Industry In Sudan
SUDAN’S INDUSTRIAL SECTOR HAS PRODUCED QUITE A NUMBER OF WORLD CLASS SUCCESS STORIES AND ALSO Abatch of failures. The sugar refining industry, for example, has an overall capacity utilization of better than 100%, while textiles have been somewhat of a non-starter in this leading cotton producing country. Only 4 out of the 56 textile factories established in the country were operational in 2004. While some industries have faired better than others on the whole, within certain industries, some companies have been outstanding successes and others flops.
Downstream petroleum industries, having benefited from crude oil production commenced in 1999, look very promising. The country has been self-sufficient in petroleum fuels since June 2000, producing 70,000 or more barrels per day to meet local demand and exporting over $100 million a year in refined products.Refined products exports for 2003 were $113.68 million, down from $114.4 million the previous year; although production was up by 3.9%.Butane gas production fell by 4.8% in 2003 and the entire 229,100mt produced were consumed by the domestic market. Today, there are four refineries running at full capacity. The state of the art Khartoum Refinery, located at Geli, is now said to have a capacity of 90,000bpd. In the western region of the country, El Obeid Refinery, after rehabilitation four years ago, produces near its capacity of 10,000bpd.
The government is interested in expanding the Port Sudan Refinery, which now has a capacity of 21,000bpd, to 100,000bpd. In line with this ambition, Sudan is pursuing refined products markets in neighboring states. In June 2004, the Indian government approved plans by its national oil company, ONGC, for a $194 million, 450-mile petroleum products export pipeline running from the Khartoum refinery to Port Sudan. The project is to be completed in around 14-16 months.
The Chinese National Petroleum Company (CNPC) petrochemical plant, which commenced production in early 2002, is an indication of the aggressiveness with which Sudan’s partners in the hydrocarbon industry are approaching down-stream possibilities. Khartoum Petrochemical Company, as the CNPC subsidiary is called, produced 29,200mt of naphtha in 2003, down from 34,100mt the previous year. These figures account for only about 1% of domestic downstream value, but over 90% of the 2003 production was exported. Fuel oil production in 2003 was up 25.6% over the previous year, at 375,800mt; gasoline production rose by 8% to 1.105 million tons, and kerosene by 9% to 36,500mt, while all other categories, including butane gas, benzene, naph- tha, and jet fuel, were slightly down. Crude oil supplies to the domestic refineries have thus far been supplied at a preferential fixed rate, precluding petroleum price hikes commensurate with those in the global crude oil market.
With proven reserves of less than one billion barrels and estimated reserves of only three billion barrels, prudence dictates that Sudan focuses on optimizing manufacturing value added (MVA) to its primary hydrocarbon production and maintaining strategic reserves. Refinery upgrading and expansion has therefore constituted a wise move. Sudan National Petroleum Company has its eyes on the domestic markets in Ethiopia and Eritrea, which together could perhaps double demand for production from Sudan’s refineries.
The Chinese have been the main investors in Sudan’s downstream hydrocarbon industries, but the Indians, now partners in the Greater Nile Petroleum Operating Company that dominates the upstream sector, are moving into the downstream side with investment in the pipeline from Khartoum Refinery to Port Sudan. While this investment bodes well for the future expansion of Khartoum Refinery, it could further stall investment in rehabilitation of the Port Sudan Refinery. Sudan’s petroleum authorities have been trying unsuccessfully since 1999 to land a commitment to expand the refinery at Port Sudan.
Sudan’s industrial sector is substantially concentrated in Khartoum State, but major industries, like sugar, cement, cigarettes, and types, are located elsewhere. As petroleum refining is the burgeoning industry, sugar refining has a well established track record. During 2003, the leading sugar refiner, Kenana Sugar Company, established in 1975, operated at 132.7% of capacity and the industry on the whole at 111.2%. At 728,000mt, the sugar refining industry, in 2003, recorded 4.4% growth over the previous year. With the exception of a drop from an industry peak of 755,000mt in 1998 to 610,000mt in ’99, the industry has maintained steady growth, from 500,000mt in 1997 to 664,000mt in 2000, 689,000mt in 2001, to 697,000mt for 2002. Kenana, based at Kosti in Central Sudan, has throughout remained the pacesetter, accounting for 54.7% of sugar industry production in 2003 and 54% the previous year. The other major producer, Sudanese Sugar Company, operates four refineries: Jenaid, which over the course of 2003 operated at 145% of capacity, producing 87,000mt; New Halfa, which turned out 82,000mt operating at 109% of capacity; Sinnar Sugar Refinery, which refined 85,000mt in 2003 operating at 77% capacity, and Assalaya, which operated at 69% capacity, producing 76,000mt. Sugar cane is locally produced by the two companies. Less than 3% of the production is exported and exports mainly consist of premium quality refined sugar produced at Kenana. In the service export domain, Kenana Management Services manages, under contract, Savannah Sugar Company, a subsidiary of Nigeria’s Dan Goté conglomerate based in the northern state of Adamawa.
