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Is ‘doing business in Sudan’ a good investment?

By Solène Benhaddou
Posted on Thursday, 27 May 2021 18:33

View of the Corinthia Hotel, Khartoum. Christopher Michel/Flickr/Licence CC

Two years into a democratic transition, Sudan is looking to attract foreign investors in five key sectors: infrastructure, agriculture, energy, mining and telecoms.

“We are taking care of the debt. There is no reason not to invest in Sudan now,” said France’s economy minister Bruno Le Maire at the France-Sudan Business Forum held in Paris on 17 May. He made this statement in the presence of Sudan’s prime minister Abdalla Hamdok, who had come from Khartoum with a large delegation of leaders and entrepreneurs.

The prime minister has a doctorate in economics and previously served as the principal policy economist at the African Development Bank (ADB) and deputy executive secretary of the United Nations Economic Commission for Africa (UNECA). Hamdok came to power in 2019 after the fall of the Omar al-Bashir regime, with the aim of reforming Sudan to reintegrate it into the international community and restore sustainable growth.

The country’s GDP fell from $74.3bn to $30.5bn between 2015 and 2019. Sudan is now behind Kenya, whose national output grew by half over the same period to $95.5bn.

Good reasons to invest, despite the economic crisis

Sudan’s macroeconomic indicators are currently in the red. The Covid-19 pandemic has severely impacted its GDP growth from +3.5% in 2019 to -8.3% in 2020.

Also, according to the IMF, Sudan’s inflation rate is considerably high – with an average of 125% for the year 2020, compared to 82.4% the previous year – mainly due to the devaluation of its currency (-85% against the dollar in February 2020). In comparison, inflation in Ethiopia was at 21% and 3% for Chad in 2020.

Sudan has the potential to become the start-up hub of Africa.

Sudan is ranked 171 (out of 190) in the World Bank’s Doing Business 2020 ranking, which classifies economies according to their ability to provide a conducive business environment. Rwanda is ranked 38 while Ethiopia is at 159.

So why invest in Sudan? “The country has put in place important macroeconomic reforms that will have a real impact on development,” says Hafez Ghanem, regional vice-president for Eastern and Southern Africa at the World Bank. The Franco-Egyptian expert says: “Sudan has enormous potential and I am very optimistic about its future.”

These reforms include “a new investment law, an anti-corruption commission and a law promoting public-private partnerships (PPPs),” says Jihad Azour, the IMF’s North Africa and Middle East director. “This provides a basis for investment.”

Strategic access to international markets

Sudan is “strategically well placed with access to international markets,” says Ghanem. Located between North Africa and sub-Saharan Africa, Sudan is surrounded by seven countries – Egypt, Libya, Chad, South Sudan, the CAR, Eritrea, Ethiopia – and has access to the Red Sea and Gulf countries.

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“I came to Paris with the hopes and dreams of my people, and of generations that didn’t live to see a free Sudan. Today, we saw the world welcoming us to its fold like non before. Will push on this new momentum to make the Sudanese dream a reality!” said Sudan’s prime minister.

During the France-Sudan Business Forum, the Khartoum delegation – which was made up of both officials and private entrepreneurs – interacted with several representatives of Western multinationals including Ericsson, Siemens and Bolloré. Participants discussed several sectors, those that the government feels offer the best opportunity for investment: infrastructure, energy, mines, agriculture and telecoms.

  • Infrastructure

First and foremost, the water and waste sector offers considerable potential, particularly thanks to PPP opportunities, according to the Sudanese representatives.

In Khartoum (where there are 9 million citizens out of a total population of 42 million Sudanese, according to 2019 statistics), the annual demand is 3 million m3 of water.

The demand increases annually by 8%, while the water supply capacity is currently at 1.8 million m3, leaving a gap of 1.2 million m3, said Saaid Mohamed Saaid, a representative of Newtech Consulting Group, a business and engineering consultancy firm.

The gap between supply and demand is, on average, 40% in rural areas and 30% in urban ones. The capital is supplied by the Khartoum State Water Corporation (KSWC).

Sudanese authorities also say there are many opportunities for investment in construction of infrastructure for water supply and wastewater treatment, as well as in recycling and waste management.

