The recent dismissal of South Sudan’s First Vice President Riek Machar in early 2025 has reignited fears of renewed civil war in a country already grappling with deep ethnic divisions, an economic collapse, and the regional effects of Sudan’s ongoing conflict. The move, which undermines the 2018 peace agreement, raises critical concerns about South Sudan’s future economic prospects and its risks to both regional and global stakeholders.
The arrest of Machar, a prominent Nuer leader and long-time rival of President Salva Kiir (a Dinka), follows accusations of a militia-led assault on a government base in Upper Nile state. Kiir’s actions breach the power-sharing agreement intended to end South Sudan’s civil war, which resulted in over 400,000 deaths. This collapse has fractured the unity government, with Machar’s allies either under arrest or in hiding.
The rivalry between the two leaders is deeply embedded in ethnic politics, with competing visions for control—Kiir’s authoritarian centralization versus Machar’s demands for democratic governance. The instability is further compounded by Kiir’s reliance on Uganda’s military and his control over the National Security Service (NSS), as well as his refusal to implement necessary security reforms.
South Sudan’s instability is intertwined with regional tensions, especially due to the ongoing conflict in Sudan, which has severely disrupted oil exports through the Jonglei pipeline, vital for South Sudan’s economy. Oil accounts for over 90% of government revenue, and the disruption of this key export route has worsened South Sudan’s fiscal crisis, as the economy continues to shrink.
Compounding these challenges, cross-border militarization is turning South Sudan into a proxy battleground. Sudanese military forces are reportedly arming Nuer militias in Upper Nile to counter rebel groups, further escalating ethnic violence. The UN has warned of escalating massacres and displacement due to these cross-border military operations.
The humanitarian situation in South Sudan is dire, with over 7.7 million people facing severe food insecurity, and 1.4 million displaced by conflict and floods. These extreme conditions are pushing the government’s already weak capacity to attract international investment to its limits.
For investors, the country presents several risks:
- Political instability: Postponed elections and lack of rule of law signal an uncertain future.
- Economic fragility: Heavy reliance on oil exports exposes South Sudan to global price volatility and infrastructure vulnerabilities.
- Security threats: Companies face heightened risks in conflict zones, with potential for sabotage, militia attacks, and unpredictable regulatory environments.
South Sudan’s escalating political tensions and deteriorating security pose severe risks to both its stability and economic future. With delayed elections, stalled reforms, and a worsening humanitarian crisis, the country’s path to recovery remains unclear.
Key statistics underscore the gravity of the situation:
- Oil Dependency: An estimated 1.5% annual shrinkage in the economy due to production cuts and infrastructure damage.
- Humanitarian Crisis: 60% of the population—7.7 million people—are facing acute hunger, straining already limited resources.
- Security Risks: Increased intercommunal violence by 30% since 2023, with a weakened UN peacekeeping mission unable to protect civilians effectively.
For investors, the lack of a credible political settlement and rising security concerns will continue to discourage foreign direct investment (FDI). The international community must prioritize diplomatic mediation to prevent a return to civil war, but for now, South Sudan’s situation stands as a cautionary tale of the devastating impact of ethnic rivalry and mismanagement on a nation with immense potential.
