South Sudan: Economic Boom, Bust and Breakdown

Compared to mature Western markets, frontier markets in regions such as sub-Saharan Africa present higher returns on investment but greater levels of political risk. South Sudan exemplifies this because of its natural resources and development potential that have been undermined by poor governance and pervasive conflict. President Salva Kiir must overcome these myriad problems to create a favourable climate for long-term investment.   

South Sudan gained independence from Sudan in 2011 after decades of violence between the south and governments in Khartoum. The South Sudanese Civil War erupted in 2013 when Vice President Riek Machar exited the ruling Sudanese People’s Liberation Movement (SPLM) and created the SPLM in Opposition (SPLM-IO). The war morphed from a political dispute into a conflict between Kiir’s ethnic Dinka and Machar’s ethnic Nuer supporters (CfR, 2025). The 2018 peace agreement saw Machar re-enter government, but the country’s stability continues to be undermined by low-level ethnic conflicts, violent SPLM-IO factions, and an ongoing humanitarian crisis.

Political Environment

Political tensions between Kiir and Machar remain heightened. In 2025 Kiir removed SPLM-IO politicians from local state parliaments (Igihe, 2025). The SPLM-IO’s withdrawal from the 2018 agreement and the arrest of Machar in March have pushed the country closer to civil war (CFR, 2025; Lime, 2025). This adds to the uncertainty surrounding the delay of South Sudan’s general election from December 2024 to December 2026. Kiir and Machar are stalling the country’s political transition to maintain control of their financial and military resources (Bali, 2024).

South Sudan is also hindered by region-wide instability. It joined the East African Community in 2016 to diversify its trade partners and integrate into regional political networks (Ministry of East African Community, 2022). South Sudan trades extensively with Kenya and Uganda, as well as with China, but limited trade occurs with other neighbours such as the Democratic Republic of Congo (OEC). This is the result of non-existent transport infrastructure, interstate tensions with Sudan, and instability in areas bordering South Sudan (African Development Bank, 2016).

Economic Environment

South Sudan’s oil industry accounts for 90% of government revenue and depends on Sudan’s pipeline network to export crude oil (World Bank, 2024). Despite expectations of oil being used to fund development, Kiir has used the revenue to buy the loyalties of rebel leaders. When disputes between Sudan and South Sudan halted the export of southern crude through Sudan’s Petrodar pipeline in 2012, competition between Kiir and other elites for scarce financial resources contributed to the outbreak of civil war (International Crisis Group, 2021). Attacks on Sudan’s pipelines during its ongoing civil war led South Sudan to halt crude exports between February 2024 and January 2025, resulting in another economic crisis (Esau, 2025).

Other economic sectors remain underdeveloped. Only 5% of South Sudan’s agricultural land is currently used, with the country’s many subsistence farmers unable to produce enough food to export or meet the country’s needs (African Development Bank, 2024). The country is on the US Financial Action Task Force greylist, lacks a stock exchange, and has a small banking system, which, in combination with difficulties exchanging South Sudanese Pounds for other currencies, makes business challenging for foreign investors (US Department of State, 2023).

This visualisation of South Sudan’s GDP and economic growth rate demonstrates its volatility. Political uncertainty, armed conflict, and an overreliance on crude oil exports have prevented sustained economic development.

Opportunities

Large-scale investment in South Sudan is contingent on the cessation of conflict and the formation of a stable government. The country’s underdeveloped infrastructure leaves significant room to invest in telecoms, roads, and other means of communication or transport (Africa Business). Investment in South Sudan’s oil sector could increase output or discover new deposits, with the construction of the hypothetical South Sudan-Kenya pipeline serving to reduce South Sudan’s dependence on Sudan (Howard, 2025). The country’s mining potential – including resources such as diamonds, gold and copper – could attract investment and diversify its commodity exports (African Development Bank, 2019).   

Agricultural development would transform the livelihoods of rural populations and increase production of both staple foods and cash crops. Investments by the EU and the United Arab Emirates have the potential to boost South Sudan’s food security and reduce its dependence on oil exports for revenue (News.cn, 2024; WAM, 2025). Opportunities for small-scale industries and infrastructural development exist inside the capital, Juba, because of its international connectivity and the presence of government security forces (African Development Bank, 2019).

Future Prospects

South Sudan will remain fragile despite oil exports through Sudan restarting in January 2025 (BMI, 2025). Efforts to increase fiscal stability by taking on a $12.9 billion oil-backed loan from an Emirati company will improve the government’s short- to medium-term finances, but will oblige South Sudan to sell discounted oil to the United Arab Emirates until 2043 (Al-Monitor, 2024). Conflicts between rival SPLM-IO factions, local militia, government forces, and non-signatories to the 2018 agreement continue to plague areas near the country’s oilfields, hindering exploration and investment (IISS, 2024).

The implementation of the 2018 agreement has foundered as political tensions and localised violence escalate. Attacks in north-eastern South Sudan by Sudanese Rapid Support Force rebels on SPLM-IO troops this year signify the potential for South Sudan to be dragged into the Sudanese civil war (Sudan War Monitor, 2025). The merging of conflicts in Sudan and South Sudan would result in a regional war, the military intervention of Kiir’s ally Uganda, and the worsening of the country’s dire humanitarian situation (Reuters, 2025).

Conclusion

Long-term and sustainable investment in South Sudan is impossible without political and regulatory reform. Kiir and Machar must agree to a smooth transition of power and avoid provoking localised ethnic violence or involving their forces in the Sudanese civil war. Failing to do so will condemn the world’s youngest country to a violent, oil-dependent, and deeply uncertain future.

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