SPECIAL REPORT-In South Sudan, a state of dependency

By Simon Robinson

The world's newest nation relies on oil to finance 98 percent of its budget. So when the government decided to shut off crude production in January after a dispute with a neighbor, South Sudan's foreign donors and aid groups were shocked.

How will the country survive, they wondered?

By leaning even more heavily on donors and aid groups, an examination of the country's safety net shows.

As in many developing nations, international aid is both an invaluable help to South Sudan and a crutch that sometimes enables it to avoid reality. Development experts have grown more sophisticated in recent decades about how they deliver aid. But in fragile states such as South Sudan, getting the balance right between helping a country and helping that country help itself remains incredibly difficult.

On paper, South Sudanese are actually better off than their neighbours. When the oil was flowing, the government estimated per capita GDP at more than $1,500, double that in Kenya and triple that in Uganda. The government's annual budget in 2011 was $2.3 billion.

But decades of war and neglect have left South Sudan dirt poor. That's why foreign governments and other donors gave just under $1 billion or so in aid in 2010, the latest available figures. None of that money went directly to South Sudan's government. But it funded everything from security training to food, drugs, textbooks and a host of other services. Around four-fifths of all health care is provided by outside groups.

South Sudan's President Salva Kiir has spoken a number of times of his country's reliance on aid. "We still depend on others. Our liberty today is incomplete," he said at an independence day speech yesterday. "We must be more than liberated. We have to be independent economically."

In a series of stories that chronicle South Sudan's first year of independence, Reuters is examining the country's chances of success. Getting the aid calculus right is one of the biggest challenges.

As it celebrates its birth, South Sudan faces an economic crisis. Without oil, the country is quickly running out of money. Ministries that should be taking on more and more responsibility for running things are instead cutting their budgets. The World Bank has warned of the "real possibility" of "state collapse."

Many donors are furious with the oil shutdown and say they won't pony up more money. But even before the government's decision, a series of emergencies - ethnic violence, food shortages, an unexpected influx of refugees - had pushed donors to shift money earmarked for long-term development plans back into things like food aid and emergency shelter.

Last week the United Nations increased the amount of funding it thinks South Sudan will need in 2012 from $763 million to $1.15 billion. That money will assist the country through a lean period, but has delayed efforts to help the government help itself.

Hilde Johnson, the U.N. Secretary General's Special Representative for South Sudan, said the government is still weak and struggling to take on more. The broad effort by the U.N. and aid groups to transfer responsibilities to the state "is just not happening," she said. "This is one of the things that the aid community is struggling with."

A SUSPECTED CASE OF TETANUS

Nowhere is South Sudan's dependence on the outside world more clear than in its health system.

One Sunday afternoon early last month, a white Toyota Land Cruiser pulled into the compound of a health-care centre in the state of Northern Bahr el Ghazal, near the border with Sudan. In the back of the vehicle, a mother hugged her week-old baby, who had a suspected case of neo-natal tetanus.

James Majuong Macar, the clinical officer at the centre, helped load two more patients into the makeshift ambulance: a 12-year-old boy with a fractured leg that had ballooned alarmingly, and a three-month-old girl whom Macar thought probably had meningitis.

A storm was moving in. Wind whipped through a huge fig tree and a bicycle fell to the ground with a rattle. The Land Cruiser turned out of the gate to make the hour-long drive through the rain south to Aweil, the state capital.

The people of South Sudan face cholera, measles, meningitis, polio, river blindness, sleeping sickness, yellow fever and whooping cough. Malaria accounts for a quarter of all hospital visits. South Sudan has one of the highest maternal mortality rates in the world. Around one in six children die within their first year.

And there are just 120 doctors and 100 nurses in a country of 8 million.

"The health system as it is now, is extraordinarily dependent on non-governmental actors," said Susan Purdin, the head of U.S.-based aid group International Rescue Committee in South Sudan. "Many years and much money, used prudently, will be needed to transition from what it is to what is envisioned."

The Ministry of Finance and Economic Planning calculates that the country received almost $179 million in aid for health in 2010, the second-biggest amount after funding for social and humanitarian affairs, which includes things like food aid and emergency medicines.

"HONOUR AND INTEGRITY"

South Sudan depended on aid long before it became a country.

During the south's decades-long civil war with Khartoum, the capital of Sudan, aid groups and donors kept health clinics running and built a massive hospital over the border in Kenya to treat South Sudanese who were ill or wounded by the fighting. The United Nations and aid groups helped feed people when the crops failed, and kept schools open. But aid certainly did not reach everyone.

In the lead-up to independence and in the 12 months since, many more aid groups have arrived. Donors have spent billions to build roads and bore wells, ferret out mines laid during the civil war, print textbooks, train women to farm, audit state finances and help the government write laws. They have hung more than 1 million bed nets to protect children from malarial mosquitoes and supplied sewage trucks to the prison headquarters.

In short, they have begun the effort to move from delivering emergency aid to longer-term development. But the emergencies and the oil shutdown have started to send that progress into reverse - stoking tension between the new government and some donors.

The country exports its crude through a pipeline that crosses Sudan. Juba believes the government in Khartoum stole 1.7 million barrels of oil from the pipe. Khartoum said it confiscated what it was owed in pipeline transit fees. When the two sides could not reach a settlement, South Sudan decided it would rather go without oil revenue than allow its enemy to have any.

In defending their decision to cut off the oil, South Sudanese officials have told western diplomats that "the independence, honor and integrity of South Sudan is more important than material things," according to one European diplomat.

RISK OF "COLLAPSE"

But the economic implications are dire. A World Bank memo on the country's outlook paints a dramatic picture. The memo, written in March and leaked to a local newspaper in May, said that the oil shutoff threatened the state's survival.

"The World Bank has never seen a situation as dramatic as the one faced by South Sudan," it read. "The shutdown will lead to a rapid reversal in key development gains." The Bank forecast that the number of people living in poverty will likely jump from 51 percent to 83 percent by 2013, that the mortality rate for children under 5 will double

REUTERS