Sudan promises thriving private sector if revolution prevails

For 30 years Sudan’s economic development was stifled by President Bashir and his cronies, but as the transition to democracy progresses, new opportunities are opening up. Tom Collins reports from Khartoum.

The Monte Carlo recreational club in downtown Khartoum sits as a faded reminder of Sudan’s forgotten past. The unused gym and swimming pool show the signs of former use while the courtyard restaurant functions as an impromptu office for the club’s owner, Adil Gabir Abo Elizz.

A businessman, Elizz recounts what the past 30 years were like for those not aligned to the regime of President Omar al-Bashir, who came to power in a 1989 coup and fell in last year’s revolution.

“My father started three businesses in 1959: tanneries, contracting and some carpentry and steelwork workshops,” he says. “Our main business was contracting. Before 1989 we used to get 60% of the tenders – we were one of the biggest contracting companies. In the past 30 years we haven’t got a single tender.”

Along with dragging Sudan into $60bn of external debt and crippling the local currency, Bashir obliterated the country’s free market through the creation of a parallel economy that unfairly favoured the regime and its cronies – especially military and security entities.

While easily exploitable sectors like livestock and gold mining were turned into government cash cows, those on the sidelines avoided government interference by investing in riskier sectors or abroad in places like Egypt and the UAE.

“It was very tough from the beginning. We always had to avoid being in competition with any of the politicians,” says Amin Nefeidi, group president of Elnefeidi Group, one of Sudan’s largest conglomerates. “They [the government] tried their best but they couldn’t make it in transportation. It is one of those tough businesses where you need to closely monitor trucks travelling all over Sudan.”

The Elnefeidi Group now runs a fleet of well over 1,000 lorries, extending into Central Africa from bases in Cameroon and Tanzania. It made its name transporting humanitarian aid for the United Nations’ World Food Programme to places like Darfur and neighbouring Ethiopia under the Marxist Derg.

While most businessmen kept a relatively low profile during the period, many look forward to opportunities in a new Sudan. Osama Abdo, the new head of Sudan’s business federation, once dominated by Bashir allies, told African Business: “This is our first step towards free competition and transparent, fair and free trade.”

Overcoming the barriers to a revitalised economy    

Yet while the country’s prime minister Abdalla Hamdok, who came to power with the support of the civilian elements on the country’s interim Sovereign Council, has had an encouraging start, the barriers to revitalising the economy are many. 

Hamdok says the government needs up to $8bn in external aid over the next two years to cover the huge import bill and an immediate cash injection of $2bn to slow down the depreciation of the Sudanese pound.

This year’s budget – which has an estimated overall deficit of $1.62bn – was financed by the Friends of Sudan, a group providing political and economic assistance including the US, France, Germany, Britain, Ethiopia, Saudi Arabia and Egypt. However, Sudan remains on the US State Department’s state sponsors of terrorism (SST) list, which means the US opposes financial institutions such as the International Monetary Fund (IMF) agreeing bailouts and reform packages with the government, making them effectively impossible.

US restrictions also apply to commercial banks, thwarting any hope the country might have of attracting foreign direct investment (FDI) as companies are unable to repatriate their earnings. To avoid what amounts to continuing sanctions, much of Sudan’s international commerce takes place in secondary hubs like Dubai, pushing up domestic inflation as imported goods bear added costs.

Sanctions continue to bite

In early December, the prime minister returned from Washington after unsuccessfully lobbying the US to remove Sudan from the list. The negotiations, which began under the previous regime, have focused on five tracks, including counterterrorism measures, ending interference in South Sudan and allowing humanitarian groups to access conflict zones within Sudan.

While it is generally thought that Hamdok’s efforts will eventually bear fruit, Washington has voiced concerns over the continued presence of terrorist groups and the ongoing influence of Sudan’s military and paramilitary forces during the transition to democracy.

US courts have demanded billions of dollars in compensation from the government for the suspected involvement of Sudanese nationals in the bombing of the USS Cole in 2000 and the 1998 Nairobi and Dar es Salaam embassy bombings.

