Sudan’s Global Re-integration Put on Hold
Back to the bad old days…?
A military coup d’état on 25 October has derailed Sudan’s shaky transition to democracy. It also put a big question mark around the country’s hopes of re-integrating into the global economy after decades of isolation under long-time dictator Omar al-Bashir.
Bashir was ousted in April 2019 following a popular uprising. Since then Sudan had been governed by a joint civilian-military Sovereign Council, which aimed ultimately to hand the reins to a civilian government, with elections scheduled for 2023. The coup dissolved the Council, and it remains unclear what the future holds for the troubled African nation.
Ending 30 Years of Isolation
For most of al-Bashir’s 30-year rule, Sudan was engulfed in internal conflict and fenced off from global markets by stringent international sanctions.
With the establishment of South Sudan in 2011, these sanctions have been gradually relaxed. Sudan’s hopes of joining the world economy received a further boost in December 2020, when the Trump administration removed it from the US government’s Sponsors of Terrorism list, effectively lifting all restrictions on financial transactions and other engagements with Sudanese individuals and entities. This was partly in return for Sudan normalising relations with Israel.
In March 2021 the World Bank resumed work in Sudan after three decades of disengagement. This made available to the country billions of US dollars of grants for poverty reduction and sustainable economic recovery.
A False Re-Start
Yet international investors did not come rushing into Sudan, and FDI remained low in the transitional period. One major reason for this was the COVID-19 pandemic, which foiled any real chance of an economic recovery.
Another significant issue had been simmering tensions between the interim civilian and military authorities which frequently boiled over, adding to the sense of instability in the country
That has not deterred the UAE, Saudi Arabia, and, to a lesser extent, Egypt. All three countries increased their economic activity in Sudan in recent years as part of a geopolitical game of chess over Sudan’s strategic location and natural assets.
Military Control of the Economy
A central point of contention between civilian and military authorities has been the military’s reluctance to give up its control over large segments of the Sudanese economy.
Similar to neighbouring Egypt, the armed forces in Sudan have interests in hundreds of commercial firms. Other Sudanese defence and security agencies, including the paramilitary Rapid Support Forces (RSF), dominate a range of sectors, such as livestock, water distribution, construction and aviation.
Sudan’s military control of the economy deters investors as it poses serious compliance and reputational risks. Military-owned companies in Sudan operate under a veil of secrecy and are afflicted with high-level corruption and conflicts of interest. The profits they generate finance paramilitary activity and line the pockets of generals. They include RSF commander Mohammed Hamadan Dagalo (commonly known as Hemedti), who has been widely accused of involvement in war crimes and crimes against humanity in Darfur.
Positive signals came from Khartoum in March 2021, when interim authorities reached an agreement to gradually transfer military-owned commercial companies to the control of the civilian-run finance ministry. Last month’s coup, however, put an end to any prospects of it being implemented.
What’s Next
Since the coup, the international community has exerted significant diplomatic pressure on the military junta to restore Sudan’s civilian-led cabinet. On 3 November, the UAE and Saudi Arabia – which have enjoyed close ties to Sudan’s military and are widely understood to have been propping up its generals – joined these calls.
More recent reports have suggested that talks between military and civilian factions have progressed, with new transitional institutions potentially set to emerge. The military’s top general Abdel Fattah al-Burhan claims to be committed to transferring power to civilian leadership, though many observers remain sceptical.
Should the military continue to derail a transition to democracy, there is a risk that Sudan may find itself sanctioned once more. On the other hand, a successful settlement could be a game-changer. As Africa’s third largest country, bordering seven countries and the Red Sea, Sudan offers many opportunities for investors. This includes in transport and telecoms, as well as in rebuilding the country’s infrastructure, which has suffered from years of war and neglect. With millions of hectares of arable land and vast mineral reserves, Sudan’s agriculture and mining sectors are also fertile grounds for investment.
For their part, the transitional civilian and military authorities introduced several measures to attract foreign capital flows into these and other sectors. Among them were a new investment law, an anti-corruption commission and various incentives to promote public-private partnerships.
Yet Western investors looking to profit from a new dawn in Sudan, whenever it comes, should tread carefully. Even in the event of a return to civilian rule, the military is unlikely to loosen its opaque grip over Sudan’s economy anytime soon.