Economy of Sudan
Sudan is a poor country, despite its potential resources. Sudan’s economy is basically agricultural, with inadequate infrastructure and ridden by civil wars and social and ethnic conflict. The country witnessed a radical change in 1999, when the country began to export crude oil. For nearly a decade, the economy boomed, driven by rising oil production and prices and significant inflows of foreign direct investment related to the oil sector, but the economic shock of South Sudan’s secession in 2011 was devastating. The government of Sudan has endeavoured, in vain, to absorb the consequences, re-stabilize the economy, and make up for the sharp drop in badly needed foreign-exchange earnings. The interruption of oil production in South Sudan for more than a year and the eventual loss of oil transit fees (1 billion USD in 2013) further worsened Sudan’s fragile economy.
Comprehensive sanctions imposed on Sudan by the US and other international parties for political reasons further mired the economy. Sudan is attempting to develop non-petroleum sources of revenues, such as gold mining, while carrying out an austerity programme to reduce expenditures. The world’s largest exporter of gum Arabic, Sudan produces 75-80% of the world’s output.
The civil war in South Sudan, which broke out in December 2013 and is closely linked to disagreements over oil following South Sudan’s secession, imposed new pressures on Sudan’s economy. In March 2017, the number of South Sudanese refugees in Sudan was around 330,000, according to the United Nations. A famine, which has largely affected the northern areas of South Sudan since early 2017, has forced additional refugees across the border.
The World Bank emphasizes the importance to Sudan of agriculture and livestock for economic diversification and macroeconomic stability in the medium term. The country’s multi-phase strategy to reduce poverty and reform the economy Interim Poverty Reduction Strategy Paper (I-PRSP) and the Five-year Program for Economic Reforms, which were approved in December 2014, rely on increasing agricultural productivity and exploiting other export possibilities, notably livestock.
As part of the secession, Sudan agreed to take over all of South Sudan’s pre-secession debt, provided it received sufficient international commitments on debt relief.
According to the World Bank, the main barriers preventing Sudan from achieving its economic goals are conflicts; reliance on oil; neglect of agriculture and livestock and alternative energy sources; unfair distribution of financial resources and access to natural resources; government failure; the low credibility of public policy; and insufficient incentives for private sector investors.
The Gross National Product (GNP) of Sudan in 2014 was 475,827.7 Million Sudanese ponds SDG (around 79 billion USD, official exchange rate 1 USD = 6.0975 SDG). The agricultural and livestock sectors contributed 28.2%, the industrial sector – including oil and mining 24%, and the service sector 48% according the Central Bank of Sudan 2014 report.
Sudan’s gross domestic product (GDP) in 2015 was $97.15 billion, compared with $82.15 billion in 2014 and $72 billion in 2013. GDP is expected to grow by 3.5 per cent in 2017, compared with 3.1 per cent in 2016 and 4.9 per cent in 2015. GDP per capita in 2015 was $2,119.
Inflation in 2017 is expected to be 16.1 per cent, compared with 13.5 per cent in 2016 and 16.9 per cent in 2015.
Sudan GDP witnessed continuous growth from 2000 after oil exportation started, until 2010. In 2012 after the secession of South Sudan and thereby removing roughly 75% of oil production, the rate declined to only 1.4%. Gold exports help the GDP to grow with 4.4% in 2013 to drop again to 3.6 in 2014.
Sudan faces the problem of rising inflation, which as of November 2012 reached 47% per year, before starting to fall in 2014 and ultimately dropping to 18% in 2015. The relative decline of inflation was due to implementation of macroeconomic policy reforms, including a number of austerity measures. This included those of September 2013, entailing a sharp reduction in fuel subsidies, a unification of all official exchange rates, and exchange rate devaluation. Those measures led to a wide range of protests, which were forcefully suppressed leading to a number of deaths. In January 2016 the government lifted subsidies on cooking gas, fuel oil, and jet fuel. This led prices of cooking gas to soar with 300%; from two to six Sudanese pounds (SDG).
Most Sudanese debt dates back to the 1970s and 1980s. The original debt was 17.1 billion USD, with the accumulated interest the debt reached USD 36 billion in 2015. The unresolved arrears, combined with U.S. sanctions since 1997, rule out access to most sources of external financing, including concessional borrowing.
