Opportunity In Conflict: Trading in War-Torn Sudan

Courtesy of The Economist, an article on how profiteering from Sudan’s conflict is only part of the story:

Vast swathes of Sudan face famine on a scale the world has not seen in decades. In Port Sudan, where perhaps 250,000 people have fled from the country’s civil war, essentials are scarce and prices are stratospheric. Yet Kinza, a sugary drink similar to Coca-Cola and manufactured in Saudi Arabia, is abundant.

Much of Sudan’s formal economy is in ruins. The war, which pits the Sudanese Armed Forces (SAF) against a paramilitary group from the western region of Darfur known as the Rapid Support Forces (RSF), has devastated the country’s industrial base. The central bank lost most of its reserves when the RSF attacked and looted it, according to Burai Sidig Ali, the bank’s governor. The banking system has mostly ceased to function.

Yet war has also produced business opportunities, as Kinza shows. Locals say that an enterprising trader from Port Sudan struck a deal to import lots more of the drink soon after fighting broke out in Khartoum, the capital, in April 2023, destroying the Coca-Cola bottling factory in north Khartoum. Kinza filled the gap.

“Sudan’s private sector has long been characterised by these strong local networks able to move things around,” says Anette Hoffmann of the Clingendael Institute, a Dutch think-tank. Manufacturers have shifted production to Egypt, the Gulf or India to continue trading back home. Middlemen brave military checkpoints and frontlines. Flour from Egypt still reaches Nyala, a city in South Darfur which fell to the RSF last year. So do some medicines. “We can reach Darfur indirectly via people who are willing to take the risk, or who have a relationship with the RSF,” says one pharmaceuticals manufacturer in Khartoum.

Some traders inside Sudan even continue to export abroad. Locals in Nyala say that each week lorries laden with skins and hides depart for Nigeria. Sudan’s exports to Saudi Arabia, the vast majority of which are livestock, were 77% higher in 2023 than the previous year, according to the Saudi General Authority for Statistics. The South Sudan Chamber of Commerce also reports a sharp increase in cross-border trade.

Yet while some trade helps ordinary Sudanese, much is wartime profiteering. Sudan’s armed factions, including the SAF, are, in effect, competing kleptocracies. Many have long been involved in smuggling. An oil mafia linked to the SAF is reported to be price-gouging consumers in army-controlled areas. The RSF stays afloat partly by smuggling gold to the UAE in exchange for arms. (The UAE denies this.) “It was difficult to control such things in times of peace, let alone in war,” says Mr Ali of the central bank.

That is making a desperate situation worse. The UN says the price of the average food basket has risen by at least 138% since April 2023. More than half the population is on the cusp of starvation. Both the SAF and the RSF restrict the flow of aid into areas outside their control. Yet mobile banking is booming, and some Sudanese companies are using satellites to keep people online. Sending money directly to the needy could prop up Sudan’s remaining fragile markets, says Ms Hoffmann. That could keep people alive.



This entry was posted on Thursday, September 12th, 2024 at 6:05 pm and is filed under Sudan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.