By Simon Wolfe
With the possible exception of North Korea and Syria, there are fewer countries in the world with worse brand reputations than Sudan.
Since the late nineties, the country has been synonymous with the genocide and humanitarian crisis in Darfur, which some sources say has claimed up to half a million lives. The resulting sanctions from the United States, referral to the International Criminal Court and a 2009 arrest warrant for President Omar al-Bashir, as well as widespread condemnation from a slew of NGOs left Sudan isolated and ostracized, with few economic partners beyond China and Russia.
But those days, it seems, are gone. Last year, when the Trump administration decided to roll back those US sanctions (including lifting limits on international financial institutions making deals in the country), Sudan was suddenly reopened to the world, with a significant level of interest among businesses looking for opportunities in sub-Saharan Africa’s fourth-largest economy.
For many years under the sanctions regime, Sudan’s economy continued to thrive nonetheless, growing at a rate of 5 percent from 2004-2008 thanks mainly to strong oil prices. But since losing 75 percent of their oil reserves to South Sudan’s independence in 2011, growth has been much spottier. The missing oil revenues have gutted state finances while at the same Sudan is banned from debt relief.
These pressures are likely what led President al-Bashir to undertake the “positive actions” long sought by Washington, which include halting arms purchases from North Korea and allowing more aid to flow to war victims and vulnerable communities. In securing this rollback of sanctions, al-Bashir, though still wanted by the ICC, has pulled off a miracle act of political survival – even most recently serving as a “mediator” to South Sudan’s peace talks.
However, to keep this survival act up, the country’s leadership must attract significant diversified foreign direct investment – and quickly. Though Sudan is most well-known for oil, cotton, and agriculture, there is increasing interest in other mining opportunities.
For example, the country’s relatively untapped gold deposits have received unprecedented public and private sector attention in recent years. According to The World Bank, gold exports from Sudan were barely worth over a $1 billion USD in 2010, but surged to over $2 billion USD by 2012, and production remains exceptionally higher today despite slowing in year on year growth.
Today, gold products account for up to 57% of the value of Sudan’s exports, when just a few years’ prior, gold products accounted for 30% in 2013. Gold production totaled to 93 tonnes and 107 tonnes in 2016 and 2017 respectively, showing rapid growth. Projected to produce up to 110 tons this year, Sudan is slated to become the ninth largest producer of gold in the world and remain as one of the 20 countries producing 38% of the world’s gold supply. Though behind this impressive growth is an unfortunate reality.
According to reports from the Economist Intelligence Unit, the steady are not all that they seem. In fact, a considerable majority of Sudan’s gold exports are produced by small-scale artisanal miners, and in the end, are actually smuggled out of the country for sale, with profits accruing to gangs or militant groups.
The ongoing problem is that artisanal miners face no real threat of government oversight, and therefore have a record of dumping toxic waste, smuggling up to 34% of their gold out of the country, and using violence to gain and maintain access to mining sites.
It is clear that Khartoum understands that the country could benefit enormously from the participation of multinational companies, allowing for more socially responsible extractive practices, clear and lawful export practices that contribute to state revenue and infrastructure building.
This is part of the reason why some of the biggest extractive industry nations are paying close attention. Earlier this year Australia announced an offer to deposit $7 billion into Sudan’s central bank, indicating interest by the country’s five largest mining firms to get involved. Lutfur Rahman Khan, Chairman of the Canada State Oil Company, has made several visits to the country and has indicated that Canada wants to lead on foreign investment in the oil sector. Turkish President Recep Tayyip Erdoğan has been perhaps the most vocally bullish on investment in Sudan, recently signing 13 bilateral agreements on strategic and defense cooperation, mining, agriculture, forestry, and education, among other areas.
But despite these hopeful signs, the investment flows have not yet begun in earnest. Sudan may be open for business for the most intrepid and brave early adopters, but there are still staggering obstacles to doing business in the country, including confusing parallel exchange rates, a lack of clarity of how to repatriate profits, and an underdeveloped licensing and legal regime. It seems that many major players are lying in wait, but few are ready to place their bets just yet.
This deadlock is a serious problem for the international community, and one that could easily be tipped toward the resumption of conflict that we should all be aiming to avoid.
The governments of Australia, Canada and indeed the United States in particular should be motivated to take more action to help Sudan in this transition to an open economy, allowing for lawful growth and expansion of opportunities that helps institutionalize reforms – something that the Chinese have totally failed to encourage in more than 10 years of working with Khartoum. Many of the above issues could be addressed through the creation of special economic zones and other policy solutions that could be explored.
This, ultimately, is a political problem as much as an economic problem. The solution lies in developing an understanding of both and moving forward from that platform. It’s going to take creativity, hard work, and patience, but with some luck we may be looking at a new African economic powerhouse in the years to come – and hopefully a new identity that escapes the atrocities of the past.
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