Sudanese debt is considered unsustainable. The country’s external debt reached USD 43.6 billion in 2015 (52 % of GDP) according to the statistics of the Central Bank of Sudan. However, the IMF reports a much higher figure for ratio of external debt to GDP, reaching 78%. To relieve this debt, Sudan needs to reach new understandings with foreign creditors and international financial institutions. Most importantly with the IMF, which requires real change in national politics and international relations policies.
Reliable data on Foreign Direct Investment (FDI) in Sudan is scarce. What is certain is that FDI has been substantially increasing during the last years; fluctuating but remaining at a level generally surpassing USD 2.5 billion per year. As of 2011, the Sudan’s inward FDI stock stood at USD 24 billion, the fourth highest in North Africa behind Egypt, Morocco and Tunisia.
Most large investment projects focused on the oil industry, which continued to attract investments even after the secession of South Sudan. However, other smaller projects of USD 100–1,000 million took place in electricity (Bharat Heavy Electricals), mining (ASCOM Geology and Mining), telecommunications (Investcom), food (Bin Omeir Holding), hotels (Rotana Hotels) and building materials (RAK Ceramics).
The Sudanese Minister of Investment told the press the total of foreign investments in Sudan between 2002 and 2014 amounted USD 38 Billion, of which 14 billion USD originated from China with the remaining amount coming from Arab countries.
Additionally, tourism is on the rise in Sudan – bringing in modest investments. In 2013, tourism attracted 591,350 visitors, while a majority of them are thought to be Sudanese expatriates, bringing USD 735 million to Sudan. Statistics show that these numbers have been steadily increasing since 2009.
Accession to WTO
Sudan has been seeking World Trade Organisation (WTO) membership since November 1994, but negotiations stalled after a decade, remaining in deadlock since 2004. This due to Sudan failing to comply with the requirements of making necessary changes to legislations and policies; current laws needed to be changed in accordance with WTO rules to guarantee the rights of importers and exporters, and enact transparent economic and investment laws. Sudan would highly benefit from joining the WTO, especially in attracting foreign investments and access to international capital markets and debt relief. Sudan officials claim to have implemented the necessary changes for WTO accession, but that Sudan is being prevented from doing so because of political reasons. This may be fueled by the fact that rules to accede to the WTO are country-specific.
Supported by high oil revenues from 1999 to 2011, Sudan’s infrastructure improved markedly compared to the pre-oil period. That improvement had a strong impact on per capita growth, contributing 1.7 percentage points, according to a World Bank Report. The information and communication (ICT) revolution contributed most to Sudan’s growth. The country has invested heavily in infrastructure in recent years, with some notable achievements. For example, around 10.5 million Sudanese enjoyed internet access in 2014 according to the figures of Sudan Ministry of Communication. That is almost one fourth of the country population. In ICT, Sudan has made enormous strides in liberalizing the sector and thereby attracted significant private capital. Mobile penetration soared from less than one per cent in 2000 to 77 per cent by the end of 2015.
The road network of Sudan almost doubled in length, reaching 6,200 kilometres all of which was rolled out between 2000 and 2008. Nonetheless, much of the country still lacks roads. The huge expansion of the road network in Sudan is characterized by poor construction and lack of proper maintenance.
This lack of adequate roads negatively affects the production of agricultural and animal products, which are located in rural areas, as it impedes its access to both local and foreign markets, making it less competitive in regional markets by adding excessive transport costs.
The country is, however, connected by asphalted roads to three of its important neighbours, namely Egypt, Eritrea, and Ethiopia and to the borders of South Sudan, Chad, and the Central African Republic.
The railway system in Sudan is extensive, with about 4757 Kilometers of railroads across the country, to all major towns and cities. Sudan railways built by the invading British troops in late 19th century played a role in nation building and providing infrastructure for agriculture, trade, and industry until the mid-1970s. Since then, the railways have begun to deteriorate for lack of maintenance and renovation. It is currently operating at about one-fifth of its capacity. In 2016 Sudan railways transported 850 thousand metric ton of goods.
