Guidance

Overseas Business Risk - Sudan

Published 8 January 2013

Information on key security and political risks which UK businesses may face when operating in Sudan.

1. Political and Economic

1.1 Economic Risk

Following the secession of South Sudan in July 2011 and the subsequent decision by South Sudan to shut off oil flows (which transit Sudan) in January 2012, a decision which has still not been reversed, Sudan faces multiple economic challenges. It has lost most of its supply of foreign exchange, and is running significant current account, government and trade deficits. Inflation is high (the year on year figure in November 2012 is 46.5%) and the Sudanese pound (SDG) has lost more than 50% of its value during the past year. Having been an oil exporter, Sudan is now a net oil importer. The Government has sought to diversify the economy away from oil, in part by increasing gold production and exports, and developing the mining sector and there has been much discussion of the need to increase agricultural output and exports. The Government has also introduced austerity measures, including cuts to fuel subsidies in June 2012, and attempts to increase tax revenue, by increasing levies on companies. Further cuts to fuel and food subsidies may take place in 2013. Several internal conflicts in Sudan and ongoing disagreements with South Sudan on the sharing of oil revenues, location of their shared border and other issues result in high levels of tension, a virtual halt in cross-border trade and consequent harm to the country’s economic development.

GDP grew by 5.5% in 2010, in part due to oil production and inflows of foreign direct investment from Arab countries. However, Sudan saw negative real GDP growth in 2011 partly due to the 75% reduction in oil revenue following the secession of South Sudan. The International Monetary Fund (IMF) assesses that Sudan experienced negative real GDP growth in 2011 of -3.9%. The IMF revised downwards its predictions for the performance of the Sudanese economy which they estimate will contract by -11.2% in 2012, according to data released in October 2012, although they currently estimate that GDP will remain unchanged in 2013. These figures exclude the impact of any agreements with South Sudan which may be implemented.

Apart from an EU arms embargo and a UN arms embargo on Darfur, there are no EU or UK legal restrictions preventing trade with Sudan.

On the World Bank’s Doing Business Report 2013 Sudan ranks 143 out of 185 economies, down 3 places from an adjusted 2012 figure.

Because of our wider concerns regarding human rights and ongoing conflict in Sudan, UK Trade and Investment does not proactively promote British trade with Sudan. The British Embassy’s UKTI section in Khartoum, however, is ready to respond to enquiries and requests for assistance from British companies interested in operating and investing in the Republic of Sudan.

The Government of Sudan is placing heavy emphasis on economic diversification following the loss of oil revenues. It plans to overhaul mining and agricultural production and boost oil exploration. They have also implemented a number of austerity measures, including a reduction in the size of government and partial removal of fuel subsidises.

Potential growth sectors in Sudan include:

• Agriculture

• Commodities, including minerals exploration and development

• Oil and renewable energies

• Engineering and construction

• Pharmaceuticals

• Education and vocational training

• Healthcare

• Telecommunications

• Financial services, including insurance and international banking services

1.2 Financial Risk

Due to US sanctions obtaining banking services for Sudan can be a challenge and we advise all UK companies to consider this before embarking on doing business with Sudan.

The Sudanese pound (SDG) lost more than 50% of its value during the past year given the sharp drop in exports (previously dominated by oil) and consequent dramatic reduction of foreign currency. This has increased the cost of imports causing the government to restrict the list of items that can be imported while raising duties on others.

Sudan is subject to comprehensive U.S. financial and economic sanctions. Sudan faces a hefty external debt (which the IMF estimates at $43.7 billion in 2012 and predicts will grow to $45.6 billion in 2013) on which it is in arrears, and is consequently unable to access concessional financing from international financial institutions or Western nations. Political Risk

Sudan gained independence from Britain and Egypt on 1st January 1956 and has since been ruled by a series of parliamentary governments and military regimes. Under Major General Gaafar Mohamed Nimeiri, Sudan instituted Sharia (Islamic) law in 1983 which led to the outbreak of a civil war between the government and groups in the south of the country, principally the Sudan People’s Liberation Army (SPLA)

In 1989 a military coup installed a Revolutionary Command Council chaired by General Omar al-Bashir. Bashir ruled by decree until 1996 when he was elected President and a national assembly was established. Bashir was re-elected in 2000 and then again in 2010.

Civil war continued between the Sudanese government and the SPLA until a cease-fire was agreed in July 2002. This led to the signing of the 2005 Comprehensive Peace Agreement between the government and the Sudan People’s Liberation Movement (SPLM), the political arm of the SPLA. The agreement set a number of elements, which would ultimately lead to a referendum on the independence of South Sudan.

In January 2011, 99% of South Sudanese voted to secede from the north, and on July 9, 2011, South Sudan officially became an independent nation. However, a number of issues from the Comprehensive Peace Agreement remained unfulfilled with areas of contention including border demarcation, oil revenues and citizenship still requiring negotiation under the mediation of the African Union. These negotiations have not been smooth and both Sudan and South Sudan have been involved in border skirmishes in 2012.

Internally Sudan is also facing numerous challenges. The President, Defence Minister and Governor of Southern Kordofan have all been indicted by the International Criminal Court over allegations of war crimes related to Darfur. There is currently conflict in Southern Kordofan and Blue Niles states as well as ongoing insecurity and conflict in Darfur, alongside partial implementation of the Doha Document for Peace in Darfur (DDPD). Furthermore, and most recently, there have been protests around the country. These started as a response to Government austerity measures but have developed into protests against the government. The Government response to these protests has been harsh, including violent tactics to break up protests and restrictions on freedom of expression in the media.

2. Human Rights

Sudan faces a number of human rights challenges, including arbitrary detention, lack of accountability of security services, restrictions on freedom of speech and movement and conflict-related human rights violations. The Foreign, Commonwealth & Development Office produces annual and quarterly updates on the human rights situation in Sudan.

You can also keep up to date on HMG Ministerial statements on the situation in Sudan by following the FCDO Sudan Unit Twitter.

3. Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

According to the World Transparency International Corruption index Sudan was ranked 173 out of 176 in 2012, compared to 177 out of 182 in 2011.

Earlier this year Sudanese President Omer Hassan al-Bashir established an anti-graft agency in response to growing concern over corruption and what is seen as lack of accountability in that area. However so far nothing has emerged from the agency on its corruption probe.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Sudan.

Read the information provided on our Bribery and corruption page.

4. Terrorism Threat

More information on the threat of terrorism in Sudan is available in the FCDO Travel Advice.

Read the information provided on our Terrorism threat page.

5. Protective Security Advice

It is necessary for all travellers to check the FCDO travel advice to Sudan. The FCDO currently advises against travel to a number of areas in Sudan, and recommends a number of precautions in general. Travellers should also consult their travel agents or trip planners as well as hotel security about security measures while in the country.

Read the information provided on our Protective security advice page.

6. Intellectual Property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets.

Read the information provided on our Intellectual Property page.

7. Organised Crime

We are aware of reports of individuals who have attempted to use personal information to extort money from relatives. You should be careful to keep your personal information secure.

Read the information provided on our Organised crime page.