Micro-Economic Profile In Sudan
AT THE CLOSE OF 2004, SUDAN COULD LOOK BACK ON A 14-YEAR PERIOD, OVER WHICH GROWTH IN GROSS DOMESTIC Product (GDP) averaged 6.99%. In being one of Africa’s brisk striding economies throughout the 1990s, Sudan entered the new millennium positioned to attain that oft-elusive goal of developing countries; sustained growth and development. Inflation has been a chronic problem, though it was down to 7% by the end of 2002, but up slightly to 8.8% in 2003, averaging 8.5% over 2004. However, despite the positive statistical indications,the country remains perilously dependent on primary product exports, to which crude oil has recently been added. Sudan is currently at a very crucial point in its economic evolution and sustaining long term growth and development will require modernizing its labour contribution to the global economy while commensurately increasing per capita productivity value.Sudan, like most countries in tropical Africa, built its post-independence economy on external credits and domestic subsidies; the latter in the form of price supports, over-employment,protracted government financing of unprofitable parastatals, and maintenance of fixed exchange rates in the face of declining rates of conversion to foreign exchange. All this resulted in an inability to meet debt repayment schedules, eventual national currency devaluations,dramatically reduced purchasing power, deterioration in government services– particularly inheath and education–and general economic recession.
This situation, widespread in Africa, prompted the Bretton Woods institutions to devise and prescribe Structural Adjustment Programs (SAP) to countries throughout the continent. The essence of SAP was the elimination
of subsidy factors and total subjection of the economy to market forces, based on the theory that this would compel competitive orientation of the productive forces. In other words, SAP was conceived to put the African countries
in an economic Darwinian swim or drown situation, with the national leadership in countries like Sudan challenged to keep their nations afloat through disciplined compliance with the SAP prescription and productive performance, as well as entrepreneurial motivation.
Sudan in this vein began the structural adjustment from a subsidized economy to a strictly commercial one with the coming to power of General Omar Al Bashir’s National Salvation Revolution in 1989. After some initial harsh
shocks, including rampant inflation owing to manifold currency depreciation, as the economy squarely faced the global market forces, the situation began stabilizing toward the end of the 1990s. Inflation was brought down from
an average 110% between 1991 and 1996 to 7.3% in 2002 and 8.8% in 2003.
Between 1991 and 1996, Sudan’s GDP grew 41.6%, recording growth rates of 11.3% in 1992 and 12.3% in 1993. Aggregate growth over the period 1991 through 2003 was 86.4%, including 6.1% in 2003, bringing GDP to $17.8 billion (World Bank Group, Sudan Data Profile). GDP growth is estimated at 6.5% for 2004, while direct foreign investments exceeded $1 billion.
The economy is still overly dependent on agriculture production and it was the decline in this sector that brought GDP down from 6.5% in 2002 to 6.1% in 2003, despite the 27% increase in earnings from petroleum products exports. Sudan exports a variety of 30 agriculture commodities, with cotton, livestock, and sesame heading the list, combined accounting for $320.04 million, including meat, skins, and hides. However, fluctuating prices and production volumes keep the agriculture sector at risk of recession. In 2002, cotton export earnings were only $62.2 million, compared to $107.76 million in 2003; whereas livestock export earnings fell from $117.2 in 2002 to
$87.68 million in 2003. Sesame was stable at $74.6 million in 2002 and $74.37 in 2003.
Price fluctuations and natural conditions constituting a major production variable are perennial problems for all countries excessively relying on primary products for export earnings, while maintaining large finished product
For the first time ever, Sudan in 2000 recorded a trade surplus, which amounted to $254 million, compared to a $634.8 million deficit in 1999. The combination of petroleum exports and elimination of petroleum imports facilitated
this feat. However, imports subsequently increased at a faster rate than exports, reducing the trade surplus for 2001 to $113 million, then reversing the surplus into a 2002 deficit of $497.3 million. Actually, there was only a marginal
2.1% import bill increase in 2001, but exports fell by 6%. However, in 2002, imports increased by 54.2% against an export increase of 14.74%.
The trade balance deficit continued through 2003, but reduced to $339 million on the strength of a 30% increase in exports, against a 17.78% increase in imports. Petroleum product exports increased by 25.9%, while the aggregate
of all other exports increased marginally. The most significant development in the export realm is the more than one hundred million dollars worth of refined petroleum products, but even these were down marginally from $114. 1 million in 2002 to $113.68 million in 2003.
The classification system used by the Bank of Sudan does not permit a clear demarcation between consumer goods and capital goods imports. With the exception of 2003, Machinery & Equipment has in recent years been the category claiming the largest percentage of imports, at 24.9 in 2003, compared to 25.4% in 2002 and 24% in 2001; however, this category includes home electronic goods such as televisions, radios, and tape recorders. It also includes electrical appliances, air conditioners,and refrigerators. Manufactured goods imports, which exceeded Machinery & Equipment in value during 2003, also mix apparent production inputs such as jute & sacks, iron & steel, cement with toys & sports goods, footwear, and ceramic products. On the whole, there seems to have been no significant importation of capital goods in 2003. Industrial input imports are indicated by $79.3m for raw materials; and, also, the $148.7 million in petroleum product imports appears to contain a large lubricants for local packaging content. In the manufactured goods category, imports grew by 127% between 2000 and 2003, from $323.5m to $728.7million; and there is a substantial scientific instruments component of about 35% and an iron and steel component of about 25%.
