Shoppers grumble as South Sudan oil shutdown drags on

Tue Apr 3, 2012 1:21pm EDT

* Oil shutdown in dispute with Sudan has hit economy

* Inflation up, work more scarce in Africa's newest country

By Alexander Dziadosz

BOR, South Sudan, April 3 (Reuters) - Amburose Gift expected to make good money in South Sudan when he moved to the oil-producing country from Uganda three years ago. Now he is just trying to pay for a bus ticket home.

The 23-year-old construction worker has yet to cobble together the fare of 200 South Sudanese pounds - about $50 on the black market - to get him out of the country that stopped pumping crude in January due to a row with Sudan.

For Gift and thousands of other foreign and local workers in the newly independent nation, the oil shutdown meant a steep rise in prices and less work as businesses try to hold down spending in what has become an economic crisis.

"There have been increases in the prices for things like eggs, even onions, everything," Gift said.

South Sudan took about three quarters of Sudan's oil output when it became independent in July under a peace deal that ended decades of civil war and oil - when it flows - provides about 98 percent of state revenues.

The catch is that South Sudan still needs pipelines, a Red Sea port and other facilities located in Sudan to export crude. The two have fallen out spectacularly over how much it should pay to use them.

Facing roaring inflation and a sinking currency of its own, Sudan began to confiscate oil from the South to make up for what it said were unpaid fees, prompting Juba to shut down its oil fields in protest.

That cut flows of foreign currency into the new nation and helped weaken the South Sudanese pound to about 4 to the U.S. dollar on the black market from around 3.5 before the shutdown.

That drove up inflation as the country relies on imports for everything from basic food items such as sugar or bananas, to furniture, machines and consumer goods. No sizable industry exists outside the oil sector.

Prices were already rising before Juba stopped producing oil, due in large part to a disruption in trade with the north.

REMOTE

The impact has particularly hit places like Bor, capital of South Sudan's Jonglei state, where most goods are trucked in at a premium on bumpy dirt roads from Uganda, Kenya and elsewhere.

Analysts say annual inflation in remote places like Jonglei is much higher than the national figure of 42 percent reported for February, due to transport costs.

"Prices here are tied to the dollar. If the dollar goes up, the prices go up," said Ali Salah, a 40-year-old trader in Bor's dusty market, adding that staples like sugar and rice were rising.

"The first thing in the economy of this country is petroleum. If there's no petroleum, there's nothing."

The government announced a raft of austerity measures including cutting spending by 35 percent this budget year.

Northern Sudanese officials say the shutdown has worked to their advantage, despite their own economic problems, pushing South Sudan to soften its bargaining position in talks about oil transit fees and border disputes.

MARKET BUZZ

Several traders and customers in Bor's market said the oil shutdown had forced authorities to collect duties more aggressively, pushing prices even higher.

Kiyingi Paulo, a 25-year-old Ugandan trader, said "high taxation" had helped push the cost of a 25-kg sack of flour at his brother's shop to about 70 pounds from 60 before the shutdown.

The cuts are also being felt in Bor's government offices. One local official who asked not to be named said his ministry had been asked to halve the "services" section of its budget, which covers things like water, cleaning and car repairs.

"If I was given 10,000 last time, now it's cut to 5,000," he said, declining to give the actual budget figures.

Despite the strain, Bor's market of corrugated metal and wooden shacks still appears lively. Plastic bags rustle as shoppers haggle over vegetables for evening meals. The smell of dried fish and burning charcoal hangs in the air.

Mary Augustine, a 36-year old hotel worker buying okra from a woman who put the money into a piece of newspaper stapled together into a purse, said it was becoming impossible to make ends meet.

"It used to cost just five pounds to feed the whole family for a day, but now 30 isn't enough," she said. (Editing by Robin Pomeroy)

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