APPENDIX C: Economic Realities in Sudan: What a Kleptocracy Looks Like
Eric Reeves | May 22, 2016 | http://wp.me/p45rOG-1TC
(My commentary, where it is provided, is always in blue italics, in [brackets], followed by my initials)
“The Logic of War: Khartoum’s Economy After Southern Secession,” July 3, 2011 | http://sudanreeves.org/2011/07/03/the-logic-of-war-khartoums-economy-after-southern-secession-a-prcis/
“Watching the Bubble Burst: Political Implications of Sudan’s Economic Implosion,” Enough Project Forum publication, 17 September 2014 | http://www.enoughproject.org/reports/enough-forum-watching-bubble-burst
“Kleptocracy in Khartoum: Self-Enrichment by the National Islamic Front/National Congress Party, 2011 – 2015,” December 2, 2015 | http://www.enoughproject.org/blogs/enough-forum-release-kleptocracy-khartoum
INFLATION, FOREX, AND SHORTAGES: Recent reports
Economist slams Bank of Sudan exchange rates | (Radio Dabanga) May 19, 2016 | KHARTOUM – A Sudanese economic analyst has denounced the justification by the Central Bank of Sudan for raising foreign exchange rates against the US Dollar “because of the increase in passenger numbers of Sudanese and foreigners abroad.”
Power cuts in Khartoum | (Radio Dabanga | May 3, 2016 | KHARTOUM
Sudanese Pound drops sharply against US Dollar: SDG13 | (Radio Dabanga) April 12, 2016 | KHARTOUM
Price hikes as Sudanese Pound plunges | (Radio Dabana) April 21, 2016 | NYALA
[There are clear signs that the generals who dominate the regime have only a vague understanding of the relation between domestic inflation and acute shortages of Forex—ER]
Sudan inflation rate cools to 11.70 in March | (Sudan Tribune) April 13, 2016 (KHARTOUM) – Sudan’s Central Bureau of Statistics (CBoS) Wednesday reported that the monthly inflation rate has dropped to 11.70% in March from 12.94 % in February.
[These are simply made-up figures: they have nothing to do with the drastic rise in prices for ordinary Sudanese, especially for critical staples: see recent examples below:
Basic commodity prices continue to rise in Sudan | March 10, 2016 | PORT SUDAN / NYALA / KHARTOUM
Growing discontent over food prices in Darfur | March 18, 2016 | DARFUR
Khartoum queues for bread as flour shortage bites | February 29, 2016 | KHARTOUM
Staple food prices rise across Sudan | March 25, 2016 | MELLIT / HAJAR EL ASA
East Darfur fuel and food prices rising | February 26, 2016 | ED DAEIN
Imported goods ‘unaffordable’ in Sudanese markets | March 15, 2016 | EL OBEID / NYALA
Prices continue to rise in South Darfur capital | March 13, 2016 | NYALA
Higher price for staple foods in North Kordofan | March 1, 2016 | SODARI
From Sudan Democracy First Group has produced a series of powerful investigative reports:
“Release Announcement of the Sudan Transparency Initiative (STI) First Report on the Oil Industry in Sudan” | http://www.democracyfirstgroup.org/release-announcement-of-the-sudan-transparency-initiative-sti-first-report-on-the-oil-industry-in-sudan/#sthash.LnTnw6lR.dpuf
Lack of transparency and corruption are rampant across Sudan. Many stories have been written in different media outlets to highlight the magnitude and scope of these phenomena. However, only a few of these writings measure up to recognized standards of rigorous research and verification of information. Because of these inadequacies, despite the important data that these stories often contain, they end up as little more than sensational news.
“Corruption in the Health Sector: The Public Hospitals” | May 16, 2016
As a result of the current government’s aggressive economic liberalization and privatization policies that it started in the early nineties, the free medical service that had been in place for decades, especially in public hospitals, was nearly abolished and a health insurance system was introduced in 1994. Since then, the public health sector has witnessed a notable deterioration and decline in capacity and the quality of service provided.
This is due to a number of factors including; the increase in the number patients without a parallel increase in facilities, equipment and access, a decrease in the number of qualified medical staff, low motivation of hospital employees due to poor salaries, and the complicated and ineffective health insurance system that does not cover patients’ needs.
