South Sudan's Political Crisis: A Threat to Stability and Investment Opportunities

The dismissal of South Sudan’s First Vice President Riek Machar in early 2025 has reignited fears of a return to civil war, destabilizing a nation already grappling with ethnic divisions, economic collapse, and regional spillover from Sudan’s conflict. This political rupture underscores the fragility of the 2018 peace agreement and raises critical questions for investors: How does South Sudan’s deepening instability affect its economic prospects, and what risks does this pose to regional and global stakeholders?

The Political Standoff and Its Roots

The arrest of Machar, a Nuer ethnic leader and longtime rival of President Salva Kiir (a Dinka), stems from accusations of orchestrating a militia-led attack on a government base in Upper Nile state. This move by Kiir, who has long sought to consolidate power, breaches the 2018 Revitalized Agreement on the Resolution of the Conflict in South Sudan—a power-sharing deal intended to end a civil war that claimed 400,000 lives. The agreement’s collapse has fractured the unity government, with Machar’s allies now under house arrest or in hiding.

The rivalry between Kiir and Machar is deeply rooted in ethnic politics and economic control. Both leaders emerged from the Sudan People’s Liberation Movement (SPLM), which led South Sudan to independence in 2011. However, their competing visions for power—Kiir’s authoritarian centralization versus Machar’s demands for democratic accountability—have fueled cycles of violence. The current crisis is compounded by Kiir’s reliance on Uganda’s military support, his control of the repressive National Security Service (NSS), and his refusal to implement security reforms demanded by the 2018 agreement.

Regional and Economic Fallout

South Sudan’s instability is now intertwined with broader regional dynamics. The civil war in Sudan has disrupted oil exports via the Jonglei pipeline, which carries South Sudan’s crude to Port Sudan. With oil accounting for over 90% of government revenue, this shutdown has exacerbated an already dire fiscal crisis. reveals a steady decline, from -12% in 2020 to -1.5% in 2024, reflecting economic stagnation.

Meanwhile, cross-border militarization risks turning South Sudan into a proxy battlefield. Sudan’s military (under General Burhan) has reportedly armed Nuer militias in Upper Nile to counter the influence of the Rapid Support Forces (RSF) and South Sudanese rebel groups. This spillover has intensified ethnic clashes, with the UN warning of massacres and displacement.

Humanitarian and Investment Risks

The humanitarian toll is staggering. Over 7.7 million South Sudanese face severe food insecurity, while floods and conflict have displaced 1.4 million. These conditions create a fertile ground for further violence and weaken the government’s capacity to attract investment.

For investors, the risks are multifaceted:
1. Political Uncertainty: The delayed elections, now postponed to 2026, signal a lack of credible institutions and rule of law.
2. Economic Dependency: South Sudan’s overreliance on oil——makes it vulnerable to global price fluctuations and infrastructure disruptions.
3. Security Costs: Companies operating in conflict-prone regions face elevated risks of sabotage, militia attacks, and regulatory unpredictability.

Conclusion: A Nation on the Brink

South Sudan’s dismissal of Machar and its deteriorating political landscape pose existential risks to the country’s stability and economic viability. With delayed elections, stalled reforms, and a humanitarian crisis worsening by the day, the path to recovery remains blocked.

Key data underscores the gravity:
- Oil Dependency: South Sudan’s economy shrinks by an estimated 1.5% annually due to production cuts and pipeline damage.
- Humanitarian Crisis: 7.7 million people—60% of the population—face acute hunger, diverting scarce resources from development to emergency aid.
- Security Deterioration: The UNMISS mission, now weakened by U.S. withdrawal, struggles to protect civilians amid a 30% increase in intercommunal clashes since 2023.

For investors, South Sudan’s trajectory offers little optimism. Without a credible political settlement, foreign direct investment (FDI) will remain negligible, and existing projects—such as oil infrastructure—will face heightened operational risks. The international community must prioritize diplomatic mediation to prevent a return to civil war, but until then, South Sudan remains a cautionary tale of how ethnic rivalry and mismanagement can unravel even the most resource-rich nation.