted in development for communities in the Delta. This is
partly due to poor management of funds, poor leadership and
corruption, but also to conflict and rivalry between communities
because of a "host community" criterion which all communities must
pass in order to qualify for receiving a share of derivation revenue.
The "host communities" qualification has led to competition over
border demarcations and has resulted in acts of sabotage against oil
companies and loss of billions to the country. Experts believe if all
communities in Niger Delta were to enjoy equal shares, most of
violence and conflict could subside.
A complicating factor for the management of the three percent is that
currently the CDCs administrative and technical capacity and
experience are limited. Even worse, we found that most are very weak
or non-existent. Those that exist are ad hoc bodies appointed and
dissolved by county commissioners, which in turn are usually appointed
by the Governor, contrary to the Local Government Act 2009 which
stipulates their election. The Bill provides for an Advisory Body to
the CDCs, which has its own risks. The formation of it is unclear: is
it an elected or appointed body? Secondly, it is stipulates that all
members should come from ´producing areas´, excluding others. As an
Advisory Body should have a completely independent oversight role
only, this requisite is illogical.
Thus, in conformity with the wishes of many citizens and to avoid the
challenges and tensions over community differentiation, we think equal
distribution of the three percent among all communities living in the
13 Upper Nile and 9 Unity State counties will be most sustainable. The
negative impacts of oil exploitation in the states have to be
compensated separately on a case per case basis, by the responsible
companies or government institutions.
In the words of a one-time Niger Delta state governor, South Sudan
should not “want to create a fat man with thin legs.” And if we have
understood him correctly, strong legs in the context of South Sudan
are a legislation that is thoughtful, workable, and puts community
perspectives and interest first.
Dr. John A. Akec is chair of Academics and Researchers Forum for
Development (ARFD), South Sudan; Ms. Kathelijne Schenkel is programme
officer (Natural Resource Governance) at IKV Pax Christi/ECOS,
researcher and co-author of a forthcoming report: Research into Local
Level Sstructures for Petroleum Revenue Distribution to inform
Regulations, scheduled to be published in September. For enquiries
contact the authors: [email protected] and [email protected]
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