Friday, 29th March, 2024

A New Sudan: Economic and Investment Potential

Successive sectarian, partisan and military governments have held Sudan hostage to political and ideological battles. These are the key reasons for the disruption of the country’s development, despite the fact that it has tremendous wealth, a vast territory and an abundance of water. As a result of the political and ideological disruption, Sudan has not been able to achieve prosperity and stability for its population, let alone the food security of its Arab and regional neighbours. There was a time when Sudan was nicknamed ‘the Food Basket of the World’ but, unfortunately, by 2013 it had slipped to the bottom of the index of the world’s failed states, which is prepared annually by Foreign Policy magazine with the support of the US Peace Fund.1,2 By 2015, the poverty rate has reached at 47%.3


Sudan used to be the largest Arab country, with an area of 2,505,813 square kilometres;4 however, the secession in 2011 reduced Sudan’s area to 1,861,484 square kilometres. The regime of the National Islamic Front, which has ruled Sudan since 1989, has been unable to manage the tremendous racial, ethnic and religious diversity, causing the break-up of the country after nearly 22 years of fierce wars. Sudan is one of the most diverse countries in the world, with a population comprising about 600 ethnic groups including, among others, Muslims, non-Muslims, Arabs, Nuba, Beja, Fur, and Zeng.5 Together, they speak more than 400 languages and dialects. The failure of successive governments to administrate this enormous diversity and their insistence on imposing an Arab-Islamic identity has exacerbated the country’s internal problems, leading to the secession of the south and the outbreak of fighting in Darfur and other parts of Sudan.6

The separation caused the loss of 80% of concentrated oil production in the south, and the proportion of areas classified as ‘arid’ has increased from 65% to 90%. Sudan also lost about 55% of its financial revenues and about 65% of its foreign exchange earnings.7

But, despite the separation and its devastating consequences on the Sudanese economy, Sudan remains the third largest Arab country in terms of area and is ranked as the sixteenth largest country in the world. According to the Food and Agriculture Organization (FAO), Sudan is one of the largest countries in the world. Arable land comprises about one- third of its total area and it has an abundant supply of water.8 Only 16.8 million hectares are used for cultivation in northern Sudan, 73.5 million hectares of arable land remaining uncultivated.9 Sudan, with a population of 43,132,169 people,10 has a number of rivers, such as the Nile River and its tributaries (the Blue Nile and the White Nile) and a number of waterways, groundwater supplies and surface water spread over a large area of the territory of Sudan.11 Agricultural experts have confirmed that Sudan is naturally qualified to produce and export a huge number of agricultural products due to its enormous water resources (El Khatim et al., 2018). Cotton is already considered a major export crop, and, following India and China, Sudan is the third largest producer of sesame in the world. It is also world’s largest producer of corn, peanuts, wheat, sugar cane, sunflower, maize, beets, vegetables, fruits, legumes and spices
Sudan is also considered the world’s largest exporter of gum arabic, having supplied more than 80% of the global gum arabic requirement in the 1950s and 1990s.12 The United States excluded gum arabic from the sanctions it imposed on Sudan in 1997 due to its economic importance. In addition to agricultural products, there is the livestock sector, which produces cattle, sheep, goats and camels, and is considered one of the fastest growing export sectors. However, 85% of livestock resources depend on pastoral production systems and rain-fed farms, making delivery of services and the transfer of technology for improvement a difficult task.13 Sudan also has tremendous fishery resources in marine and freshwater fisheries, especially along the Red Sea coast and within its inland waters along the Blue and White Nile Rivers, Lake Nubia and the Rosers reservoirs, Jebel Awlia, Khashm el-Girba and Meroe.14 However, the techniques and vessels used in inland fisheries are traditional. There is no official export of fish or fishery products.15

Sudan also has vast forests and grazing areas, with rainfall exceeding 400 billion cubic metres annually.16 However, the forested area of Sudan has declined sharply since 1990 due to overgrazing, mechanized farming and desertification.17 The forestry and fisheries sectors are treated as marginal activities in Sudan, while they are of interest to international organizations from the perspective of the environment and climate change.18

