Instability in South Sudan threatens East African businesses

Instability in South Sudan threatens East African businesses

Fatal clashes in South Sudan raise the possibility of civil war and the certainty of on-going instability, which may have measurable implications for businesses and economies in East Africa.

During the course of a meeting between President Salva Kiir and Vice President/former rebel leader Riek Machar, fighting ensued between their respective military forces, the SPLM and SPLM-IO. From July 8th until 11th, barring a lull on the 9th (the country’s Independence Day), violent reprisals resulted in hundreds of soldier and civilian fatalities in the capital city of Juba. 40,000 people ended up fleeing their homes.

The trigger of the clashes, although unclear, is believed to be an altercation between opposing military factions at a checkpoint, in which five soldiers were killed on 7th July.

The rapid escalation of violence is testament to the country’s continued volatility, the most immediate source of which is a non-integrated military. The lack of military integration was one of the presiding dynamics which led to the December 2013 – August 2015 civil war, in which over 50,000 people were killed and 2.3 million displaced.

The SPLM and SPLM-IO troops had remained in fragile peace since the latter returned to Juba on 29th April 2016, as part of the implementation of the Agreement on the Resolution of the Conflict in South Sudan (August 2015). This was brokered by regional powers through Intergovernmental Authority on Development (IGAD) and ended the two year civil war.

Yet en masse, South Sudan has been far from peaceful since then (the extent varies region to region). By example, in late June in Wau town, ethnic Dinka government soldiers targeted and attacked Fartit neighbourhoods killing around 43 people and displacing roughly 120,000.

Insecurity will continue

The complex relationship between political leaders and military forces throughout the civil war is part of the reason the peace agreement has been relatively unsuccessful. Worryingly, the relationship has become more complicated owing to the waning authority of both Kiir and Machar over their internally divided forces – within which disillusionment is rising and being taken advantage of by military leaders, particularly in Juba and Wau.

In the short to medium term, it is likely that insecurity will prevail across South Sudan with various strategies employed by (a divided) IGAD, African Union, China and US failing to adequately account for a tangled and evolving politico-security structure.

Further clashes may occur in Juba and elsewhere in the southern portion of the country (where ‘rebel’ presence and insecurity have grown). East African countries may once again be drawn into a proxy war and will certainly be affected again by security issues along their borders with South Sudan.

Risks to business and economies in East Africa

Kenya, straddled between South Sudan and Somalia, would likely receive more South Sudanese into its bordering and oil producing county, Turkana. The influx of refugees into Turkana has historically resulted in frequent clashes, as immigrants and local communities compete for control over land and resources. This issue may be revived and ignited with widespread firearms, which could disrupt the country’s oil exploration and production activities, as well as international oil companies’ operations.

Similarly, Ethiopia’s western and bordering Gambella region would likely see more refugees fleeing political instability in South Sudan’s Greater Pibor Administrative Area. Problematically, Gambella may also become more exposed to attacks from militias across the border.

This poses risks to investors in Gambella’s mining and agricultural sectors, both of which are of paramount strategic importance to Ethiopia’s national economy – particularly as drought damages the agricultural sector in the north and east of the country.

Uganda will certainly see continuing political asylum seekers in the north. This bordering area could also become increasingly insecure, particularly if ‘opposition’ South Sudanese militias interpret Ugandan military involvement in South Sudan as pro-government (as has been historically). These security problems would also provide a blow to Ugandan exports destined for their northern neighbour, which will likely contribute to currency volatility for the Ugandan shilling.

It will be business as usual in commercial centres such as Nairobi, Kampala and Addis Ababa. However, if South Sudan deteriorates into further conflict, which appears likely, Kenya, Uganda and Ethiopia will all become increasingly vulnerable to: an influx of refugees (which could create violent competition over scarce or substantial resources and an uptick in crime), planned attacks by South Sudanese militias (which could become more likely in the vacuum of state presence), and damaged economic ties with South Sudan (which negatively impacts national economies).

About Author

Elliot Kratt

Elliot is a Freelance Analyst with The Economist Intelligence Unit. Prior to this, he held positions in a number of risk consultancies and has worked in East and West Africa. He has been quoted by journalists with the Financial Times and Wall Street Journal. Elliot holds a first class BA (Hons) in International Relations from the University of Leeds. All views expressed are his own.