Many attempts to maintain and improve the railway network and its capacity were hindered by political instability and lack of funding, as well as suffering from political interference to curb the power of the strong railway trade unions. The railways were neglected by the government, which preferred to invest in less expensive land highways. In 2015, the railways are reported to have 60 locomotives in service, but they have a maximum speed of only 40 km per hour because of the poor state of the tracks.
The first serious step to modernize Sudan railways was made in 2014, with the help of China. The modern Chinese made Nile Train between Atbara and Khartoum is becoming very popular even though it take much longer than buses to make the trip because it is cheaper and safer.
Sudan government officials have also repeatedly talked about a project to build a railroad from Port Sudan on the Red Sea across the country the western neighbor Chad and later to Cameron for the cost of 2 billion dollars. China is again the suggested partner for this big project.
In 2015, President al Bashar, during his electoral campaign visited so-called ‘railway city’ Atbara, saying he was committed to expand the current railroad network.
The Nile – consisting of the White Nile and the Blue Nile, provides an important inland transportation route and has played an important role historically. Its usefulness is, however, limited by several cataracts in the main Nile, between Khartoum and northern Sudan. The White Nile, south of Khartoum, has shallow stretches that prevent the passage of large barges. The Blue Nile is not very suitable for river transport and has two dams that make it less appropriate for river transport.
River Transport historically played a vital role in connecting North and South Sudan. That was hindered by the civil war of 1983-2005 and the Independence of the South. Recently President Bashir announced reopening of river transport to the South as a part of reconciliatory gesture towards the republic of South Sudan.
Sudan has three operational deep-water ports, Port Sudan, Sawakin, and the Marsa Bashayer oil export terminal. Sawakin was the oldest operating at least since the 11th century. The colonial administration of Sudan built Port Sudan harbour in 1906, because Sawakin – located only 45 km away – proved inefficient and too small for the new large ships of the 20th Century. In 2014,Port Sudan handled 1,539,034 metric tons of exports and 6,002,652 metric tons of imports.
A national shipping company, Sudan Shipping Line (SSL), was established in 1962, as a joint venture with the Yugoslavian Foreign Trade Bank with two Yugoslav-built cargo vessels. In 1967, Sudan government bought the Yugoslavian share. The Sudan Shipping Line grew to ten ships, totalling more than 122,200 deadweight tons in 1990. After reaching a peak of fifteen ships in 1980 during the mid-1980s, SSL started to sell its fleet one by one because of financial difficulties. SSL no longer owns any operational ships now and its managers recently denied press reports that the government is considering a plan to privatize the company, vowing that the company will soon revive and buy new ships.
Power generation capacity in Sudan tripled, from about 800 megawatts (MW) in 2005 to 2,687 MW in 2015, with a shift
toward hydropower from the expensive thermal power. The Merowe Dam, built between 2003 and 2010 on the Fourth Cataract of the Nile in northern Sudan, generates 1,250 megawatts. This makes it the largest contemporary hydropower project in Africa. Nevertheless, the shortage of electric power is the main bottleneck in the Sudan economy. According to local media reports, factories in Sudan operate, on average, at only one-quarter of design capacity, because of a shortage of power, and the cost of energy significantly reduces the competitiveness of Sudanese industries in both national and international markets. The total production of energy is estimated to meet only 70% of the total demand for power in Sudan, which explains why the government is planning construction of three more hydropower dams in Sheriak, Kajbar and Dal, despite the strong objections of citizens at the proposed locations of dams in eastern and far northern Sudan.
Merowe Dam is criticised for its forced relocation for its forced relocation of some fifty thousand people from their historical home to a poorly developed semi desertous area. Other concerns are its possible negative environmental impact, which was not properly studied, and the archaeological heritage lost under its water.
Agriculture is the most important economic sector in the country, creating 39 per cent of GDP, employing more than one third of the workforce, and producing 80 per cent of the country’s exports until the late 1990s when oil and gold to lesser extent, took over as the main export products .
Agricultural and animal products made up 75% of Sudan exports, until 1999 when oil became Sudan’s main export product. About 22% of imports are destined for agricultural production, including such inputs as machinery, fertilizers, and pesticides.