Imports under the Machinery & Equipment category increased steadily from $323.5 million in 2000 to $442.5 million in 2001, to $620.8 million in 2002, to $717.9 in 2003; but given the negative growth of the trade balance,
these figures do not indicate a surge in Manufacturing Value Added (MVA). One would expect Machinery & Equipment to refer to capital goods, giving an indication of likely short and medium-term increase in industrial
output. That is to say, an import aggregate with a high capital goods factor should, in a few years, translate into decreased imports, owing to import substitution production and possibly an increase in manufactured exports as well, which we could expect to be the case in a petroleum producing country like Sudan.
Imported automobiles account for about 45% of the transport equipment import bill of $409.1 million, while the local automobile industry established by the government operates at only a fraction of installed capacity. This trend does not bode well for Sudan. Gross fixed investment during 2003 amounted to only 14.8% of GDP (World Bank Group Sudan Data Profile), compared to 35% to 40% levels that facilitated sustained growth in the Pacific Rim’s tigers: Singapore, Malaysia, South Korea, Taiwan, Hong, and mainland China’s coastal provinces. One economist described the generation that built up the savings volumes in these countries over 40%, to facilitate a commensurate
level of investment, as having worked and saved heroically while living fugally.
Despite this alarming reversal of the short lived trade surplus and evident acceleration in consumer spending rates, savings are actually growing at a phenomenal pace. Over the 15-month period from December 31, 2000,
to March 31, 2004, the volume of savings in commercial banks grew by 54.4%. Looking at the Commercial Banks Consolidated Balance Sheet, published by the Bank of Sudan, total deposits at the end of 2003 were up 30% over the previous year, standing at $1.8 billion; but that is still only 10.11% of the $17.8 billion GDP.
The economy is still dominated by agriculture, which accounted for 46.2% of GDP in 2002 and 45.6% in 2003. Industry and mining, despite the leading position petroleum products now hold in Sudan’s export portfolio,accounted for only 9.1 and 9.6% of GDP in 2002 and 2003, respectively. Invariably, the Industry & Mining sector is dominated by petroleum, especially upstream operations.
Apart from the addition of the petroleum industry, Sudan’s contribution to the international division of labour has not significantly changed since independence 49 years ago. The country has thus far made no significant headway
towards penetration into new and more sophisticated markets, like manufactures, technology, and services. Perhaps the country’s most significant export has been its professional manpower, as many Sudanese have achieved world
class status working abroad in various professional capacities. A considerable amount of the investment in real estate appears to be financed from foreign earnings, but the Bank of Sudan, in its statistical reports, does not mention remittances by Sudanese working abroad. BOS does, however, reveal that non-government foreign currency deposits in Sudanese banks amount to $650.36 million, which is about 36% of the total commercial bank deposits.
While exposure to science and technology is not new to Sudanese and there is a growing number of computer programmers, website designers, industrial designers, and research scientists, the S&T community has not yet gained a high enough profile to be considered a distinct sector contributor to GDP. Despite the prominence of the Malaysians, Chinese, and Indians in the petroleum industry, and their movement into other areas of production, there are no basic technology industries in Sudan, as found in these Asian countries; like computer chips, hard disks, disk drives, printers,semi-conductors, or VDUs.
Professional services valued added has been steady at about a quarter of GDP, with nongovernmental services at 24.5% in 2003, which was actually the lowest level of contribution in recent years. This, however, suggests that,
generally, non-government services are growing in pace with the economy. The growth rate for this sector in both 2002 and 2003 was 4.0% per annum. It must be borne in mind though that this is a very broad sector, including public transport, legal service, information services, banking, wholesaling, and retailing. Modernization of the services sector in terms of digital offerings is visible; telecommunications are now world class and typewriters are scarcer than donkey drawn rickshaws. But Sudan has not reached the point of contemplating a modern underground rapid transport system or overhead bullet train.
As long as Sudan is not on the road to modernizing its contribution to the international division of labour, GDP growth will likely weigh increasingly in the interest of the elite communities, while industrial and clerical wages continue to lag behind those in the industrialized nations. Presently, civil service salaries, including amenities, range from about $150 up to $700 a month; while some non-owning corporate executives enjoy earnings exceeding $2,000 monthly. From the private residences being newly built and the high-class automobiles cruising around Khartoum, Sudan no
doubt has a growing community of net worth millionaires.
Real Estate prices in Khartoum have skyrocketed in recent years, so that low-income families settled on their 300-square-meter plots that cost $3,000 7 years ago can now get $30-40,000 for them, with mud structures, in places like Omdurman and the Hillet Kuku quarter of Khartoum Bahri. A 50-square-meter shop in a central Khartoum commercial condominium also costs $30-40,000. In fact, the high rents in central Khartoum occasion high rates of retail business failure. Those who own property in the central city invariably have the advantage of avoiding excessive rents and are therefore better positioned to survive in the retail market.
With a class of propitiously positioned property owners and second generation entrepreneurs dominating the Sudanese economy, mass upward mobility indeed requires expansion of the industrial and technology sectors and large scale creation of high value jobs. Profitable enterprises like the DAL Group have at least created high value management jobs and given good opportunities to bright young Sudanese who are not necessarily from wealthy backgrounds.
Although the Group grew out of DAL Engineering Co. Ltd., which today provides technical equipment and services to the construction and petroleum industries, its manufacturing investments are still limited to basic industries.