“It’s of course unfair,” says Mohamed Nagy Alassam from the Sudanese Professionals Association (SPA), a civil society organisation that acted as a key driver of the revolution. “The Sudanese people were the main victims of the past regime so it’s unfair to ask us to pay for their crimes.”

Parallel economy persists

Despite Washington’s concerns, some believe that Sudan is headed towards a more secular future.

During the revolution a broad coalition of civil society activists, communists, women and youth came together in an alliance known as the Forces for Freedom and Change (FFC).

The FFC played a major role in the overthrow of Bashir and is now represented on the Sovereign Council, which plays the role of head of state during the political transition.

Bashir’s National Congress Party, an Islamist party, has been dissolved and its assets seized, but dismantling the security and military apparatus may prove much harder. As a result, the parallel economy is yet to be dismantled, and military companies continue to operate outside the free market. Dissolved enterprises formerly belonging to the intelligence services are even being transferred to the military rather than the government.

“For me this is a serious source of concern because the military has its own budget, they could become a state within a state, start to exercise influence, entrench their position and sabotage the democratic process itself,” says Mohamed Osman, general manager of Inmaa for Poultry and Feed, Sudan’s leading poultry company.

Subsidies burden economy

Apart from fears about the military and the Islamists, a major donor concern is the burden placed on the economy by subsidies. Despite the IMF encouraging “bold and comprehensive decisions”, the Sudanese government backtracked from removing fuel subsidies in the 2020 budget after fierce protests from the SPA and the FFC.

In one of the world’s poorest countries, the government is hesitant to undertake reforms that will hit those already suffering the hardest. Cuts to wheat subsidies in December 2018 and the resultant spike in the price of bread sparked the protests that ultimately led to the downfall of Bashir’s government.

“Lifting subsidies without improving the livelihood of the people will lead to turmoil and people taking to the streets,” says Osman. “Demanding that the current government lift subsidies without looking at the consequences is not sensible. You need to do it over time and ensure that the government finds other sources of income.”

Huge opportunities

Governance issues aside, Sudan remains a country rich in minerals and, although mostly desert, it is nonetheless well endowed with fertile land.

Livestock accounts for a quarter of exports according to the World Bank – much of this to import-hungry Gulf countries like Qatar, Saudi Arabia and the UAE. Investing in the sector, along with other export-led forms of agriculture, is an obvious way to tackle the debilitating dollar shortage that was made worse when Khartoum lost three-quarters of its oil revenue after the independence of South Sudan in 2011. 

Being able to transport chilled chicken in less than 24 hours to urban centres like Riyadh gives Sudan great export potential, says Osman.

Another key sector, which has already undergone positive regulatory changes, is gold. Previously Sudan’s central bank was the only entity legally allowed to buy and export it. Because the law enabled the bank to buy it at a heavy discount to the international price, smuggling became rife and the state lost out on the proceeds.

Regime figures had interests in the trade – a company owned by the leader of the government’s Rapid Support Forces Mohammed Hamdan “Hemedti” Dagalo was flying gold bars worth millions of dollars to Dubai in 2018 as the regime imploded, according to a Reuters investigation.

Regulations that came into force on 1 January now allow the private sector to export gold and the central bank has said it will stop purchasing the precious commodity entirely.

Although Sudan is currently the third-largest gold producer in Africa after Ghana and South Africa, the relatively underdeveloped sector promises much more if properly exploited.

Ammar Hassan Abdalah, a small-scale gold miner based in Khartoum, says the current industry has only scratched the surface: “It is a new era for gold in Sudan. There are not many companies that are operating on an industrial level. Most people are digging with manual tools, for artisanal mining.”

If the government can attract foreign companies who have the necessary capital to modernise Sudan’s gold industry, the sector could act as a source of wealth for the entire country.

Looking forward to the promise of a new era

After 30 years of dereliction, the owner of the Monte Carlo club is eagerly awaiting the promise of a new era. Reopening long-closed factories as well as a trading company that deals in cement and steel, Elizz is cautiously banking on Sudan’s successful transition to democracy.

“If this revolution fails then it will be a big disaster for the surrounding region and Africa,” he warns. “The international community has to support Sudan.”