The supply chain problems created by a war in Khartoum go well beyond Sudan

Conflict in Sudan between rival military interests is not only impacting the country’s people. It also threatens the country’s fast-growing agriculture sector as well as its natural resources – including oil, gold and gum Arabic. Fizzy drinks and candy manufacturers the world over should be worried.

SPECIAL FEATURE | BIRD AGENCY | Sudan, the world’s largest producer of gum Arabic, is presently embroiled in intense clashes between the military and the country’s main paramilitary force.

Over 70% of the world’s gum Arabic supply comes from the acacia trees of Sudan. There are few substitutes for this essential sap, used to make fizzy drinks, cosmetics, and candy (particularly chewing gum) the world over. The acacia sap (sometimes referred to as golden tears) is widely used in the pharmaceutical industry.

“Right now, it’s impossible to source additional gum Arabic from rural parts of Sudan because of the turmoil and road blockages,” Mohamad Alnoor, who runs Gum Arabic USA, told Reuters.

Sudan’s gum Arabic belt covers about 500,000 square kilometres (193,000 square miles). And according to the country’s central bank figures, it is one of the country’s primary foreign currency earners, with exports totalling 88,000 tonnes in 2021 and earning the country US$110 million in that year.

“For companies like Pepsi and Coke, they can’t exist without having gum Arabic in their formulations,” said Dani Haddad, marketing and development director of Agrigum, a global top-ten supplier, adding that there is no alternative to gum Arabic in fizzy drinks, where it prevents ingredients from separating.

Nearly a month since armed conflict began between rival factions of the military government of Sudan, efforts by the international community to broker a truce in the country have failed.

The two warring armed forces have repeatedly used explosive weapons in urban areas that have claimed over 500 lives, injured thousands, caused property loss, and damaged critical infrastructure.

The ongoing fighting could disrupt the global supply chain and lead to the country’s economic collapse, which is considered among the world’s richest countries in terms of natural resources.

Sudan is Africa’s third-largest country, with a total area of 1,882,000 km2 and over 47 million inhabitants. The country borders Egypt, Eritrea, Ethiopia, South Sudan, Central African Republic, Chad, and Libya and serves as a bridge between North Africa and Central, Southern and Eastern Africa.

The Nile River traverses the country from south to north, providing a crucial water source. The country’s Red Sea coast – over 700 km long – makes Sudan a natural sea bridge between Africa and the Middle East. The country also borders the Sahel region and the Horn of Africa.

An agricultural powerhouse

Besides gum Arabica, Sudan’s vast agricultural potential for grain production has long drawn attention.

In 2022, Sudan was among the countries that recorded the biggest increase in annual grain harvests anywhere in the world, according to a report from the United Nations’ Food and Agriculture Organization (FAO).

The country defied a ravaging drought in East Africa to record an over 50% output rise in grain production – to 7.7 million tonnes.

Based on this potential and to mitigate the impact of Russia’s invasion of Ukraine, the African Development Bank in December 2022 committed nearly US$74 million to boost wheat production in Sudan. The investment would help the country achieve self-sufficiency in wheat production in the short/medium term and become a major exporter in the long term, according to the bank.

The outbreak of hostilities between warring factions of the country’s military means neither ambition is likely to be realised. The conflict also complicates the region’s already fragile food supply chains.

However, with the country’s agricultural growth potential standing at more than five times its current capacity (according to the CTC group), tougher investors may still find their way into the market – with sesame, cotton and horticulture the obvious targets.

Africa’s third-largest gold producer

Sudan is also an increasingly important gold producer, ranking in the top 20 (and, by some estimates, the top 10) of gold producers worldwide. It is the continent’s third-largest gold producer.

Gold production soared after 2011 when South Sudan seceded from the north and took with it most (75%) of the country’s oil deposits. Much of the country’s gold is derived from the Hassai Gold Mine, situated in the northeast of the country, approximately 50 km from Khartoum.

