What will Southern Sudan look like?

Following the referendum in January, Southern Sudan is expected to become the world's 193rd independent state when the Comprehensive Peace Agreement (CPA) expires on July 9th 2011. It has an agreed national flag and anthem, but key issues including the exact border with the north, the longest in Africa, remain unresolved. The new government will inherit one of the most underdeveloped regions in the world, which, despite its potential oil wealth, lacks key infrastructure and skilled labour after 20 years of civil war.

Politics

There remain fears that an independent Southern Sudan could fragment internally after a brief, initial honeymoon period. The regional Government of Southern Sudan (GOSS), dominated by the Sudan People's Liberation Movement (SPLM), already struggles to maintain order within its overmanned armed forces and to mitigate inter-tribal conflict in a region where militias and weapons proliferate. There will be ongoing tensions over tribal representation, with many southerners worried that the Dinka will dominate their government. There may also be clashes with militias loyal to former members of the SPLM, such as George Athor and Lam Akol, who have personal reasons to oppose the ruling regime. The SPLM leader and GOSS president, Salva Kiir, has promised a "broad-based government" in the new state, although it is expected that key positions will be dominated by the SPLM, who in the past have tolerated little opposition.

The south will also face new inflows of displaced people as thousands of Sudanese of southern origin living in the north, especially in Khartoum, Blue Nile and Kordofan states, migrate south. Uncertainty surrounds the status of southerners living in the north after independence. The Sudanese president, Omar al-Bashir, has publicly pledged to protect them, but figures in his government, such as the information minister, Kamal Obeid, had previously suggested that they would not enjoy citizenship rights and possibly be expelled. The South Sudan Relief and Rehabilitation Commission (SSRRC) estimate as many as 200,000 have migrated south since October 2010 and that, of the 1.5-2m southerners currently living in the north, as many as 500,000 could yet leave. Similarly, Muslims living in Southern Sudan, who make up a prosperous trading class, face an uncertain future and could migrate north, depriving the new state of an economic asset.

Economy

Relations with the north will greatly affect Southern Sudan's economy. Marred by years of violence, underinvestment and widespread illiteracy, the south's dysfunctional economy is heavily dependent on oil revenue-making up 98% of government income. Although plans for a pipeline to the Kenyan coast have been mooted, with no funds available to finance such an initiative, the existing pipeline through the north to Port Sudan remains the only export route. The current agreement, which splits oil profits 50-50 between north and south, is being renegotiated, and an amicable settlement will be crucial for both economies. Trade with the north will also be essential for the south to obtain many commodities and manufactured goods.

The new state will also seek an increase in foreign investment, and some firms will be tempted by the opportunity of gaining a first-mover advantage in Africa's newest state. Companies from neighbouring Kenya, Uganda and Ethiopia already enjoy a presence in the south and can be expected to increase their involvement. The country may also benefit from new international loans and grants, as well as development aid (which it already receives). However, access to funding may be complicated by concerns among international donors and lenders about the levels of corruption in Southern Sudan.

International relations

The US has stated that it will recognise a "sovereign, independent state" in Southern Sudan, and the EU welcomed the referendum result, as did China, despite initially favouring unity. The ruling SPLM will hope that recognition will be followed up by much needed international aid. Southern Sudan can also expect favourable relations with its neighbours. Uganda and Kenya, in particular, have led investment, and Egypt has checked its historical hostility to the south, increasing support for development projects in recent years (partly motivated by concerns about Nile waters).

Far more important to the success or failure of the new state will be its relationship with the north. The terms of division are to be negotiated in the months prior to formal secession, including oil profits and border demarcation, and the level of agreement in these talks may affect how the two states interact and co-operate afterwards. It is unlikely that disagreements could spark a resumption of the civil war, but sporadic clashes and crises are probable during the transition. Fighting would probably be focused on Upper Nile and Unity states, where there are key oilfields. There is also a risk of conflict in South Kordofan and Blue Nile, northern states that contain sizeable populations allied to the SPLM. A third area, Abyei, will probably choose to join Southern Sudan in a parallel referendum, although renewed violence between northern and southern backed groups is possible. The logistics of that vote will be particularly difficult given Abyei's remote location and opposition from local Missirya Arabs, who are afraid of losing their traditional nomadic grazing rights.

Note

If secession takes place as planned in July 2011, it will be necessary to make separate forecasts for the two newly created countries and disaggregate historical economic data series, although this will largely be based on estimates, because few data are available currently at a regional level. For the time being, however, all of our economic forecasts-including for the fiscal and national accounts and external sector-treat Sudan as a whole in 2011. In theory, Southern Sudan could be formally independent by July 9th, following the six-month transition period specified in the CPA. In reality, the transition may be slower for a number of political and practical reasons, including, for example, the difficulty for Southern Sudan of issuing a new currency to replace the Sudanese pound earlier than 2012. After secession, our coverage will probably change, and may involve launching a new Country Report for Southern Sudan or, at least initially, covering it in a separate annex to the Sudan Country Report.