File photo: Economist and public finance specialist Dengdit Akol Dengdit.

South Sudan is endowed with abundant natural resources and one of the youngest populations in Africa. Despite these advantages, the country struggles with high unemployment, a liquidity crisis, and persistent inflation driven by capital flight. Understanding this phenomenon is crucial for fostering sustainable economic growth.

What Exactly Is Capital Flight?

Capital flight refers to the movement of money out of a country, which causes wealth generated domestically to benefit other economies instead of supporting local economic growth.

The economy suffers or collapses when money earned in South Sudan leaves the country instead of remaining to build businesses, create jobs, expand industries, and stimulate economic growth.

While some movement of capital is a normal part of international trade, excessive capital flight can hinder development by reducing the funds available for local investment.

Recent reports by the Central Bank of Kenya indicated that Kenyans living and working in South Sudan remitted approximately 285 million USD in the year ending May 2025. This made South Sudan one of the largest sources of remittances to Kenya, surpassing the UK.

If Kenyans could send back home such a staggering amount, imagine what Somalis, Ugandans, Ethiopians, Eritreans, Sudanese, and other nationalities remit to their countries.

The writer is optimistic that the combined outflow of profits by foreign traders and investors is likely to be substantially higher. Although no official aggregate figure exists, the magnitude of these financial outflows underscores the importance of expanding South Sudanese participation in the country’s most productive sectors.

This should prompt our policymakers to ask a fundamental question: Why do foreign businesses own the most profitable sectors?

The answer lies not in the actions of foreign traders but how we structured our economy long before independence.

The Missed Opportunity Before Independence

During the interim period, we focused so much on political liberation while neglecting economic liberation. Enormous effort was invested in building political institutions while forgetting to prepare South Sudanese to become owners of their economy.

The country entered independence with three commercial banks, few South Sudanese-owned companies, inadequate access to affordable business finance, limited entrepreneurship training, weak industrial and agricultural value chains, and no policy reserving strategic sectors for citizens.

Unfortunately, as the youngest nation opened its markets to the region and the world, experienced foreign traders and investors with capital and management expertise rushed in and took over.

Since many businesses in South Sudan are foreign-owned, a significant share of the profits is eventually transferred abroad instead of being reinvested in the local economy.

Capital outflows are not limited to foreign businesses. South Sudanese also spend millions of dollars each year on education, healthcare, and family support abroad. While these are necessary investments, they substantially increase demand for foreign currency.

This highlights the need to improve domestic education, healthcare, and economic opportunities.

Up to this point, we can agree that the roots of South Sudan’s unprecedented capital flight can therefore be traced to missed opportunities before independence.

The Hidden Cost of Capital Flight

When profits are consistently transferred abroad, instead of being reinvested locally, it puts pressure on foreign exchange reserves, slows down industrialization, and increases dependence on imports. No economy anywhere in the world would prosper if most of its accumulated capital continuously exits the country.

The Way Forward!

To effectively address this challenge, the government must implement reforms that strengthen local participation in the economy without discouraging foreign investment.

Recommended strategies include:

• Reserving strategic sectors for South Sudanese ownership
• Promoting joint ventures between local and foreign businesses
• Expanding access to affordable financing for entrepreneurs
• Encouraging local manufacturing
• Enforcing fair taxation.

We should be very cautious not to go ”South African style’ as this will erode investor confidence and violate property rights.

Conclusion

To secure a sustainable future, South Sudan must retain a larger share of its wealth and lay the groundwork for inclusive economic growth. As we achieved political independence through guns and ballots, our remaining challenge is an economic war that should be fought through strategic thinking and innovation.

About the author

Ustaz Dengdit Akol Dengdit is an economist, public finance specialist, and lecturer at the University of Juba. He writes on economic policy, governance, and public financial management issues.

Editor’s Note: The views expressed in the above article are solely those of the author and do not necessarily reflect the views of Eye Radio. All claims made are the author’s responsibility alone.