The modern economy of Sudan was established under the British colonial administration, which governed from 1899 to 1956. Upon first establishment of its rule, the British governor-general thought the farmers should grow wheat, but changed his mind thinking a better cash crop was needed. As a result, the administration made the long-staple cotton production production the centrepiece of Sudan’s economy. In 1913, the Condominium administration, at times adopting its own policy contrary to the British Government but in this case backed by the British government, raised a loan to finance the construction of a dam at Sennar, on the Blue Nile, which was completed in 1925 and improved crop irrigation. Additionally, the Gezira Scheme, located in the triangle of land south of the confluence of the two Niles, came into being. Ultimately covering an area of more than two million feddans, it was to become the world’s largest single farming enterprise under one management and the most important source of foreign revenue for Sudan for decades.
Another agricultural pillar of the modern economy of Sudan was constructed by the colonial state following the Second World War. Mechanized farming of sorghum (dura), the main food staple of the northern part of the country, began in 1945 near Gedaref, in eastern Sudan. The first mechanized crop-production scheme covered about 12,000 feddans. At independence in 1956, there were more than 300 private mechanized schemes covering about 388,000 feddans.
Rain-fed mechanized agriculture occupies a strip (estimated at 5 million hectares) of the clay plains in the high-rainfall savannah belt in central Sudan. The main rain-fed crops cultivated in Sudan are sorghum, sesame, peanuts, and, to a lesser extent, cotton and sunflower seeds.
Cotton is the principal export crop in both rain-fed and irrigated sectors and an integral part of the country’s economy, and Sudan is the world’s third largest producer of sesame seed, after India and China. Sugarcane is also a very important crop on which the large sugar industry of Sudan depends. According to the Annual report of Sudan Central Bank of 2014 irrigated agriculture amounted to 3.3,million feddans while rain-fed agriculture reached 36 million feddans.
Dependency on oil and neglecting investing on agriculture after 1999 led to a sharp fall agricultural products export from 75% in 1995 to only 30% in 2014. The production of cereals, sorghum, millet and wheat declined in 2010 reached the total of only 2.9 million metric tons compared to 4.9 million metric tons in 2006-09 with the decline of nearly 42%.
Animal husbandry is an important part of the national economy. Its production increased during recent years because of better veterinary treatment, more liberal credit policies, and higher market prices.
Livestock is raised in all parts of Sudan mainly by pastoral and agro-pastoral groups, with the former dependent on livestock and the latter on both livestock and cultivation. The Sudan Ministry ofAnimal Resources estimated in 2011 that there are 103 million head of livestock; 28.6 million cows, 39.2 million sheep, 30.7 million goats and 4.7 million camels. More than 55% of these animals are raised in Darfur and Kordofan, with herd size varying from below fifty head to a few thousand per household.
The livestock sector of Sudan provides livelihood for about 17% of the population. Sudanese livestock products meet the domestic demand for meat in addition to a substantial excess for export both amounting to about 25% of total country exports in 2015.
Oil in Sudan
Oil exploration in Sudan began in 1959, when Agip, an Italian oil company, was given a concession in the Red Sea area in north eastern Sudan; no oil was found. Many other European companies explored for oil and gas in Sudan, without success.
The US oil giant Chevron began operations in Sudan in 1975, with a large concession mainly in Western Kordofan and Western Upper Nile. Chevron succeeded in two fields, Abu Jabra and al-Sharaf, on the border between Darfur and Kordofan. They soon made major discoveries in Western Upper Nile, near Bentiu, and developed the Muglad Basin, where they found two huge oil fields, Unity and Heglig, both now in a disputed area between Sudan and South Sudan.
Chevron halted operations in Sudan 1984, after attacks by the southern rebels of the Anyanya II movement, and probably also because oil prices dropped to historical lows, which made Chevron’s investments in Sudan less feasible.
At that time, it was decided that the newly discovered oil would be exported through a pipeline to be built from oil fields to the Red Sea.
This meant that most of the oil infrastructure would be built in the north. In June 1992, following the 1989 coup, Sudan’s President Bashir announced that Concorp International, a small company owned by a Sudanese businessman closely tied to the ruling party had bought the Chevron concession.
