When South Sudan gained independence from Sudan on July 9 2011, it was hoped that oil revenues would fuel the economy of the world’s youngest country. But corruption and cycles of violence in the years that followed undermined its development progress and worsened its humanitarian situation. 

For five of the 11 years that South Sudan has existed as a country, it was torn apart by civil war. By the time a peace agreement was agreed between president Salva Kiir Mayardit and his former deputy Riek Machar in 2018, as many as 400,000 lives were lost and millions were displaced.

The country’s economic prospects continue to be wedded to its oil, which accounts for almost all its exports and 90% of government revenue, according to the IMF. Meanwhile, agriculture provides the main source of livelihood for more than 80% of households and the population remains heavily reliant on humanitarian aid. 

South Sudan’s oil reserves are estimated at 3.5 billion barrels, giving it the third-largest reserves in sub-Saharan Africa, after Nigeria and Angola. Nearly 90% of South Sudan’s oil and gas reserves remain untapped, according to the Ministry of Petroleum.

The African Development Bank says South Sudan’s economy contracted by 6% in its 2021 fiscal year, due to the impact of Covid-19 pandemic on the services sector, while agriculture was diminished by floods and locusts. Due to increased oil export receipts, the economy is projected to rebound by 5.3% in the 2022 fiscal year and by 6.5% the following year.

New oil and gas blocks

Spanning more than 640,000 square kilometres, South Sudan is landlocked and bordered by six other nations: Sudan, Ethiopia, Kenya, Uganda, the Democratic Republic of Congo and Central African Republic. In the almost half-century before it seceded from Sudan, the country endured two civil wars where more than 2.5 million people died.

Nowadays, following the establishment of a transitional government in February 2020, South Sudan has been on a push to woo international investors. In June 2021, the Ministry of Petroleum launched the country’s first oil licensing round to accelerate exploration and production. 

Akol Dok, a managing partner at Orus Consulting, says the country’s oil and gas industry is untapped and has growth potential: “People didn’t understand South Sudan’s energy potential a decade ago. Right now, South Sudan is trying to attract investment.”

South Sudan currently produces roughly 150,000 to 170,000 barrels of oil per day, according to estimates cited by the International Crisis Group. However, it only earns income from 45,000 barrels, after the share owed to international companies and fees paid to Sudan. As part of the peace agreement reached with Sudan in 2005, a portion of the oil revenues are shared.

Besides, political elites in South Sudan’s capital Juba are alleged to syphon off a significant portion of the country’s oil revenues with little of the benefits reaching the people. In 2018, the US government placed sanctions on 15 South Sudanese oil firms, due to them being “a source of substantial revenue that, through public corruption, is used to fund the purchase of weapons and other material that undermine the peace, security, and stability” of the country. 

South Sudan sits at the bottom of Transparency International’s corruption perceptions index. The International Crisis Group recommended in 2021 that “reform-minded South Sudanese and their external partners should focus on making the oil economy more transparent and accountable by ensuring that revenue deposits go in a single public account and through other anti-corruption measures”.

New investors

Despite South Sudan facing a host of humanitarian and economic challenges, there have been some notable recent investors. In May 2022, Radisson Hotel Group opened a new 154-bed site in the capital, Juba, marking the first internationally branded five star hotel in the country.

“We believe Juba will benefit from the [effects of tourism] and we seek to position ourselves as a positive contributor to the local economy,” Ramsay Rankoussi, the vice president of development for Africa and Turkey at Radisson Hotel Group, tells fDi (see interview, opposite). Radisson has almost 100 hotels in operation and development across Africa.

Despite signs of interest, several factors continue to inhibit investments into South Sudan, including a lack of skilled labour and limited physical infrastructure beset by checkpoints. Transport in South Sudan is among the most expensive in the world, rivalled only by Afghanistan and its neighbour the Democratic Republic of Congo. 

A 2021 International Peace Information Service report estimated that a return journey along the road between Juba and the northern city of Bentiu will easily cost more than $3000 in checkpoint taxes. A return barge trip along the White Nile between Bor and Renk can total $10,000. 

While there have been efforts to make it easier for businesses to establish in the country, such as through the Ministry for Investment and the Juba Specialised Economic Zone, there remains no one-stop shop investment centre. There are also major concerns over legal protection.

“Foreign investors continue reporting unfair practices in the country, including expropriation of assets, unpredictable tax policies, harassment by security services, extortion attempts, and inconsistent results in legal proceedings and labour disputes,” according to the US Department of State’s 2022 Investment Climate Statements on South Sudan.

The IMF wrote in its Article IV assessment of the country in August 2022 that “strengthening governance and enhancing transparency are key for South Sudan to improve economic management and attract investment and financial support from abroad”.

This article first appeared in the October/November 2022 print edition of fDi Intelligence.