South Sudan became the world’s newest nation on 9 July 2011, making it Africa’s 54th country. Independence brings enormous opportunities to South Sudan to increase its integration into the regional economy but also substantial challenges to put in place a policy and security regime that facilitates cross-border trade. The 2005 peace accord that ended Africa's longest-running civil war has led to a significant growth in demand in South Sudan, ushering in a new era of increased regional trade, in particular, with Uganda. A new Africa Trade Policy Note highlights the recent patterns of trade between South Sudan and Uganda, and draws attention to significant constraints that are limiting the prospects for enhanced cross-border trade.

Bilateral exports from Uganda to Sudan have skyrocketed from $60 million in 2005 to $635 million in 2008. Trade between Uganda and South Sudan is highly asymmetric with the volume of exports from Uganda being disproportionately larger than the volume of exports from Sudan to Uganda. While South Sudan lacks local production capacity, its oil revenue transfer from Khartoum, based on the wealth sharing agreement in 2005, has financed those imports from Uganda as well as from elsewhere in the region and the world. Also, imports from Uganda largely go through informal channels. However, this rapid growth in cross-border trade stalled after 2008. Formal trade declined in 2009 as a result of import controls imposed by the Central Bank of Sudan due to concerns over foreign exchange reserves. A substantial drop (55 percent) in informal trade occurred in 2010 following violence and harassment against Ugandan traders in South Sudan and fears of insecurity during the general election (April 2010) and in the run-up to the referendum (February 2011).

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