South Sudan Oil Linked to Militias Needs Oversight, Groups Say

(Bloomberg) -- South Sudan’s state-owned oil company needs increased oversight to protect vital revenue in a country reeling from a civil war and at risk of famine, according to two groups monitoring the activity.

Militias operating in the midst of the fighting have been paid by Nile Petroleum Corp., a private company owned by the state whose structure allows the transactions to be less transparent than they would be under other traditional government branches, Global Witness, a non-governmental organization, said in a report. The group cited documents including a bill submitted in 2016 to Nilepet for $1.5 million of expenses incurred by security services.

“In a conflict like South Sudan, especially within any democratic state, it is important that those concessions and that expenditure is subject to proper oversights,” Michael Gibb, who wrote the report, said by phone. “The capture of this one significant institution, very significant economically if you look into the numbers, has really been a key part of that slow gradual diversion of money from the oil fields and into the conflict.”

Four years of civil war in South Sudan have left tens of thousands of people dead and displaced 4 million others. The conflict has slashed food production and disrupted markets, raising the risk of famine. More than 7 million people, about two-thirds of the population, are at risk of at least some shortfall in food supplies between May and July, according to agencies including the World Food Programme.

Commercial Arm

Nilepet was established in 2009 as the commercial arm of southern Sudan’s government, prior to South Sudan’s secession in 2011. It’s the vehicle through which the state enters commercial relationships in the oil industry and holds shares in all three of South Sudan’s active joint-venture oil projects, according to Global Witness. The company has fallen under the direct control of President Salva Kiir, it said.

The company made payments between 2014 and 2015 of more than $80 million to politicians, military officials, government agencies and private companies in relation to the conflict, The Sentry, a Washington D.C.-based group said in a separate report on Monday.

Kiir’s spokesman, Ateny Wek Ateny, rejected both reports.

“Such reports are only intended to further polarize the country,” he said by phone from the capital, Juba. “Nilepet and the oil in South Sudan are the only things that have helped the government to deliver its services.”

To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net, Okech Francis in Juba at fokech@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Paul Richardson, Michael Gunn

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