Sudan’s wealth is not limited to agricultural, animal and fishery resources only, but extends to the production of minerals as well, such as gold from the Red Sea, Nuba and North Darfur hills. Sudan ranked second in Africa and ninth globally in gold production,19 and has more than 40 investible metals.20 In addition to precious stones, Sudan has large stocks of gypsum, chromium, asbestos, limestone, marble, manganese, mica, iron ore and uranium ore.21

The export of oil, which holds most of its reserves in the south, began in 1999 and led to a significant increase in the national income.22Two pipelines and export terminals have been built on the Red Sea. Under the 2005 peace agreement, oil revenues were divided between north and south, but the dispute over transit fees in 2012 caused a halt to the production.  Excavations have been under way in the north of the country since 2011 (John Ryle et al, Sudan Report, 2011). There are three major oil refineries – one situated in Jiali, near Khartoum, and two others in Port Sudan, and they have a combined capacity of 170,000 barrels per day.23

Why Sudan has been unable to use its vast agricultural lands and wealth

Official Sudanese studies reveal that 57% of the land in Sudan is arable but that only 20% of this arable land is cultivated. This means that 175 million feddans (4,200 square metres) of arable land is not used,24 which is due to a number of reasons, including instability and poor infrastructure. Roads are insufficient, large parts of Sudan’s economically productive areas are isolated from markets. The transport networks are weak, there is a lack of foreign investment, long periods of war have occurred in the south and in Darfur, and sanctions and increasing high external debt is causing low economic performance. On the secession, the north also inherited the south’s debt, with annual inflation rising from 10% in 2010 to 37% in 2013, and then increasing to 52% in 2019.26 Sudan also recorded a large government budget deficit of 8.5% of GDP, according to 2018 statistics.27

In addition to the political instability that constituted the largest factor in Sudan’s inability to make full use of its economic resources, in its infancy the rescue system clashed with the international community, especially the United States, after it opened the territory of Sudan to hard-line leaders including Osama bin Laden, Al-Zawahiri and even the international terrorist Carlos, not to mention the support of a number of different jihadist movements.28 As a result, the United States imposed sanctions on Sudan in 1988, followed by the inclusion of Sudan in the 1993 list of state terrorism sponsors. In 1997, the United States accused Sudan of involvement in the attack on its embassies in Tanzania and Kenya, and imposed economic and trade sanctions. Under these sanctions, assets of Sudanese companies were frozen and they were barred from cooperating with the regime in Khartoum as a source of threats to US national security and its foreign policy. Although US President Trump lifted the sanctions on Sudan in 2017, the US government has kept Sudan on its list of state sponsors of terrorism till now.29

Sudan became burdened by massive debt (totalling $56 billion in 2018, or 137% of GDP) and a shortage of foreign currency due to the US intensifying their blockade. In fact, it was the economic hardship that drove civilians to begin protests in December 2018. The protests reached their peak in April 2019, leading to the toppling of President Omar al-Bashir after 30 years of his dictatorship.30

As a result, despite all its vast areas of untapped agriculture and water, Sudan has been unable to be self-sufficient in basic consumer foodstuffs, let alone export to Arab countries. The 2018 World Food Programme report for Sudan revealed that 1.2 million Sudanese children of primary school age are suffering from unavailability of food for the school feeding programme. While 99% refugees and 98% of internally displaced people do not have the capacity to secure a local food basket.31 Sudan increased its food imports by 16% between 2012 and 2013, from $2,049 million to $2,372 million.32

According to the statistics of the Arab Organization for Agricultural Development, the food gap in Arab countries during 2009–2017 ranged from $39.3 billion to $33.6 billion annually;33 grains representing more than half of that gap. There are fears that the food gap in cereals, meat and other stuffs will increase to an estimated value of $53 billion by 2020 and $60 billion by 2030.34

The former government of Sudan enacted a number of laws and measures to facilitate the entry of Arab investment within the framework of the Arab Food Security Initiative. Under this initiative, Sudan has offered 220 projects to the Arab countries for investment. In March 2017, at ministerial level, the Economic and Social Council of the Arab League adopted the implementation mechanism of Sudanese President Omar al-Bashir’s initiative for Arab food security, which was announced at the Arab Economic Summit hosted by the Saudi capital in early 2013. Under the Investment Promotion Law of 2013, Sudan is committed to the protection of the state for investments and investors. However, the political fluctuations in Sudan, the weakness of the central state authority, and the internal conflicts have led investors and Arab countries to hesitate to take part in this food security initiative.35

What are the prospects for recovery in Sudan?

