Sudan in state of emergency

Sudan in state of emergency

A series of ongoing uprisings are threatening to bring an end to Sudan’s President, Omar Hassan al-Bashir’s, thirty-year rule. The declaration of a state of emergency, on Friday 22nd February, has increased the powers of the security service, further fuelling heightened political tensions, economic problems, and insecurity in the region.

Meanwhile, the crisis presents a significant opportunity for regional powers vying for influence in Sudan. This developing political crisis will determine whether Sudan is on the brink of collapse, or whether it is a high-risk high return climate for potential investors.

Sudan’s current situation

Simmering political tensions and a declining economic climate has engulfed Sudan in a political crisis. The Government’s failure to address rising living costs, wheat and fuel shortages, and rampant inflation have fuelled a series of widespread protests. Bashir’s decision to declare a year-long state of emergency and the subsequent firing of live ammunition at protestors by security forces has highlighted the scale of threat the protests pose to his three-decade rule.

Although previous challenges have been likened to a Sudanese Arab Spring, Bashir’s decision to dissolve central and regional governments has been viewed as a power play to retain power amidst the upcoming 2020 elections. In 2013, Bashir pledged not to run for the 2015 elections following protests but then reneged. The role of Sudan’s security service in suppressing opposition is a recurring trend which has continued to destabilise the region.

Snapshot of the Sudanese economy

The country needs to attract diversified foreign direct investment if it is to recover from the 2011 succession of South Sudan. This divide saw Sudan losing 75% of its oil reserves. Two decades of US economic and trade sanctions have increased the country’s debt and inflation. Despite sanctions being lifted in 2017, its inflation rate is among the highest in the world’s at nearly 70% in September 2018. Furthermore, Washington’s attribution of Sudan as a state sponsor of terrorism has further deterred foreign entities and banks from investing.

Increasing inflation and a declining currency mean that the economic crisis is likely to further intensify opposition, as macroeconomic challenges continue to restrict household purchasing power. The 46.5% rate of poverty, is characterised with geographical and gender-based disparities. This may be due to the development and economic resources being concentrated in urban areas where political power is located, such as Khartoum, River Nile and Gezira. Poverty among families headed by women is reported to be estimated at 35%, compared to 29% in male-headed homes. Widespread food insecurity, increased food prices and transport costs have further inflamed simmering political tensions in the region.

Significant investment remains to be seen, despite increasing interest in mining opportunities and an unprecedented interest from the public and private sector in Sudan’s untapped gold deposits. The recent uprisings combined with the possibility of Bashir remaining in power is likely to reinforce the climate of instability in the region. This increasingly volatile political environment and fragile economic situation are likely to undermine investor confidence over the short to medium term.

Why this political crisis is different

The Sudanese Professionals Association (SPA), is the group currently leading protests calling on Bashir to step down. Although it has no organisational structure, it has scheduled a series of protests posing a challenge to his rule. What distinguishes the recent uprisings are the varied demographic involved with the SPA, including youth movements, civil society organisations, farmers’ unions and university professors. This is unsurprising, given the economic crisis is affecting the middle classes as fuel, wheat and cash shortages contribute to inflation reaching 70%. The regime uses an extensive patronage system to maintain power over the middle class.

The most intense protests occurring in the wealthier areas of Bashir’s strongholds in a significant and potent new development. Since independence in 1956, Bashir has depended on the National Intelligence and Security Service for support of his regime. It has become an integral mechanism for Bashir’s ruling party. However, the recent protests have received a lack of direct support from his power base. Instead, the focus has been redirected to preserving the nation’s security and ‘achievements’, rather than Bashir’s regime. Furthermore, the ‘Rapid Support Force’ created to protect Bashir’s regime appears to be taking a neutral position.

This suggests a shift of allegiance, as the fragmentations and divisions within the apparatus Bashir has used to uphold and legitimise his regime, is tested with widespread opposition. The threat these divisions pose is reflected in Bashir’s response to the protests, as a series of decrees introducing a ten-year jail term for illegal trade in fuel, wheat, foreign currency and gold is the latest in a crackdown. This has increased the probability of more rebelling and has revealed the fragility of the Government’s power as it struggles to maintain control.

It is unlikely the collapse of the regime will result in immediate political and economic stability for the region in the short term, but as the geopolitical climate stabilises it could offer investors a risky but high return investment. If this situation were to occur, Sudan has a strong potential to become a lucrative investment opportunity as it forges the road to stability, particularly given its untapped gold and mining resources. However, it is likely in the event of a collapse, that there could be a military takeover before any opposing forces attempt to stabilise the country. It remains to be seen which players will emerge. However, the key obstacle will be whether they are able to implement the extensive reforms required to stabilise the country.

The Gateway to Africa: Regional powers, dependency, and opportunism

The unfolding political crisis provides a significant opportunity for regional powers vying for influence in Sudan. It has a  relationship of dependency on the Gulf states. They have been a source of funding for Sudan after its loss of three-quarters of oil in 2011 and have supported the regime. This has proved to be a mutually geopolitically beneficial foreign policy ploy. In return, any political challenges to Sudan’s regime remain contained and regional players remain in a position where they are likely to have unfettered access to resources when the country stabilises.

Sudan’s untapped resources in agriculture and cotton, combined with its strategic geographical position, consolidate its position as the gateway to Africa and makes it a crucial asset for investors. This is particularly the case for international powers hoping to gain access to the continent’s resources, such as China and Russia. However, the volatile political climate makes it a high-risk environment for investment.

Regional interest in Sudan is also motivated by desires to maintain the status quo. Example, Qatar, Kenya, South Sudan, Turkey and Egypt reiterated their support for the President. The lessons of the Arab Spring have not been forgotten, and the alternative does not prove favourable with regional powers. In order to prevent a repetition, international support by surrounding powers to contain the crisis appears to be a key priority.

Sudan risk outlook: A high-risk high return climate?

Sudan provides a unique investment opportunity, its resources are mainly untouched and promise to offer lucrative returns. However, Sudan’s current political insecurity continues to destabilise the region whilst opposition remains fragmented. If the uprisings continue to expand, a wider demographic continue to participate and take advantage of internal divisions, there is a realistic possibility that the current political structures could collapse from within. Although in the past regional powers have funded Bashir, support so far has remained verbal with no concrete investment.

With continuing levels of food insecurity and lack of investment in infrastructure, it is highly likely the economy will remain destabilised in the short to medium term and it is unlikely foreign entities will significantly invest. Sudan is experiencing a structural economic crisis and has an unsustainable amount of external debt. Momentous reforms will be needed to overcome its economic challenges. It is unlikely that the impact of these will be felt in the short term. It is more likely that the implications of any significant changes will be felt in the medium to long term, as the country stabilises.

If the current uprisings succeed in deposing the existing regime, it will take time for the region to stabilise. However, this in itself provides a unique opportunity for investors as Sudan will need significant infrastructure expansion. The current political state of Sudan and its abundance of resources in gold, oil, cotton, agriculture and mining, makes it a high-risk climate offering high returns.

About Author

Hadeeka Taj

Hadeeka Taj is a recent History graduate from the University of Southampton specialising in the British Empire in Africa. In addition to her specialism, she has covered conflict and transformation in Asia focusing on South Asia and China. Her research specialities include political risk and security in sub-Saharan Africa, British foreign policy, international and European politics. She also has an interest in geopolitical risk in MENA. Hadeeka is passionate about making a change, having been a Student Trustee and Company Director, Youth Parliament MYP, political campaigner and has chaired a range of topical debates in her role as President of the Debating Union whilst at university.