By Amargira James Kadanya
Insight and Overview of the micro and macroeconomic situation.
In order for us to not only identify and ascertain the most effective and efficient mechanisms and interventions aimed at remedying the detrimental impacts and effects of the prevailing economic and financial situation in South Sudan, it remains of great importance to critically analyze the ground-based manifestations of the Economic situation, at both the micro and macro levels.
In direct relation to the subject matter at hand, Individual decision-making, the entity under scrutiny here directly pertains to the South Sudanese State, inclusive of it population, both in the Country as well as those in exile, secondly, international players such as the neighbouring States, large Multi-national Corporate Firms and the Wider Global and Regional Diplomatic Agencies maintaining operations in the Country are all equally to a greater extent implicated in the manifestation of the economic situation in the Country, with or without proof or evidence of partial or complete involvement. In the broadest sense of Economics as a field of study and practice, micro basically refers to the manifestation and outcomes of the decisions made by individual households, firms and other ground-level players in the production, distribution, exchange and consumption of scarce resources within single market systems.
Furthermore, micro still entails the factors that determine market prices and quantities offered for sale and purchase which arise from the interactions amongst players such as consumers, producers or suppliers and other intermediary agents such as Government authorities and the financial systems comprised of Banks and other Institutions. It is from the micro aspect of the Economy that we study concepts such as Market demand and supply, that form the baseline upon which vital interventions aimed at handling rapid price fluctuations of basic commodities are grounded.
In order to realize mid to longer-term effective price control mechanisms and interventions, it becomes imminent that we look at the macro aspect of the economy comprised of the structure, performance, behavior and collective decision-making of the whole or aggregate South Sudanese Economy. Through analyzing the Country’s National Output (GDP), Unemployment, and Price stability (Inflation), by looking at the prevailing circumstances and numerous factors of significance, effective measures aimed at averting the fluctuating price in the market becomes much more feasible. Lastly, it is through the macro aspect of the economy that we get to appreciate the impact of various decisions on the Nation’s growth and development rates, unemployment and inflation over time.
- Significance of Decision-making at the Institutional Level.
According to the subject matter of this discussion; decision-making, the definition of a decision clearly broadens the scope upon which analyzing the numerous existing measures aimed at combatting market price surges can be explored and implemented. With the assertion that decisions happen to be choices amongst alternatives, it is worth noting that the prevailing circumstances plaguing the South Sudanese microeconomy can be entirely attributed to the decisions made by the numerous Government agencies and authorities tasked with overseeing the overall operations and functions of the economic system. On a sad note, the most recent decision made by the Country’s Apex Bank (Bank of South Sudan) together with the Ministries of Finance, Trade and Investment to collectively run and oversee a scheme aimed at purchasing basic goods and commodities from the neighboring Countries at affordable costs in order to subsequently lower market prices in South Sudan presents itself as a classic case of making short-term centered decisions that yield immediate positive effects though are always prone to imminent failure in the mid to long-term. Based on the above-described ordeal, it is worth noting that market prices will remain unstable due to the short-term nature of the decisions made by the concerned Institutions.
Mid to Long-term effects and Impacts of the prevailing Economic downturns.
Matters economics are always complex and sophisticated in the real sense that numerous factors of significance both directly and indirectly affect each other over time. It is worth noting that the various decisions taken by the players in the economic system all have effects and impacts on the performance, stability and overall output of the system itself. Well known to the Country’s populace are the widespread occurrences of numerous periods of insecurity and political instability allover South Sudan, which have been one of the biggest deterrents to realizing meaningful economic potential and sustainable growth and development. Owing to the fact that matters insecurity and instability happen to be highly politically militarized, it is best to detach them from economic analysis in direct relation to the impacts of the decisions made under such circumstances on the stability of market prices. The most detrimental effect and impact of the decisions made by the South Sudanese populace happens to be attributed to Capital flight, which entails the excessive transfer of huge amounts of money outside the Country, basically defined. Even though this practice often pertains to foreigners, it is very absurd to realize that the large, growing population of exiled South Sudanese across the region continues to create an environment of unsustainable dependency back home, which further leads to a weakened microeconomy in the long run, due to the high maintenance costs and expenses of families in exile. It is upon this basis that we realize the effect of a growing exiled population denies South Sudan the required technical and competent work force needed to strengthen the Economy’s foundations of home-grown and based production and consumption.