Oil exploration and export from an area devastated by civil war continued, with exorbitant human and environmental costs. The Sudanese government wanted to obtain oil at whatever it costs; even if it meant harming the environment. The SPLA rebel movement wanted to stop these efforts, leading to conflict between the two parties. In the process, the Sudanese army in 1992-1993 created an area completely devoid of civilian life, stretching for kilometres beyond the oil fields and related facilities.
Twelve-Year Oil Boom
The first shipment of Sudan crude oil was loaded aboard a Shell tanker at Marsa Bashyer on the Red Sea (18 km south of Port Sudan) on 31 August 1999, marking the beginning of twelve years of unprecedented economic growth. Sudan’s oil production peaked at an average of almost 500,000 barrels per day in 2007, before falling back somewhat in 2008-2009. It reached only about 125,000 bpd after the independence of South Sudan in 2011, putting an end to the ‘boom’ years because around 75% of oil and production was coming from oilfields in the present Republic of South Sudan, while 90% of pipelines and export facilities are in (North) Sudan.
The 1540-km oil-export pipeline from the oilfields locate in southern Kordofan in Sudan and the states of Upper Nile and Bahr el Ghazal, in the present Republic of South Sudan, to a marine export terminal on the Red Sea, was built by GNPOC, a consortium of Chinese, Malaysian, and European companies, for 1 billion USD.
The signing of the Comprehensive Peace Agreement in January 2005 and the cessation of hostilities between Sudan and now South Sudan, improved oil production and export. The agreement stipulated that oil produced in the south be divided 50/50 between the government in Khartoum and the regional government of the south, in Juba. After independence, tensions between the two Sudans flared on the issues of transit fees for South Sudan’s oil to the north and the demarcation of the border and disputed areas between the two countries, including the oil-rich territory of Abyei.
Oil Transit Fees
Sudan and South Sudan agreed after laborious talks Addis Ababa, In September 2012, that South would pay Sudan USD 9.50 per barrel for exported oil, in addition to a fee of USD 15 per barrel in fulfillment of a 3.028 billion USD package to be paid in three years. That amount was agreed upon between the two sides as transitional financial arrangement (TFA) to compensate for the loss of revenues of Sudan due to secession of South Sudan 2011. When the agreement was reached oil price was above USD 100 per barrel.
As the civil war erupted in in the South in 2013 reduced the production from 240 000 barrels per day to 140000 and the drop of oil prices to USD 29, it became unfeasible for the South to continue producing oil to remain with only 4 dollars for a barrel.
The two countries has to sit to negotiations table again to make a new deal in January 2016 according to which the oil transit fees will be fluctuating according to international prices instead of the fixed amount and the and the 3,028 USD will paid over a longer period. The specific amount to be paid was left to technicians to decide. Oil transit fees remains to be a major foreign currency sources for Sudan.
Oil revenue has caused major developments and other changes in Sudan’s economy over the past two decades. Thousands of kilometres of new roads have been constructed; modern satellite and digital communications facilities stretch across the country; and a huge hydropower dam on the Nile River and thermal power stations have been built. The macroeconomic figures for the country soared, including a high GDP growth rate and low levels of inflation. More direct foreign investment poured into Sudan.
However, the decade of the boom had an adverse impact on agriculture, which was neglected and left to deteriorate further, leading to more poverty and mass migration to the capital (Khartoum) and other cities. On the other hand, thousands of lavish villas, in the well-off neighbourhoods of Khartoum, reveal where and how significant parts of the oil revenues were spent.
Gold had been mined in the Red Sea Hills since Pharaonic times. During the 1970s, the government located more than fifty potential gold-producing sites in various parts of the country. Several joint ventures between the Sudanese Mining Corporation, a government enterprise, and foreign companies like the French giant Areva, and Canadian LaMancha Resources (TSX:LMA) were launched in the 1980s; these undertakings produced gold at Ariab and Gebeit and several other mines near the Red Sea Hills, beginning in 1987. In 1988, about 78,000 kilograms of gold ore were mined in Sudan. In the late 1990s, Sudan and two French mining companies formed a joint venture to exploit gold reserves in the Khor Ariab, in the Red Sea Hills. The two French companies were forced to sell their shares to an Egyptian businessman in May 2015, as a result of international sanctions against Sudan, as French banks declined to money transfers from Sudan.