Sudan’s strategic location in north-east Africa and the Arab world, and its proximity to Europe, make it a potential centre for agricultural trade. The FAO’s view is that Sudan’s proximity to important markets, such as the Common Market for Eastern and Southern Africa (COMESA), the Middle East, the Gulf States and Europe, ensures significant opportunities for increased FDI inflows.36

Despite the blockade and the reluctance of Arab countries to participate, China, Russia and other Asian countries have expanded their capital investments, especially in the Sudanese oil industry, while Egypt and other Middle Eastern countries are involved in large-scale hydrological projects on the Nile (John Ryle, et al, 2011). Sudan also benefits from large sums of Chinese infrastructure investment as part of China’s Belt and Road Initiative to create a global trade route.37

According to John Ryle et al (2011), China is the single largest provider of infrastructure investment, followed by India and certain Arab countries. Sudan benefits from a framework agreement that is one of the largest partnership agreements ever granted by an African country to China. Chinese projects provide about 2,200 megawatts of new thermal power generation. China has also participated in the reconstruction of about 1,500 kilometres of roads. In addition, Russia has recently provided extensive support to Sudan in the hope of strengthening the security and trade impact on the Red Sea.38

Sudan has also made remarkable progress in the information and communications technology (ICT) sector since the early 2000s, bringing equal access and penetration rates to its African peers. Growth in mobile phones has been impressive and Sudan has been one of the fastest growing users in Africa. Internet penetration has also grown significantly (The Sudan Handbook, edited by John Ryle et al, 2011).

Arab countries with an abundance of wealth and a considerable need to import food, such as the Gulf States, can achieve bilateral gains when Sudan stabilizes by obtaining appropriate additional revenues – being the profits from the capital income they have invested in Sudan – as well as fulfilling their food needs at lower prices than those at which they currently import.39

Sudan still faces major challenges to joining the international economic system

The first challenge for Sudan is to have its name removed from the list of state sponsors of terrorism. Until such time, due to the US sanctions, it will not be eligible for funding from international lending institutions – such as the IMF and the World Bank, or for debt relief – for which there is a significant need. Removing Sudan’s name from the state sponsors of terrorism list could open the door to foreign investment. A senior US official said, in August 2019, that Washington would test Sudan’s new transitional government’s commitment to the respect of human rights and freedom of opinion, and the ensuring of humanitarian access before removing Sudan from its list of state sponsors of terrorism.40

To attract investment from private investors and foreign countries, Sudan must first achieve its political stability, then put a stop to rampant corruption and ensure the rule of law, and overcome the very poor classification of governance in Sudan compared to its counterparts in Africa. Sudan also needs to overcome the transport problem, especially in rural areas, to ensure that agricultural land is used efficiently.41 Road development is a necessary precondition for Sudan’s agricultural potential.

Sudan also needs to update information on the Sudanese economy. Current information is sporadic or unreliable.42 The previous ruling government falsified Sudanese facts and statistics, especially with regard to data concerning not only the state budget, but also the estimates of macroeconomic indicators and other indicators, with no regard for the truth. There are many inconsistencies between the data and statistics issued by the Central Statistical Organization, the Central Bank and the Ministry of Finance. That is why the Central Statistical Organization needs to be restructured.43

