Sudan: Smuggling, A Serious Drawback to the Economy

2 January 2020

The smuggling of national commodities and agricultural and mineral products is the biggest threat to the Sudan economy because of its direct impact on macro-economy, in particular with respect to the irreplaceable potentials such as minerals.

Sudan's land is home to over 50 minerals, top of which comes gold that could have steadied up the economy after the breakaway Republic of South Sudan took with it about 75% of Sudan's oil revenue. This bleak situation after the secession of South Sudan could have been mitigated by gold, huge quantities of which were struck by traditional miners active in 12 states of the country.

Estimates put the gold produced by these traditional miners (individuals and small scale companies) at 85% of the country's overall gold output.

Reports cite a jump in gold production during 2015-2017 from the former 73.4 tons to 93.4 tons, a 20% increase.

The performance report of the Ministry of Mining during the first half of 2018 had revealed the production of 62 tons, 8 tons of which were purchased by the Central Bank of Sudan (CBOS). During the same period, licensed companies had delivered 1.4 tons to the Central bank, raising its exports to a total of 10.7 tons, fetching $422.5 million during that period.

The same report has cited the loss of 48.8 tons, of produced gold (whether due to smuggling, local manufacturing or hoarding)- that is a rate of 77 percent from the actual production. According to the report also, gold had constituted 37% of the country's total export revenue during the previous three years.

However, an expert on the matter has put Sudan's gold output during the aforesaid period at far greater than that. Musa Karama, the Former Minister of Trade and Industry, has said gold smuggled via the Khartoum Airport alone during 2015 had amounted to 102 tons, all smuggled on the Emirates Airlines to Dubai, United Arab Emirates.

UN experts, in a report issued in September 2016 have put the worth of gold smuggled to the United Arab Emirates at $4.6 billion.

Both Karama (the former Minister of Trade and Industry) and chairman of the chamber of gold exporters Abdelmoneim Siddiq agree with the UN experts' report that the United Arab Emirates is the biggest buyer of Sudanese gold.

Further, Karama has said that both goldsmiths and miners had cited a jump in gold production to between 230-240 tons during 2017-2018, 'while the government was talking about just 90-110 tons of produced gold at that time. That is a difference of an annual 100-130 tons.

Karama has said gold is smuggled via "all outlets, in particular through the Khartoum Airport."

He considered the Khartoum Airport the biggest avenue for the smuggling of gold, beside the land road to Sudan's Northern neighbor, Egypt.

For his part, Finance and Economic Planning Minister Ibrahim Albadawi has recently conceded that Sudan does not benefit from its gold output because of smuggling. He said about 450 kilograms of gold are smuggled everyday, the equivalent of $25 million.

Speaking to the National TV, Minister Albadawi said his government is concerting effort to control the gold market in a bid to prevent smuggling. He cited 'the existence of interests and speculations in gold and currencies', as behind the trouble in the economy.

He said the smuggling of gold and the speculations in hard currency is the work of 'limited social bodies whose interests were harmed by the Revolution. They do so in a bid to foil the government policies and upset the situation through the creation of an economic crisis.'

Meanwhile, Trade and Industry Minister Abbas Madani has revealed that gold exports have for the first time been included in his Ministry's exports list of the 2020 budget. "That means gold was not part of the Ministry's exports list in the past," he explained.

Economist Mohammad Alnayir is in agreement with the view that the Central Bank Of Sudan had, for years, failed to offer suitable prices for gold. The Bank had also monopolized gold purchases and exportation. This, according Alnayir, has contributed to the increase in the smuggling and hoarding of the precious metal. To remedy this situation, the Bank was obliged to pump vast quantities of cash in its gold purchases, a matter that led to an increase in the rates of inflation that escalated to about 63%, or more, towards the end of 2019, that also saw a sharp decline in cash in the economy.

"The Central Bank's involvement in gold purchasing is in contravention with its prescribed duties," said Alnayir.

He said the Central Bank is supposed to pull out of gold purchases and gold exports. It should also stop government companies from gold buying and exporting.

Alnayir has further called for launching a gold bourse in which exchanges are carried out with transparency and according to the daily global price of gold. "This could scale down the smuggling of gold which is estimated at 100 tons," he said.

Alnayir also indicated that the 2019 statistics cite a decline in gold production. "This is because of the Central Bank's erroneous and erratic policies that deprived the national coffer from gold proceeds," he said.

Economist Abulgasim Ibrahim also shares Alnayir's views with respect to Central Bank interventions in the gold market. "The Central Bank's monopoly of gold purchasing and exportation in order to obtain foreign exchange is the basic factor behind the collapse of the national currency," he charged, adding that "instead of being a boon, gold has turned out to be a doom."

Economists agree upon the need for serious effort to encourage production and upon the need to exclude the Central Bank and all the government companies from dealing in gold. They also agree upon the need to close all smuggling loopholes, control companies' output of gold and restructure this sector in order to guarantee the contribution of this important asset to the macro-economy. This is what the citizens expect from the government's declared economic emergency programme.

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