In 2022, Sudan recorded the highest gold production in the country’s history, with more than 18 tons produced. This marked an increase of 1,611 kg over the previously recorded highest production period, in 2019.

Gold is mainly exported to the United Arab Emirates, Italy, and Turkey. However, some 70% of Sudan’s gold production goes unrecorded and is smuggled out of the country, according to the Central Bank of Sudan.

A seven-month investigation by CNN in 2022 disclosed how “Russia is plundering gold in Sudan to boost Putin’s war effort in Ukraine” with the collaboration of Sudanese military rulers.

The investigation showed the extent to which Russia smuggles gold out of Sudan, bypassing the county’s official gold export regulations to strengthen Russian wealth in the face of Western sanctions.

Should the violence continue or intensify, incentives to divert Sudan’s legal gold production will grow further, exacerbating the commingling of conflict gold in legal markets.

Besides gold, the country is richly endowed with natural gas, silver, chromite, manganese, gypsum, mica, zinc, iron, lead, uranium, copper, kaolin, cobalt, granite, nickel, tin, and aluminium, offering significant economic potential.

New investment laws

In 2021, the country legislated new investment laws to help facilitate greater investment from domestic and international sources, increase economic growth, create job opportunities, and exploit natural and human resources.

The investment act was aimed at meeting the needs of the local and regional market, supporting and developing entrepreneurship and creativity, as well as emerging, small, and medium companies.

In 2022, Kuwaiti-owned telecoms company Zain Group earmarked an investment of USD800 million for its Sudanese operations over five years. In November 2022, Saudi Arabia also pledged to invest three billion dollars in Sudan.

“Three billion dollars will be pumped to the Fund’s projects in Sudan followed by other payments, as part of the Saudi Public Investment Fund’s plan, in line with the Kingdom’s ambitious vision 2030,” said Saudi’s Crown Prince Mohammed bin Salman on the sidelines of the UN climate summit COP27 in Egypt.

The Sudanese government was actively seeking new investments to strengthen its economy. However, the ongoing war poses a major obstacle to improving Sudan’s image, which may deter potential investors from participating.

The Oil

Sudan exported $317 million in crude oil exports in 2020. In 2021, its oil fields produced 59,000 barrels per day (bpd). The Sudan Oil Refinery can refine 90-95,000 bpd. The Sudanese government also receives an in-kind royalty payment of 14,000 bpd from the government of South Sudan for oil pipeline transit rights to Port Sudan.

According to the US Energy Information Administration (US EIA), the country has estimated oil reserves of some 5 billion barrels, compared to Angola’s 7.8 billion.

Damage to this oil infrastructure during the conflict would disrupt the oil exports of Chinese, Indian and Malaysian companies in South Sudan that depend entirely on Sudan for access to the global market.

Though South Sudan’s relatively low output means its impact on global oil markets will be limited, 90% of its economy is centred around oil exports.

Tourism

Sudan also has some of Africa’s richest wildlife, birds and natural scenery, centred around the Nile and the desert, which encourages tourism investment.

The Blue Nile and White Nile merge in the capital of Khartoum before the world’s longest river continues its upward journey to Egypt. Sudan has seven nature reserves and a Red Sea marine sanctuary, as well as architectural treasures, including pyramids.

According to National Geographic, the Nubian desert holds more pyramids than Egypt, and the country was home to the Meroe civilisation, which developed an alphabet and appeared extensively in ancient Greek and Roman literature.

Sudan is also one of the countries involved in the ambitious Great Green Wall project – an 8,000 km-long wall of trees stretching across Africa which will ultimately be the largest living structure on the planet. The trees will traverse 21 African countries along the arid Sahel savanna from the Atlantic Ocean to the Indian Ocean.

The two warring generals sent their envoys on Friday, May 5, to Saudi Arabia’s coastal city of Jeddah for talks to firm up a shaky cease-fire. The US and Saudi Arabia are sponsoring negotiations between two sides who have not met since the outbreak of clashes.

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SOURCE: bird story agency