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SUDAN: Feeling the pinch

KHARTOUM, 27 March 2012 (IRIN) - Hamed, 19, has a captive market for his goods, but only for frenetic 90-second bursts: once the traffic lights change on Khartoum’s Nile Avenue, potential customers for his packs of tissues drive on, sending Hamed and the rest of a small army of vendors of everything from socks to soft drinks scurrying for safety until the signal turns red again.

Until eight years ago, Hamed’s father farmed wheat on two hectares of land near Dongola, capital of Sudan’s Northern State. But rising costs of water, fertilizer, seeds, electricity and labour gradually made the business unprofitable and, like many in a similar position, the family moved to Khartoum.

“My Dad has a small grocery kiosk, while my three brothers and I have to work to support the family” Hamed told IRIN. 

“We thought we might find a better life in the capital. My Dad wanted us to be employed in respectable positions, but everything is becoming unbelievably expensive, and all of us had to leave school to work,” he said.

Even since oil production began in 1999, agriculture has remained a key component of Sudan’s economy, employing around 80 percent of the workforce and contributing a significant portion of the country’s gross domestic product (GDP).

But since the oil began flowing, according to Ali Abdullah Ali, professor of economics at al Ahleyya University, agriculture’s “share of GDP has declined, rural incomes have decreased and poverty in rural areas may have intensified”.

“The uncompetitive status of Sudan’s agricultural sector over the last 10 years has resulted in reduced incentives for farmers and discouraged younger Sudanese from taking up farming”, he added.

Agriculture’s share of Sudan’s total exports fell from 73 percent in 1998 to 5 percent in 2008, according to a 2011 paper by Khalid H. A. Siddig of the University of Khartoum.

Until the secession of South Sudan in July 2011, oil accounted for about three-quarters of Khartoum’s foreign exchange earnings and half of government revenue.

But three quarters of that oil came from the south and was piped northwards to market. A row over how much Khartoum was entitled to charge for transit and other fees led South Sudan to shut down production entirely in January.

While the move is having severe repercussions in South Sudan, where oil accounted for 98 percent of government revenue, the effects are also significant north of the border.

Major challenges

“The [Khartoum] government is facing major challenges,” said Hafiz Ismail, an economist and Sudan director of Justice Africa, a London-based advocacy group.

“Imports have become more expensive due to the loss of oil revenues, [there is a] shortage in foreign currency, a devalued currency that hinders international trade, and then the major hole in this year’s budget that [foresaw] almost 30 percent of the revenues coming from the oil,” he said.

The budget, presented to the National Assembly in December 2011, projected economic growth of 2 percent, inflation of 18 percent and a year-on-year deficit decline from 4.4 to 3.4 percent of GDP.

The International Monetary Fund (IMF), in its World Economic Outlook published in September, projected a negative rate of growth of -0.4 percent in 2012.

The Sudanese pound now trades on the black market at around five to the US dollar, against an official rate of 2.7. In July, the black market rate ranged between 3.0 and 3.4 to the dollar.


Photo: Huyangshu/Shutterstock
In the past, oil accounted for about three-quarters of Khartoum’s foreign exchange
Inflation, unemployment

Year-on-year food price inflation reached 21.3 percent in February, up from 19.3 percent in January, according to official figures.

“Being a student and living in the hostel, I need to manage my expenses well,” said Fahd Mohamed, a fifth-year student in Khartoum University’s engineering faculty.

“Previously, my daily expenditure was six pounds, now it’s nine pounds, despite me having cut down on some fronts. My parents used to give me 200 pounds a month, now it’s 250-300.”

During the five years he spent at the university, Mohamed has seen the price of the meal at the dorm rise from 3 to 5 pounds. 

“The college has also increased the fees, citing more expenditure. Five of my friends had to leave university.”

Of his friends who graduated last year, Mohamed knows of only three who now have jobs. “It’s only because they have connections; other friends had to open groceries or work in a store. There are no jobs in this country. Once I graduate, my plan is to apply for jobs outside Sudan. I studied engineering: I don’t want to end up doing anything else,” he said.

“More than 50 percent of the graduates are unemployed, there’s no investment, no agriculture, no jobs, nothing,” said Hassan El-Bashir, professor of economy at Al-Neelain University.

“Social welfare payments make up for less than 10 percent of the budget, which is very weak, compared to other countries,” he added. 
 
Gold

Sudan is better placed than South Sudan to weather the oil shutdown across the border. According to Sudan’s mining ministry, it produced 11.5 tons of gold between January and mid-March and is on track to meet an annual target of 50 tons.

President Omar al Bashir announced earlier this month that Sudan’s own oil production could reach 75,000 barrels per day this year, and said there were plans to boost exports of cotton, sugar and other commodities.

Additional economic respite is set to come from Qatar, which in early March pledged to invest $2 billion in Sudan, specifically in the sectors of mining, agriculture and oil.

Bashir still faces myriad challenges: he has been indicted by the International Criminal Court for crimes allegedly committed in Darfur, where armed opposition is now in its 10th year; since June 2011 the Sudan armed forces have been engaged in a costly counter-insurgency operation in the border states of South Kordofan and Blue Nile, where they have also been accused of war crimes; rebels from all three areas have joined forces under the banner of the Sudan Revolutionary Front with the aim of bringing about regime change in Khartoum; and many in Sudan blame the administration for the loss of the south, and with it several billion dollars of oil revenue a year.

For Justice Africa’s Hafiz Ismail, “Sudan needs to make necessary political changes, needs to stop war on borders which takes up to 80 percent of its budget, needs to resolve pending issues with the south, normalize relations with its neighbours and with the Western world… Most importantly, the mindset of the elite in Khartoum has been the same for 23 years now; we need some fresh minds.”

se/am/cb

Theme (s): Economy, Governance,

[This report does not necessarily reflect the views of the United Nations]

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