In 2012, Sudan’s president, Omar al-Bashir, opened the country’s first gold refinery, designed to be one of the largest such operations in Africa. The annual capacity of the refinery is 150 kilograms a day, 150 tons of gold and 30 tons of silver annually. Sudan government is working hard and pinning hopes that the revues of gold mining will compensate oil revenues missed after South Sudan’s independence in 2011 and the civil war erupted in the South halting oil production and depriving Sudan from oil transit fees.
Artisanal gold mining or traditional mining as it is called in Sudan has been a vital source of income for both the government and around one million young Sudanese roaming in deserts and valleys in search of gold during the last few years. Sudanese Minister of Mineral told the press that the total production on gold in Sudan reached 77 tons in 2014 and expected to be more in the near future. Less than 10 tons were produced by scores of national and foreign companies busy with gold mining. The rest of the 63 tons was made by traditional mining. Sudan exported 1.36 billion dollars of gold in 2014 according the Sudanese Minister of Minerals.
Chrome ore was being mined in the Ingessana Hills, in South Blue Nile since 1970s, is also an important export for Sudan. More than 20,000 metric tons of chrome ore was being exported to Japan and Western Europe until the production came to an end by the spread of civil war to the region in 1983. Production resumed in 1988 with 5000 metric tons capacity per year
Sudan industry depends mainly on its agricultural sector, getting most of its raw materials from agricultural products, including textiles, leather tanning, sugar, edible oils, and other food products, along with some other related operations, such as soap making. Sudanese industry accounted for about 20% of the gross domestic product (GDP) in 2014.
The first modern textile factory goes back to 1945 when the Anzara (Equatoria State) textile factory was established by private sector. It was designed to produce 4 to 5 million yards of cloth per year, from locally grown cotton. However, the construction of textile industries on a large scale began under the first national government, immediately after independence in 1956, and later under the Numeri regime (1969-1985). In 1962 the first plant, the Sudan Textile Factory, which was financed completely by the Sudanese private sector, began production; a considerable number of factories followed. The textile industry in Sudan has depended solely upon cotton that is grown in the country.
The Sudan government owns fifteen spinning factories, of which only five are working, and seventeen textile factories, only four of which are working and are mostly in the process of privatisation.
There are also nine large spinning and weaving plants operated by national and joint ventures companies in Sudan.
About 75 small textile factories of varying capacity are scattered mainly in Gezira, the main cotton-producing region of Sudan and around the capital Khartoum. The total design capacity of the textile industry is estimated at 54,000 tons of spun yarn and 380,000,000 yards of cloth per year, but these plants are working at a fraction of their capacity.
The textile industry is going through many financial, mechanical, and technical difficulties. Mainly because of the decline of cotton production in Sudan because of the political decision of the government to produce more wheat in Gaziras scheme in instead of cotton in 1990s, which proved to be disastrous a few years later. That is to add to the frequent shortages of electrical power, dumping local market with cheap imported textiles. Some plants have even halted production for long periods. At least 80,000 Sudanese workers have lost their jobs during the last ten years, because of decline in textile industry in Sudan until 2013.
Three textile factories were affiliated to Giad, a government owned leading industrial group in the country in 2015. Another important spinning factory in Al Haji Abdullah in Algazira is undergoing a rehabilitation process. These measures are expected to revive the textile industry and increase manufacturing growth.
Sugar production is a key industry in Sudan, being Africa’s third largest producer of sugar. There are six cane-sugar factories in Sudan , belonging to Khartoum-based Sudanese Sugar Company are New Halfa, Guneid, Assalaya, and Sennar with a total annual production of 288,000 tons, and the White Nile Sugar Company (WSNC) aims to produce 450,000 tons a year. The Kenana Sugar Company is shareholder of 30% of WNSC and owns the Kenana factory, which produces 400,000 tons a year, making it not only the largest producer in Sudan, but also the world’s largest producer of white sugar. KSC is a joint venture of the Sudanese government, the Kuwaiti government, and private investors and some other local and foreign small shareholders. While Kuwait owns 30.5% of shares, Saudi Arabia 10.92%, and the Arab Investment
Company 6.96%, the Sudanese government (35.17% of shares) is notorious for making decisions without consulting the GCC co-shareholders. For example, in mid-2014 a crisis loomed following threats of the Minister of Industry firing the managing director, and eventually this having taken place without him or shareholders having been informed or consulted.