There is a need to coordinate and review the work of international organizations in Sudan. To achieve food security so as to foster comprehensive agricultural investment, the FAO in Sudan is in contact with major bilateral and multilateral donors to inform them of its activities and to seek their participation in support of FAO. The international organizations participating with the FAO in Sudan are: the African Development Bank (AfDB); the governments of Australia, Belgium and Canada; the Darfur Regional Authority (DRA) and the Darfur Community Peace and Stability Fund (DCPSF); the EU; Italian Development Cooperation; the International Fund for Agricultural Development (IFAD); Intergovernmental Authority on Development (IGAD); United Kingdom Department for International Development (UK/DFID); United Nations Children’s Fund (UNICEF); United Nations Office for the Coordination of Humanitarian Affairs (OCHA); United States Agency for International Development (USAID) and its Office of U.S. Foreign Disaster Assistance (OFDA); the World Bank; World Food Programme (WFP); and the World Health Organization (WHO).44 
Finally, when the government of Hamdouk came to power many opportunities were seen to be on the horizon for Sudan. Potential investors in Sudan have begun to reconsider their position. Donors and investors are waiting for Washington to lift the sanctions it placed on Khartoum and to remove its name from the list of state sponsors of terrorism so as to make Sudan eligible for funding .45 French President Emmanuel Macron proposed an international conference to restructure the country’s debt once the United States has removed the country from the list of state sponsors of terrorism.

Saudi Arabia and the United Arab Emirates (UAE) have also played a major role in trying to persuade the United States to remove Sudan’s name from its terrorism list and, more importantly, to help Sudan by waiving their debts, which exceed $50 billion. Attempts remain to be made to recover the money looted by the former regime, which deposited large sums of money in Western and Asian banks.46

Saudi Arabia and the UAE pledged $3 billion, a part of which was deposited in the Central Bank of Sudan, and petroleum products, wheat and agricultural inputs to the value of $1 billion have been received.47

Debt relief and access to foreign financial assistance would provide Sudan with economic stability during its transition period, at least, which will end with the 2022 elections.48 It is possible that such financial assistance could revitalize the economic sectors of agriculture, industry, mining and trade in Sudan, as well as Sudan Airways, shipping lines and river transportation, by providing finance and export technology. Such support could be considered the benefits of an influx of US investment and assistance separate from loans from international financial institutions, such as the Heavily Indebted Poor Countries (HIPC) Initiative.49 All this aid favours the alleviation of the current economic crisis in Sudan.50

A Friends of Sudan meeting was held on 21 October 2019 in Washington, chaired by US Under-Secretary of State David Hill and the Assistant Secretary of State for African Affairs Naji Tibor in the presence and with the participation of Dr Ibrahim Al Badawi, Minister of Finance of Sudan. This meeting was attended by the representatives of Norway, Qatar, the UAE, UK, the African Union, the European Union, the United Nations, the African Development Bank, the International Monetary Fund and the World Bank, and was attended by observers from Finland, Italy and Sweden. The purpose of the meeting was to discuss how the international community could assist the transitional government in its economic reform programme. Sudan’s partners agreed to support the proposed rapid-impact projects, and considered the proposed medium- and long-term reforms together with what they could implement and execute. The United States says it has reached out to the government of Sudan on the requirements for the removal of Sudan from its list of state sponsors of terrorism.51

The Hamdouk government is now expected to find mechanisms to coordinate and simplify policies and strategies across states and governorates. Historically, top-down policies have been characterized by frequent changes, inadequate circumstances to enable a policy and insufficient resources for implementation.52

In a gesture promising the near-breakthrough conditions that received great acclaim on the streets of Sudan, the media reported that diplomats from the US Embassy in Khartoum were lining up to open bank accounts in Sudan in a ‘step to end the isolation’.53

Dr. Sumaya Adam Eisa

Dr. Sumaya Adam Eisa

Researcher, GLOBAL AFFAIRS DEPARTMENT (FORMER)

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Areas of Expertise

  • Writing
  • Research
  • Editing
  • Translation

Education

  • PhD, Fictional Genre Translaion
  • M. A. in Translation & Interpretation, American University of Sharjah, UAE
  • B. Sc. In Rural Economics, University of Khartoum, Sudan

Bio

Skilled writer dedicated to work to high standards with extreme commitment to meet deadlines and assure output accuracy. A dynamic experienced translator, translated for the FAO and other regional and international organizations. The Sole Author of Fisheries and Marine Science Dictionary, English-Arabic, the first of its kind in the Arab world. CEO and Founder of TBLT, Khartoum, the Translation Firm which translated the Legislation of the State of Qatar. Has great experience in the fields of scientific research, business and technical writing and translation. In addition to translation of hundreds of economic, administrative and scientific reports and studies. Volunteered in women and other non-governmental associations.