The challenge of dismantling Sudan’s deep state

In Sudan, the military and opposition are making progress towards a new governing model. But much still needs to be done to fully dismantle the “deep state” on which elite power rests. Shoshana Kedem reports.

Protests in Sudan have already overthrown one of Africa’s longest serving leaders, Omar al-Bashir. But the downfall of his presidency brings a new set of challenges – principally how to dismantle the “deep state” while keeping the economy running smoothly. 

In Khartoum’s Maidan Square, a dizzying array of protesters from across Sudan’s political, social and sectarian spectrum continue to unite under one cause: removing the clique of officials that surrounded the former president and dominate the economy and security services. 

Yet the protests have divided business between those who support the regime and its grip on the economic system, and those who want to see the “deep state” torn down.

The Declaration of Freedom and Change drafted by the Sudanese Professionals Association (SPA), the key group behind protests, calls for the “full dismantling” of the structure of governance set up by the ruling National Congress Party (NCP) and a transition to institutions based on a constitution and the rule of law.

Many businesses profit from connections to the governing elite, and are growing uncomfortable. 

The Bashir regime developed networks of hybrid political-military businesses that control large parts of the private sector.

Dismantling this web of companies headed by former government officials and family members could involve the heads of these companies being removed as well as more fundamental liberalisation. 

“Dismantling the deep state actually means taking on many of the bigger monopoly providers in the so-called private sector such as telecoms, construction, oil, and banking and liberalising these sectors, in the context of lifting sanctions and allowing normal, non-political businessmen to take on the business,” says Alex de Waal, executive director of the World Peace Foundation.

But a fully-fledged purge risks creating a power vacuum, argues Tarneem Saeed, head of strategy at Saeed Industrial and Commercial Group. 

“You cannot have a purge because it’s too entrenched all the way down,” she says.

“If you start purging you’re going to purge away everything and then we will end up with what many of our neighbours fear would be a civil war or worse. We have to accept that they are there, and slowly over the transition period make changes to the way Sudan is governed.” 

Regime-linked businesses are keen to slow radical change in a bid to protect their interests. At the same time, businesses operating independently and marginalised for years by the regime’s stranglehold are waiting patiently on the sidelines, ready to grasp their share of the spoils.

“There is a very small sub-set of businesses today in Sudan that [are] truly independent from the old regime,” says Ihab Ibrahim Osman, chairman of the US-Sudan Business Council and a general manager of NADEC New Businesses, a food and beverage producer.  

“These businesses are very patient because their interests are perfectly aligned with the interests of the people, because they have also been relatively marginalised. I would be patient and would wait for no matter what it takes to get it right, because they will be the first to benefit.”

Economic nightmare 

The ongoing uncertainty over Sudan’s direction has further contributed to an already severe economic downturn where hyperinflation and a lack of fuel and foreign currency have combined to drive underdevelopment. The IMF expects the economy to shrink by 2.3% in 2019.

The secession of South Sudan in 2011, taking with it over 80% of Sudan’s oilfields, left the government scrambling to cover the deficit.

The lack of foreign currency and physical cash in the economy drove policy-makers to expand the money supply, causing the Sudanese pound to plummet.

In an attempt to shore up the deficit caused by subsidies for fuel and bread, the government hiked prices, causing anger and frustration that exploded into mass protests in December.

“The economic situation was completely unsustainable and something had to give. And it did,” says Saeed.  

Prior to the revolution, her company had to reprice goods daily to cope with inflation. “This was absolutely horrendous to deal with. We had to stop sales to prevent unwanted arbitrage in the market of our products.”   

Across the mining and agriculture industries the lack of fuel, especially in remote places, brought businesses and transport in the country to a standstill. 

“If you combine that with the endemic corruption and incompetence that seems to take place at all levels of the PCP [Popular Congress Party] government, it made doing business anywhere in the country an absolute nightmare,” Saeed explains.

“The last 30 years have been very difficult from a business perspective. But for many of us in the business community this is the price for what we hope will be a brighter future for Sudan.”

Rebuilding Sudan

As African Business went to press, Sudan’s military and opposition alliance inched closer to a final power-sharing agreement by agreeing a three-year transition period to a civilian administration.

The Transitional Military Council said the agreement would see the umbrella opposition alliance, the Declaration of Freedom and Change Forces (DFCF) take two-thirds of the seats on a legislative council.

But both sides now need to hammer out an agreement for a sovereign council at the commanding heights of state power, where both want a majority.

In the short term, the transitional government must ensure the steady flow of bread, bank notes, fuel and electricity. A Gulf pledge of $3bn in April provided some support to the military government. With $250m of a promised $500m deposited in Sudan’s central bank, the cash will keep the country going for the next two months.

As the protests continue, the short-term challenge will be ensuring ousted officials don’t siphon billions out of the economy, says Osman.

“This is the time when a lot of these assets will disappear, and this regime has plenty of off-balance sheet transactions and companies and activities. If we do not find them and keep track of them, very quickly it will disappear.” 

“We need to look at all the major activities in the country with forensic accounting to stop these leakages: gold, oil, subsidies, all the things that have a lot of cash attached to them.

We need to very quickly design and negotiate an economic package with the international community that will give this transition government a chance to succeed.”

The promise of reform brings with it the hope that Sudan can finally throw off the state sponsor of terrorism designation imposed by the US, something Washington has said will not happen while the military hold power.

Sudan’s $1.3bn in arrears to the IMF and Washington’s designation have made the country ineligible for desperately needed debt relief and financing from lenders like the IMF and World Bank.

“We’re really keen to see a new Sudan which can end isolation. Renewed FDI interest, debt relief, development support – all of these things are needed and with them will come things like the return of the diaspora,” says Saeed. 

“The end of the divisive ideologies of divide and rule the NCP have applied may also lead to peace across the country, which means the opening up of markets that have been inaccessible to the business community for a very long time.”