  • Energy and mining:

According to the Société Nationale des Ressources Minérales (SMRC), gold production exceeded 100 tonnes per year in 2017, thus making Sudan the third largest gold producing country on the continent, after Ghana and South Africa. But the country’s potential is still under-exploited, according to Tarneem Nina Saeed, a representative of the Saeed Group mining group.

According to the SMRC, gypsum reserves – mainly used for the production of plaster – are estimated at 220m tonnes, chromium reserves at 2m tonnes and caolin – used in the manufacture of porcelain as well as in the paper and cosmetics industries – at 55m tonnes.

Four major players dominate Sudan’s mineral sector: Canada’s Orca Gold and Alliance for Mining, Sudan’s Ariab Mining Company and Morocco’s Managem.

Suleiman Hamed, undersecretary to the minister of energy and mines, announced on 2 December 2020 that oil production would be increased to 80,000 barrels per day by 2021. According to the US Energy Information Administration (US EIA), the country was producing 67,000 barrels per day in 2020, compared to over 450,000 barrels per day before South Sudan’s secession in 2011. He added that Sudan has estimated oil reserves of some 6 billion barrels (5 billion according to the US EIA, compared to Angola’s 7.8 billion).

  • Agriculture:

The agricultural sector accounts for one-third of GDP (33%) and 50% of employment. However, only 30% of the land is cultivated. According to figures from the CTC Group, which has been operating in this market since 1956, Sudan has 10% of the world’s unused arable land (46,025 hectares), while Brazil, Russia and Australia together have 31%.

With a potential for agricultural growth of more than five times its current capacity, the country has a lot to offer investors, the CTC Group says. There are opportunities all along the value chain (gum arabic, sesame, cotton and horticulture).

Much remains to be done within the logistics, distribution and sales sectors. This includes storage and handling of cold stores, port facilities, air, rail and road infrastructure, regional marketing and sales, etc.

Sudan has two main international airports which have a capacity of 3 million passengers per year – compared to 22 million passengers per year who pass through Addis Ababa Bole International Airport in Ethiopia – and nine domestic airports.

The country is betting on a new international airport with an anticipated capacity of 6 million, and eventually, 12 million passengers per year. It is believed that construction of the new airport, which has long been postponed, will begin in 2023.

Sudan has two main ports: Port Sudan, whose transit capacity increased to 12m tonnes in 2018, as well as the former port of Suakin.

  • Telecoms:

“Sudan has the potential to become the start-up hub of Africa,” says Nazar Arabi, who previously worked for MTN Sudan and is a co-founder of GO Digital Services. The Sudanese telecom market has a lot of potential due to its large population, whose average age is 20 (63% of the population is under 24). But investment is needed to bridge the digital divide and cover unserved areas.

“Today, 35 million Sudanese (77%) use mobile phones, including 8.5 million smartphones, and 34% of the country has 4G coverage,” says the GO Digital Group representative. South African telecoms giant MTN, which is present in the country, had nearly 9.8 million subscribers at the end of March 2021. However, Kuwait’s Zain is in first place with 16.6 million subscribers in 2021, ahead of Sudatel (also present in Senegal), which is majority state-owned.

According to Sudanese representatives, the country needs to develop all its digital sectors, including fintech, cloud, e-commerce, e-learning and innovation centres.

The telecoms sector, which is essential for the development of all the other sectors, represents a market of $1.5bn of investment, according to GO Digital Service.

Finally, thanks to its maritime coastline, Sudan has access to submarine cables, via the EASSy cable, 13% of which is owned by Sudatel. This enables it to act as a gateway to East Africa by offering access to landlocked neighbouring countries such as South Sudan, Chad and even Ethiopia.

Ending 30 years of isolation

As a reminder, in 2017, US President Barack Obama partially lifted sanctions against Khartoum, which allowed 157 Sudanese companies to resume regular international relations. In addition, Sudan was removed from the US list of state sponsors of terrorism in December 2020, ending 30 years of isolation. This removal signalled Sudan’s return to the international market as well as the return of private investors to the country.

Hamdok also announced that he is “currently in negotiations with the WTO.” The working group for Sudan’s accession was established on 25 October 1994, but several objectives must be achieved, which will require technical assistance, before the country will be allowed to join the organisation.

Sudan has been a member of several regional economic communities for more than two decades: the Common Market for Eastern and Southern Africa (Comesa) since 1994, the Community of Sahel-Saharan States since 1998 and the Intergovernmental Authority on Development (IGAD) since 1996.

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