The decline and deterioration of services in public hospitals has led to the emergence of corrupt practices that have further negatively affected accessibility and coverage. The following are examples of corrupt instances in these services:
Corruption by Ministry officials: public board in Sudan | May 13, 2016 | KHARTOUM
Privatisation plans panned in Port Sudan | May 12, 2016 | PORT SUDAN
[Of particularly significance are the conspicuously corrupt and illegale sales of urban and agricultural lands: see the discussion of this pervasive phenomenon at the end of this Appendix]
AND YET INTERNATIONAL ECONOMIC AND FINANCIAL ASSISTANCE CONTINUES
One key reason that we hear so little about economic and financial realities in Sudan is the willingness of the International Monetary Fund (IMF) to serve in effect as a “shill” for the regime. This has been true for almost twenty years. Relatively recently, in a statement of unsurpassable absurdity, finally mendacity, Edward Gemayel, the IMF’s Mission Chief for Sudan, claimed in October 2013 that, “Sudan has a long track record of implementing sustainable economic policies” https://www.imf.org/external/np/sec/pr/2013/pr13404.htm . How to square this statement with the fact of Sudan’s external debt of $48 billion is a challenge Gemayel doesn’t undertake. The vast majority of this debt has accrued during the 27 years of tyrannical rule by the NIF/NCP—both by virtue of arrears and profligate military spending that takes place with total budgetary opacity.
This gives cover to much of the international economic and financial interactions with Khartoum, and obscures the realities of massive corruption, pervasive cronyism, and finally a regime that economically is little more that a deft kleptocracy.
Sudan enrolled in World Bank “Enabling the Business of Agriculture” for the first time | (Sudan Tribune) May 16, 2016 (KHARTOUM) – The World Bank, in partnership with the Sudanese ministries of agriculture and finance and economic planning, launched on Monday the 2016.
Sudan, Saudi Arabia expect to earn $20 billion from Atlantis II project | (Sudan Tribune) May 1, 2016 (KHARTOUM) – Sudan on Sunday expressed hopes to attract more Saudi investments in mineral sector, and expected that the revenue of the two countries from Atlantis II mining project …
€6.5 million for UN projects in Sudan | (Radio Dabanga) May 10, 2016 | KHARTOUM
The European Union signed development cooperation agreements with two United Nations projects on the management of natural resources in Darfur and West Kordofan. The EU stays committed to improving its ties with Sudan regarding irregular migration, an “area of mutual concern.” Ambassador Tomas Ulicny, Head of Delegation of the EU, signed the funding agreements worth a total of €6.5 million on the occasion of ‘Europe Day,’ at a reception in Khartoum on Monday.
Sudan, UK agree to enhance economic cooperation | March 21, 2016 (KHARTOUM) – Sudan and the United Kingdom (UK) have agreed to promote cultural, economic and investment cooperation besides exchange of visits by senior officials in both nations. (Sudan Tribune)
Sudan, UK to discuss ways to promote bilateral ties | March 19, 2016 (KHARTOUM) – A political consultation committee between Sudan and the United Kingdom (UK) would meet Sunday in Khartoum to discuss ways for promoting bilateral relations… (Sudan Tribune)
Italian commercial delegation to arrive in Khartoum next week | February 3, 2016 (KHARTOUM) – Italy’s embassy in Khartoum Wednesday announced that an Italian commercial delegation would arrive in the Sudanese capital next week to discuss ways for expanding the trade exchange between the two countries. (Sudan Tribune)
Germany, Sudan sign €51m cooperation agreement | March 3, 2016 (KHARTOUM) – Germany and Sudan Thursday signed a €51 million cooperation agreement for the implementation of development projects in the three states of eastern Sudan, and five states of Darfur. (Sudan Tribune)
Sudan receives 100 million euros from EU to stem irregular migrants | February 17, 2016 (KHARTOUM) – The European Commission Wednesday announced a 100 million euro package to support Sudan to address root causes of irregular migration and displaced persons. (Sudan Tribune)
[Most of this money will end up in the pockets of the National Intelligence and Security Services for their own nefarious purposes, not to stanch the flow of “irregular migrants,” which the domestic policies of the Khartoum regime have done much to increase in number—ER]
Belgium, Sudan sign loan to improve water supply | February 24, 2016 (KHARTOUM) – Belgium Wednesday signed a loan agreement of 551,000 euro with the Sudanese government to provide 1,200 water pumping stations to ten states.