The wheat flour industry is dominated by a single producer, Sayga Investment Company, a subsidiary of the leading DAL Group. With 27 of the 33 existing flour mills out of work and overall industry capacity utilization down to 27%, Sayga operates at 100% capacity and produces some forty different types of wheat flour. Wheat is mostly imported from Australia and elsewhere outside Sudan, so the flour industry does not reflect the forward and backward integration of the sugar industry, but there is a substantial volume of Sudanese flour carried unofficially into neighbouring country markets. Over the course of 2003, 890,000mt of wheat flour was produced, up 6% from the previous year, against an installed industry capacity of 3.3 million metric tons. With a state of the art facility and leading a powerful conglomerate, Sayga’s dominance in the flour market can be expected to steadily increase in the coming years. Market share increased from 55% in 2003 to 60% in 2004. The DAL Group contains no listed companies, so financial returns are not made available to the public: But with 2004 sales reportedly in the range of 500,000mt @ $500, Sayga’s latest annual turnover figure might likely have exceeded $250 million.
Cement production has fluctuated over the years but 2003 was the best year since 1997. Demand has been rising in consonance with an increase in construction activity, which, in 2003, had a total value of $795 million. However, rehabilitation, as well as improvement of maintenance and efficiency, also contributed to the 32.8% growth in cement production from 2002 to 2003. The two cement factories were originally parastatals, but later marked for privatization. The larger, at Rabak in White Nile State, about 170 miles south of Khartoum along the White Nile, established in 1956, produces over two thirds of Sudan’s cement. The smaller factory, at Atbara, 185 miles northeast of Sudan along the Nile, was established in 1947. The holding company for the Rabak factory, Nile Cement, has been listed on Khartoum Stock Exchange since 1996, claiming assets of $4.2 million, with a 2003 closing share price of SDD24, or about 10¢ in USD. However, the stock is not very active, with only $4,348 worth of shares sold in 14 transactions over a twelve-month period.
Looking at the pharmaceutical industry from the product type angle, some sections have performed quite well of late. One billion tablets of various sorts were manufactured in Sudan during 2003, about two-thirds of installed production capacity. Capsule production, at 900 million, exceeded installed capacity by 125% (225% of capacity). Intravenous drip packages production was at 85% capacity, totaling 3.4 million units; in addition to 12 million syringes constituting 40% of installed capacity. However, syrup production fell drastically from 97 million bottles, out of an installed capacity of 109 mil lion, to only 9.4 million. Seventeen factories comprise this section of the manufacturing sector, which was launched in 1961 with the establishment of the Sudanese Chemical Industries. High tablet and capsule production levels con- tribute to affordable prices of locally manufactured medicines. An efficacious single dose treatment for Malaria costs about 40¢ US, plus 20¢ for the requisite paracetamol (acetamino- phen).
Food & Beverages constitute an exciting market in Sudan, but with some companies clearly the front runners. The global competition between Coke and Pepsi was ignited in 2003 when the former joined the market long dominated by the latter. Today, both companies claim to be market leaders and operate at maximum capac- ity, while the industry on the whole produces at 48% below installed capacity. Other leading brands in a saturated market are the apple- flavoured Stim and Pasgionos, which taste rather like a vanilla and raspberry concoction. Coke bottler, DAL, and Pepsi bottler, Araak, each have their popular fruit juice lines, Cappy and Crystal, respectively, and produce bottled drinking water. Production volume in 2003
reached 312 million liters. This is in addition to small-scale fruit juice venders operating electric blenders, who also appear to be claiming a fair share of the beverage market.
The dairy products market is also quite competitive, with several brands of locally produced milk. Presently, DAL’s Capo is the most visible yoghurt in the market, packaged in smartly designed 200gram and 500gram plastic cups with aluminum foil covers, while Premier Taza, packaged in 500gram envelopes, appears to be facing little competition from other pasteurized milk brands; though Premier Daima yoghurt trails Capo in the market. Cheese is mainly produced and packaged by brand-less cottage industries but DAL’s Blue Nile Dairy Company markets a sweetly flavoured milk- based cream for those with greater purchasing power, costing about $1.20 for 500grams. Blue Nile Dairy Company claims to be the first Sudanese company to be awarded ISO 9002 certificates for its operations.