An aggregation of the prevailing circumstances over time has subsequently led to the general and widespread lack of self-reliance of the internal market structures attributed to the limited, diminished internal capacity of the microeconomy fueled mainly by the over dependence on costly imported finished goods and commodities.
The Best way forward of the Price and Cost situation; Effective, feasible Price Control mechanisms and other Interventions.
South Sudan being confronted with a sharp rise in the prices of essential commodities happens to be the primary features of a largely monopolistic market structure. Furthermore, two situations manifest whenever the sellers, producers and suppliers of a particular set of commodities possess immense unchecked power, influence and authority on market functions and operations at the expense of consumers; Price discrimination and price volatility. The former is the tendency of sellers and producers to charge varied prices for a similar set of goods and commodities to consumers within a single location over time. The latter; Price volatility can be briefed looked at the fluctuating, unstable movements of price levels in a market over time. The manifestations of these situations can be entirely attributed to the fact that not only are suppliers, producers and sellers not regulated entirely by the concerned Authorities, but also due to a weakened microeconomic environment plagued by instabilities macroeconomically, particularly the diminished value and purchasing power of the South Sudanese Pound; SSP as well as uncurbed Inflation rates.
The best way forward in regards to the market price situation entails the enforcement of numerous economic and financial control mechanisms aimed at stabilizing price ranges within a shorter time-frame, as well as strengthening the basis upon which microeconomic activity ought to take place in order to ensure an equilibrium between sellers and consumers in the mid to long-term.
According to the above described scenario, it is worth noting that the most effective Intervention ought to be Price Control Mechanisms. These can be referred to as a set of approaches to price fluctuations on the market enforced by the government to protect either consumers or producers from unfavourable market prices that are either too high or low, respectively. Whenever market prices of a certain commodity are either below or above the market equilibrium range, the Government through its regulatory arms introduces price controls in the form of either price ceilings or price floors, equally referred to as Maximum price control and minimum price controls respectively.
Owing to the fact that the South Sudanese Market comprised of a high consumption margin for mostly imported food commodities subject to frequent fluctuations, it is imminent that local production levels and importation margins are most likely not to keep up with demand for the food commodities and hence becomes a driving factor for price fluctuations caused by market shortages. A separate scenario can involve the abundance of cheap, imported food produce on the market, leading to very low prices that most definitely lead to losses for Producers and distributors.
According to both scenarios, the government may then institute price ceilings or price floors under such circumstances. Each of the approaches works this way, as explained below;
- Price ceilings; Having described it as the maximum price control, is a price range above which producers are not allowed to sell numerous widely consumed products on the market, i.e is the highest price at which the Basic commodities can be sold and is meant to protect consumers from very high prices most likely to drive and fuel their exploitation by sellers. It is often set below the Market equilibrium price for the targeted, highly consumed produce at that particular point of time.
- Price floors; Having described it as a minimum price control, is a price range below which buyers are not allowed to purchase the affected food products on the market, i.e is the lowest price at which the most basic food commodities can be bought and is meant to protect sellers from very low market prices most likely to lead to countless losses due to the failure to recover profits from production costs. It is often set above the Market equilibrium price for the targeted, highly consumed products, at that particular point of time.
-Having described the two primarily used price control mechanisms that are most likely implemented to sustain food consumption and domestic production Country-wide, for South Sudan’s case, it is worth noting that numerous challenges most definitely arise from these market interventions and directly affect market stability, supply and consumption of basic food commodities over time.
With a uniform market price below the market equilibrium, there are most likely to be market shortages caused by the high demand for the food commodities, which leads to the emergence of sub-standard products on the market and a new market price that is higher for most consumers.
Secondly, a uniform market price above the market equilibrium equally presents a number of direct implications on market stability, for example creating an excess supply of food produce on the market which if not taken up on the market leads to widespread losses for suppliers and importers, forcing the government through its agencies such as the Ministry of Trade and Commerce in collective efforts with numerous large scale importers and distributors to purchase the excess produce on the market with the aim of stabilizing prices, relatively.
Lastly, it is worth noting that each of the above-described Price control mechanisms ought to be enforced under the right circumstances in order to limit the impacts of their side effects on the market.
Furthermore, it is of great significance to take note of the fact that without effective market research and development, numerous interventions will not yield fruitful results in direct relation to curbing high market prices due to the fact that decisions aimed at achieving positive outcomes ought to be taken through collective efforts and collaboration of the concerned Government Authorities.
The author is a student of Agricultural Economic from Kenya Methodist University in Kenya.