[Construction contracts for these pumping stations will benefit regime cronies, and the very fact of needing so much construction for adequate water supplies in Sudan is a reflection of the callous domestic economic policies of the regime—ER]
Sudanese foreign minister to meet EU officials in Brussels Monday | February 14, 2016 (KHARTOUM) – European Union (EU) envoy to Sudan, Tomas Ulicny, Sunday has discussed with Sudan’s foreign minister Ibrahim Ghandour his visit to the EU headquarters in Brussels. (Sudan Tribune)
Sudan, USAID discuss ways to promote joint cooperation | February 28, 2016 (KHARTOUM) – Sudan’s Minister of International Cooperation Kamal Hassan Ali has discussed with the Assistant Administrator for the Africa Bureau at the US Agency for International Development (Sudan Tribune)
Sudan and Russia vow to boost economic cooperation | February 27, 2016 (KHARTOUM) Sudanese and Russian foreign ministers Friday pledged to work toward greater economic cooperation between the two countries. Ibrahim Ghandour and Sergey Lavrov met… (Sudan Tribune)
Oil minister discuss with Chinese officials building Sudan’s first natural gas pipeline | February 24, 2016 (KHARTOUM) – Sudanese oil minister Mohamed Zayed Awad Wednesday held discussions with Chinese officials to build the first gas pipeline in Sudan and ways to develop gas industry. (Sudan Tribune)
UAE funds $260m water stations for Khartoum State | January 8, 2016 (KHARTOUM) – The United Arab Emirates (UAE) will fund the construction of two water pumping stations at a cost of 260 million dollars in Khartoum state in support of the Sudanese (Sudan Tribune)
[Again, construction contracts will benefit regime cronies, and the very fact of needing so much construction for adequate water supplies in Sudan is a reflection of the callous domestic economic policies of the regime—ER]
Egypt invites Bashir to attend investment African forum | January 17, 2016 (KHARTOUM) – The Sudanese president Omer al-Bashir has received an invitation from his Egyptian counterpart Abdel-Fatah al-Sissi to attend the African Investment Forum (AIF) at at the Red Sea resort of Sharm El-Shiekh from 20 to 21 February 2016. (Sudan Tribune)
Saudi Arabia gives Sudan $5 billion in military aid | February 22, 2016 (KHARTOUM) – Saudi Arabia has granted five billion dollar military assistance to Sudan initially dedicated to the Lebanese army, multiple sources told Sudan Tribune on Monday. (Sudan Tribune) [ST had excellent sources for this information—ER]
Corrupt land sales by Khartoum a measure of economic desperation
The illicit, typically concealed expropriation of Sudanese resources includes money taken from banks (including funds in the Central Bank of Sudan), diversion of oil revenues, taking cuts from the lucrative contracts in construction and agriculture given to political cronies, as well as wealth generated from land sales. The latter are of particular concern since they work to mortgage Sudan’s future, even after the regime has been deposed. A great many land deals are thoroughly opaque in nature and implication:
Kuwait’s total investments in Sudan, mainly in industry, farming and services, are estimated at over USD 9 billion. Kuwait primarily invests in sugar and communication projects in Sudan, Secretary-General of the Sudanese Investment Authority Ahmad Shawar said in a news statement.”
What are we to make of this claim? Over how long a period of time were such investments made? Where did the $9 billion in “investments” go? What was sold? Who owned what was sold? To what degree is the figure of $9 billion designed to bolster confidence in Sudan’s Forex—the obvious motive for any number of other statements?
So long as the regime offers no credible account of revenues, and no credible account of budgetary expenditures, we can’t know. What can be gleaned is something of the extent to which Sudanese popular unrest can be traced to this opacity and the perception that they have had their most precious resource stripped from them.
Recent reports indicate an especially conspicuous and lucrative decision by the regime to mortgage huge tracts of property in and around Khartoum. El Sudani reported in July 2015 that “reliable sources” had “indicated that the mortgaged plots in Khartoum state include ministries’ premises, offices of several districts, and some hospitals and schools.” With extraordinary brazenness, even by Khartoum’s standards, El Sudani reported that,
newly appointed Khartoum state governor and former Defence Minister Abdelrahim Mohamed Hussein, told journalists during a Ramadan breakfast ceremony on 1 July, that the Ministry of Planning and Urban Development has sold all the plots.
Hussein, who had fallen out of favor with the powerful generals in the regime, has been served an arrest warrant by the International Criminal Court for massive crimes against humanity in Darfur. He is hardly likely to balk at domestic corruption, even on such a massive scale. Again, however, we are left with questions: who provided the mortgage money? Were they Sudanese or non-Sudanese purchasers? If the sales are permanent, as implied by the word mortgaged (as opposed to leased), what will happen to these properties after the regime is no longer on the scene? What is the time-frame for the mortgages?