Below the elite market level, Sudan’s laundry and bath soap markets are clearly dominated by local production but there is presently excess investment. With an installed capacity of 460 thousand tons, the soap industry produced 80,000 tons– 17% of capacity. Product range, appearance, and packaging are not world class as in the beverage and dairy industries and a Syrian company that introduced Topper brand laundry soap in 2003, which had excellent packaging, appearance, and aroma, collapsed with- in a year primarily because of an ineffective marketing strategy.
Instead Moauia El Berier, with over 18 industries is heading for a breakthrough in different industries and Mamoun El Berier Group head- ed by Mr, Saoud El Berier is doing good.
Although some edible oils are gaining ground in the market against imports from Egypt by providing reasonably good quality at lower prices, this section of the F&B industry is far from dynamic. Production in 2003 was 90,000 tons, which was only 15% of installed capacity. Instead Moawia El Berier, with several and diverse industries, is heading for a breakthrough in the detergents industry.
For a country that has long been a major cotton producer, the most disturbing aspect of Sudan’s industrial sector is that the textile industry has not sustained viability. Out of 56 yarn factories established, only four are operating, producing 8,800 tons over the 2002-2003 period, In the same period 30 million yards of cloth and 2.5 million pieces of ready-made apparel were manufactured. Some marketing experts in the textile plant supply business believe that Sudan’s future in the cotton cloth market lies in high quality pima quality, since the country produces sufficient long and medium length fiber and cannot expect to compete with the Chinese, who are the world leaders in low cost cotton cloth. This does not only mean giving the textile industry an export orientation; pima cotton is becoming ever more widely worn by Sudanese.
With an enormous wealth in hide yielding live- stock, Sudan is also expected to shine in the leather products industry. There are 18 tanner- ies and a number of footwear factories, producing a total of 15.2 million pieces of leather and 7.76 million pairs of shoes in the two-year period, 2002 and 2003. Although the performance falls considerably short of capacity, the leather industry looks very promising. There is yet the need to control hide quality from the time the animals are alive, especially in Western Sudan, because owing to hide damage during grazing in thorny bushes, grades are too low for manufacture of quality export standard products. However, craftsmanship is world class; and this can be said of virtually every line of production in Sudan that requires a good measure of artistry.
Sudan has two modern industrial complexes, Giad Industrial City and Saria Industrial Complex, both opened in 1997. Saria, which was initially a parastatal, was privatized in November 1998. Saria is now owned by Salah Eldin Ahmed Mohammed Idris & Al Nilein Holding Co. Ltd. and produces a range of home electrical and electronic branded items, PVC pipes and casings, and military uniforms, including shoes and cartons.
The tremendous gap between production and installed capacity at both Giad and Saria indicates that without protection from competing imports and export market development, these massive investments will eventually become insolvent, causing loss of jobs and daunting Sudan’s industrial ascendancy aspirations. Saria produced not quite 6,000 television sets over the two-year period, 2002-2003, only 2% of the 150,000 units per year production capacity. Automotive battery production for the two-year period, at 5, 361, was slightly above 1% of installed capacity. The packing materials plant does considerably better than the others, producing at 2.28 million square meters of product, operating at about 22% of capacity. Electric home fans, radio cassette machines, small tape recorders, telephone handsets, refrigerators, pressing irons, heating plates, and fluorescent lighting fixtures are also manufactured on Saria’s Asian specification lines. Saria’s garment and shoes industries are presently dedicated to military uniform supply, which may provide some security at present but seems politically risky, in the long term, since eventual change of government could conceivably bring about new purchasing policies.