During the last five years, at least 2 billion USD in local and foreign investments have gone into the sugar industry. Two new factories have been built and a few existing ones were renovated. The government has attempted to proceed with a controversial plan to privatize sugar factories, but the National Assembly has rejected it numerous times.
Sudan is an important international producer of oil seeds. Sudan’s vast agriculture sector produces sesame seeds, groundnuts (peanuts), cottonseed, and sunflower seeds. There are approximately 223 factories extracting edible oil, with a capacity of 2.3 million tons.
Edible-oil production has fallen in the last few years. Instead of exporting seeds oil as it did during the 1980s, Sudan now has to import them . Many reasons contributed to this; mainly the deterioration of cotton production because of government policy to expand in growing wheat and other food products instead of cotton; the deterioration irrigation system as a result of lack of upkeep – including of the Gezira scheme – leading to shrinkage of cultivated area; and exorbitant government taxes discouraging famers and the cost of providing some inputs like fertilisers and fuel for agricultural machinery. Meanwhile, the annual local consumption has risen to about 230,000 tons per year, 150,000 tons of which is provided locally, while about 80,000 tons is imported.
The construction boom of the last two decades greatly increased the demand for cement in Sudan and made it one of the most important non-agricultural industries. There are seven cement plants in Sudan. Many Chinese, Saudi, and Turkish companies have invested more than USD 2 billion in the Sudanese cement industry during the last few years. The capacity of cement production is 15 million tons per year, but the actual production is only 3.5 million tons per 2014. The shortage of power is the main factor in holding down production.
Trade and Banking
In 2013, Sudan exported USD 3.92 billion in goods and imported USD 7.83 billion, resulting in a negative trade balance of USD 3.91 billion. The main exports of Sudan are crude petroleum (USD 2.43 billion), sheep and goats (USD 423 million), oil seeds – other than sesame (USD 377 million), insect resins – which is gum Arabic (USD 117 million) and gold (USD 73.3 million); top imports are wheat (USD 683 million), raw sugar (USD 464 million), medicines (USD 260 million), cars (USD 196 million), and rubber tyres (USD 144 million).
Sudan’s top export destinations are China (USD 1.92 billion), Saudi Arabia (USD 516 million), Japan (USD 412 million), India (USD 306 million), and South Korea (USD 116 million). The top import origins are China (USD 2.39 billion), India (USD 832 million), Egypt (USD 526 million), Saudi Arabia (USD 518 million), and Germany (USD 298 million).
Economic sanctions were imposed in 1997 for political and human rights reasons, having a crippling effect on the already fragile economy of Sudan. By impeding foreign trade and import of vital spare parts for industry and transport, particularly railway rolling stock and aircraft, economic growth was noticeably impaired, but daily life also strongly affected.
The first sanctions were imposed on Sudan as the result of the military coup and controversial foreign policy supporting the Iraqi invasion of Kuwait in 1990, and the Sudanese government supporting Saddam Hussein of Iraq. In 1994 the EU imposed arms sanctions, responding to the outbreak of war in Darfur. More sanctions and a trade embargo by United States were imposed on Sudan in November 1997, in response to the terror attacks on its embassies in Kenya and Tanzania by Osama Bin Laden’s al Qaeda – at the time enjoying refuge in Sudan. Noteworthy is the fact that gum Arabic – essential ingredient to soft drinks, was exempted as a result of food industry lobby work. The EU followed suit with economic sanctions and freezing of funds.
An increasingly long list of accusations related to human rights violations and harbouring of terrorists led the United States to list Sudan as a state sponsor of terrorism. The United Nations Security Council imposed an arms embargo and travel ban on Sudan in 2005. While Sudan was removed from the list of state sponsors of terrorism, sanctions remain in place. Travel to the nation is possible, however.
The US embargo prevented Sudan from easing the burden of its USD 40 billion in foreign debts. Sanctions also harmed the petroleum and petrochemical industries by prohibiting American and other companies from providing oilfield services, oil and gas pipeline facilities, machinery, and chemicals.