It is certainly highly unlikely that a sum as large as $150 billion would be paid over the short term. The regime will have been as aggressive as possible in foreshortening the mortgage period, ensuring a maximum cash flow of hard currency. Where will the money be deposited? What functions will it serve, if any, in guiding monetary and budgetary policy? Will any but those who rule Sudan benefit from this new revenue stream? Why would the regime announce such extraordinary and illicit sales of Sudanese land? Perhaps new ownership is destined to become widely known in the near future, and the regime did not want to be caught in the position of having to acknowledge that foreign nationals now own much of Khartoum. Opacity yet again accompanies apparent disclosure.
In March 2015, Sudan sold to Kuwait its stake in the Sudanese-Kuwaiti Hotels Company. Reported only by Sudan Tribune and the Kuwaiti press, details of the sale were predictably shrouded in secrecy, including where the money would go, who the beneficiaries would be, and what caused the sale of the profitable hotel chain.
Perhaps of greatest significance for the long-term health of the Sudanese economy is the sale and leasing of agricultural land. Long regarded as a potential “breadbasket” for Africa and the Middle East, Sudan is no longer even agriculturally self-sufficient and is obliged to import immense quantities of wheat with which to make bread, costing the country almost $1 billion a year in Forex.
Some of the examples of agricultural land sales are shocking in their scope; and while they give food security to a number of richer Arab countries, they diminish the likelihood that Sudan will escape from the chronic malnutrition that has been so frequently reported. In another telling example, Reuters (October 26, 2013) translated a column from the Egypt Independent:
Sudan’s Investment Authority has allocated an area of approximately two million acres for agricultural projects run by Arabs (sic) investors, namely from Egypt and Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Qatar and Lebanon. Sudani Investment Minister Sadiq Muhammad Ali said in a Friday statement on Friday that the authority granted investment holdings in the states of River Nile and Kassala, Shamaliya, Kordofan and Sennar. Preparation for cultivation takes time, Ali said, adding that production should begin in the next few years. Over the next five years, production on investor-held land would cover demand for a range of crops, he claimed.
What is not specified is what was paid for these two million acres, the quality of the land, the arrangement for expatriate workers (as opposed to Sudanese agricultural workers), where the food produced will go, and what was paid for this “allocation.”
This is a very large amount of land, now controlled by foreign investors who are all looking to provide for their own long-term food security. For very substantial cash now, the regime has surrendered what are undoubtedly arable lands of significant quality (investors are interested only in the best of the arable lands in Sudan).
But again we learn nothing of where the money paid by these Arab countries—certainly in hard currency—has gone; we know only that wherever it went, the regime retains full control. The same is true of a large sale of land to a Syrian investor, reported only by Radio Dabanga:
Residents of El Matama locality in the northern Sudanese River Nile state complain about the sale of vast tracts of their lands by Sudanese authorities to a Syrian investor. “The authorities sold 225,000 acres of farmlands in Wad El Habashi, Wad Hamed, and Hajar El Teir for $5 per acre, to be paid over a period of 99 years,” one of the affected told Dabanga from Wad El Habashi. “We have not been offered any compensation, also not for the damage to our land left to us, caused by the construction of a canal for the irrigation of the land sold to the investor.” (‘Northern Sudan farmlands sold to Syrian investor,’ February 15, 2015 | El Matama)
No accounting is available for the revenues from the sale of these lands.
More recently Reuters (May 20, 2015) reported from Khartoum on both the crippling effects of a lack of Forex (including denying companies the ability to repatriate profits in hard currency) and Khartoum’s willingness to sell land critical to Sudan’s agricultural future:
Sudan, prized for its fertile land and easy access to irrigation water from the Nile, has been trying to attract farmland and livestock investment from Gulf Arab firms seeking to secure food supplies for their arid oil-producing countries. While some government-backed projects from countries like Saudi Arabia, Kuwait and Qatar have gone ahead, privately-funded farmland deals have been hampered by severe restrictions in Sudan to transfer dollars abroad. Struggling with foreign currency shortages, Sudan’s central bank has made it almost impossible to transfer dollars abroad for firms outside the oil sector dominated by Chinese firms.
The NIF/NCP regime clearly does not care about the economic legacy it is leaving, so long as it survives in power as long as possible. If the regime loses power, men like Hussein, al-Bashir and many others will likely spend the rest of their lives in The Hague, a fact they do not forget.