In addition to Saria, there are several other refrigerator brands manufactured in Sudan, including Cold Air, Lebher, and Star. The refrigerator industry collectively operated at only 48% capacity during the two years 2002 and 2003, producing 91,000 units. However, with competitive prices and high popularity, local brands, led by Cold Air, dominate the market
Giad’s production record, presented in the table below, reveals alarmingly low capacity utilization levels for all its products. In the automobile market, Giad cars are generally at a disadvantage against imported brands. The compact Hyundai Accent was until 2004 Giad’s sole entry in the saloon car market, but it faced competition from newer Hyundai models imported under the open market regime, as well as from other imported brands. With the introduction of the stylish Hyundai Sonata in 1994, Giad’s profile has risen among luxury car consumers, but the new model does not seem to enjoy exclusive adoption for the government and parastatal luxury saloon fleet. Giad motorcycles, introduced in 2002, show no production for 2003. Minibus production was also discontinued. The Mehera station wagon, which was to be Giad’s flagship, is virtually out of the competition in a market flaunting such globally established marques as Toyota and Lexus Land Cruisers, Volkswagen Tuareg, Nissan Patrol, Mitsubishi Pajero, Mercedes Benz M series, and BMW M1. Giad Automotive Industry attaining commercial viability with its present lineup of models in an open market is improbable. At least exclusive access to government and parastatal markets should be given as a protective measure. Also, there are no visible commercial dealer showrooms for the brands. No doubt the automobile industry is important for any developing country owing to the wide range of technical and craft skills that go into passenger vehicles. Moreover, the strategy in Sudan, as has been the case in Nigeria, is to attract investment in auto feeder industries that manufacture and sell parts to the brand owner under contract.
The competition has no doubt been good for Saria, Giad, and other local industrial establishments in that it has compelled serious attention to product quality, but a prudent restriction on import volumes of products that com- pete with locally manufactured goods could provide a happy medium between unmerited monopoly and industrial development defeating competition. Long-term sustained growth of the Sudanese economy requires incremental manufacturing value-added, and eventually intellectual property value-added as well. Inflexible commitment to non-protectionist, open market regimes has not served African countries to this national economic viability end anymore than protectionist monopolies. A more sophisticated and flexible approach to trade policies is required; otherwise the African economies will continue to be primarily reliant on primary product production, while the advanced economies are moving from the industrial era into the post-industrial high-tech era. Most of the transfer of industrial production from the global pacesetters, the United States, and Japan, has gone to the Pacific Rim, making the countries of that region not only the fastest growing in the world but also positioning them for sustained growth.
From their industrial experiences over the past twenty five years, the countries of the Pacific Rim, along with South Asia’s India and South Africa, are also beginning to compete in the technology fields. Sudanese and other Africans abroad, who have moved into the intellectual elite class, are qualified to help their countries improve industrially and
enter the technology fields, but in order for them to be of domestic service in this context home, industries must be supported to grow –not just to start.
Sudan’s paint industry suffered a 35% production decline in 2003, giving indications of over investment. With one of the companies having closed, eleven remain in a field that produced at only 17.5% of aggregate installed capacity;
that is, 17.5 thousands tons, against a capacity of 100,000 tons. Production in 2002 was better, at 27,000 tons. The cigarette industry also appears to have excess capacity, because with limited imported branded visibility, the industry operated at less than one third of installed capacity. However, Tyre and dry cell production are both declining in the face of encroaching imports. The matches industry, by contrast, could possibly stand additional investment, with 419,200 cartons produced against an installed capacity of 400,000.
Over the course of 2003, 11.4% of commercial bank financing, totaling $112.6 million, went to industry; of which $18.6 million was in foreign currency. Only El Nilein Industrial Development Bank Group is said to be dedicated to
the manufacturing sector, which actually receives less than 20% of its financing. However, the situation in the manufacturing sector does not indicate under-financing; rather, there appears to be excess capacity in many industries, perhaps with a long-term growth view. In the final analysis, the need for some measure of protection is
not a ubiquitous problem in the manufacturing sector. In the beverage and wheat flour industries,for example, there is no significant imported product impact, whereas it is observable that the considerable gap between installed capacity and actual production largely reflects dominance of the market by one or two leading producers.
Pasteurized milk producers must contend with the historical and continual market dominance of fresh farm milk
delivered from door to door in the mornings and evenings. There appears to be a need for strategic consultancy
intervention from the financial sector, particularly El Nilein Industrial Development Bank Group and Sudan
Development Corporation (SDC), with a view to attaining rationalization of financial resource input into the manufacturing sector so as to avoid waste. There is a number of other small scale industries, including furniture, perfumes, aluminum doors and frames, kitchen cabinetry, water cooled air conditioners, floor tiles, printing,
and plastic goods. All of them have their eyes on the future and the people who invest in and run them are conscious of industrialization’s importance to the development of the country. Industry has been the front line of economic revolution in post-colonial Africa and will remain so for many years to come.
Although failures are wasteful, gradually the success stories become more numerous. New technologies are offering new possibilities, especially for cottage industries and custom production. Ultimately, the massive plants that
characterized industrialization in the 20th century may give way to production units the size of a shipping container that are designed to produce a wide range of products using water and resin mold conversion technology. Keeping
tuned in to new technology developments is essential.