There are 34 banks operating in the country, sixteen of which are wholly or majority owned by private shareholders, seven state-owned commercial banks, four other state-owned banks providing finance for specific sectors of the economy, and two investment banks.
Most banks in Sudan adhere to Islamic banking principles, providing financial products that are structured to comply with Islamic law (Sharia). In practice, though these banks claim that they do not charge interest on loans and financing trade, administrative and other fees imposed by the Islamic banks are always much higher than the prevailing rate of interest of ordinary banks. Most commercial banks in Sudan invest mainly in local and partially foreign-trade financing, with limited resources allocated to finance agriculture and industry.
International sanction against Sudan and restrictions on financial dealings with Sudan placed extreme limitations on Sudanese banks from accessing international banking and financing trade. Sudanese banks can only transfer and receive money from abroad through intermediary banks in Saudi Arabia. In addition, United Arab Emirates, which made the country prone to financial and political pressure. Tourists traveling in Sudan cannot use their own banking cards as Sudan is blocked from such dealings.
Another example for the impact of the sanctions on banking as mentioned earlier, is that two French companies who were busy with gold mining in Sudan for decades, were forced to sell their shares and leave Sudan 2015 as the result of international sanctions against Sudan, as French banks declined to receive money transfers from Sudan.
According to the 2011 labour force Survey of the Sudanese Ministry Human Resources and Labour, the labour force is estimated at 9.3 million, compared with 5.3 million in the 1990 survey, with an annual growth rate of 2.1% in 2011. Unemployment was estimated by ILO to be around 13% in 2009.The number of unemployed increased to 1.8 million in 2011, with an annual increase of 3.3%.
Migration from rural areas to urban centres caused shortages of unskilled labour in rural areas, especially in irrigated agricultural areas like Gezira and cane sugar factories. Meanwhile, emigration abroad by skilled labour and professionals, changed the structure of the work force beginning in the 1990s causing shortage of skilled labours in whole country.
The deterioration of the agricultural sector and the spread of instability and ethnic conflict led to more unemployment in rural areas. Workforce in the agricultural sector declined in 2011 to 47% from 60% as noted in the 1990 survey, decreasing the share of the agro industry amount to 7.2%.
Expatriates and Remittances
Approximately 1.8 million Sudanese work abroad, mainly in Saudi Arabia and the Arab Gulf states, and a considerable number live in Europe and the United States. Sudanese expatriates remit more than USD 3 billion annually, according to official Sudanese figures, constituting the second largest source of foreign currency in Sudan, after oil.
Current remittances by expatriates are increasing at an average annual rate of 16%. This growth accelerated in the second half of the last decade with leaps of 7-8% per year, while the contribution of remittances to the GDP dropped from 6% in 2003 to one per cent in 2014. Causes were mainly the growth of Sudanese GDP after oil and oil transit fees paid by South Sudan, in addition to the discouraging government policies of official exchange rates of foreign currencies, which tempted Sudanese expats to keep their money abroad.
International monitoring groups consider Sudan one of the most corrupt countries in the world,, ranking 165 (out of 167) in the Corruption Perceptions Index 2015. Public servants demand bribes for services to which individuals and companies are legally entitled, and government officials are frequently involved in corrupt practices. Officials suspected of corruption are not investigated, but the auditor general has called for members of government to be prosecuted for the embezzlement of public funds. The corruption accusation even reached the former deputy director of Bank of Sudan and present Minister of Finance Bader Eldin Mohamoud.
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Fanack is an independent media organisation, not funded by any state or any interest group, that distributes in the Middle East and the wider world unbiased analysis and background information, based on facts, about the Middle East and North Africa.
The website grew rapidly in breadth and depth and today forms a rich and valuable source of information on 21 countries, from Morocco to Oman and from Iran to Yemen, both in Arabic and English. We currently reach six million readers annually and growing fast.
In order to guarantee the impartiality of information on the Chronicle, articles are published without by-lines. This also allows correspondents to write more freely about sensitive or controversial issues in their country. All articles are fact-checked before publication to ensure that content is accurate, current and unbiased.