Significant progress - Agriculture and industry in Sudan

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By David Morgan

Global Arab Network

Thursday, 21 January 2010 16:59

Significant progress was made in leading sectors of the Sudanese economy during 2009. The economy is set to record growth in 2009 but at a lower pace than in 2008 largely as a result of international economic factors, a new report shows.

Bank Audi in its Sudan Economic Report, published in just before the new year, cites figures from the International Monetary Fund showing that real GDP growth will remain positive at 4% in 2009, falling from nearly 7% recorded in the previous year.

The report points to the important impact of factors such as the sluggish global environment and the relative decline in average oil prices as bearing responsibility for negatively impacting on economic growth.

Meanwhile, tight liquidity conditions across the globe, especially in the GCC, have curtailed FDI inflows to Sudan by almost 9% in 2009, according to the IMF.

The performance of the agriculture and farming sector, which accounts for one third of GDP, were adversely hit by drought with the country suffering low rainfall levels, the Bank Audi report points out. Traditionally, Sudan was an overwhelmingly agricultural country but in recent years oil has become a major economic driver. This has transformed the economy of the country and as a result oil dependency has increased.

Nevertheless, agriculture remains a key pillar of the economy, accounting for around 40% of overall GDP, 90% of the country’s non-oil exports and employing around 80% of the Sudanese workforce.

While the sector continues to progress gradually, it still operates below its true productive potential. The country’s land is rich and fertile as it benefits from the proximity of the Blue and White Nile rivers.

In 2009, Sudan’s agricultural sector is forecasted to achieve positive growth, although at a slower pace than in previous years. A growth of 5.4% was projected for the sector by figures released by the Economist Intelligence Unit (EIU), which compared to 7.8% in 2008. Improvements in the sector were impeded by factors such as flooding in several regions and the relative lack of infrastructure. Bank Audi reported that Sudan needed more developed rainwater harvesting schemes to ensure a more reliable access to water as well as improved support services and adoption of more modern technology in the sector.

Sudan’s rich agricultural sector has proved a magnet for investors in particular from other Arab countries. Sudan is increasingly being regarded as highly attractive for cultivation of crops for export by Arab countries seeking regular supplies of staple foods for their growing populations.

As a result both private and public sector investors from countries such as Qatar, Libya, Jordan, the UAE and Saudi Arabia in the Arab world as well as China and Korea elsewhere now hold long term rights to a total of two million feddans of arable land in Sudan, according to figures from the country’s agriculture ministry.

In September 2009, Saudi Arabia, which already had agricultural investments worth $2 billion in north Khartoum, invested in an additional 100,000 feddans of land for agricultural development.

Capital investments in the sector have jumped considerably in the last few years steadily rising from $700 million in 2007 to $2 billion in 2008 and reaching $3bn in 2009. In addition, Sudan is anticipating a further $3.5bn from Arab investors owing to incentives on farmland deals and the absence of restrictions on investment funds.

The year 2009 was most favourable for two cash-generating crops in the country, namely cotton and wheat.

Cotton production was estimated at 200,000 bales in 2009, which amounts to a staggering increase of over 52% on the previous year’s output. As far as the harvested wheat crop is concerned, this was above average owing to an increase in the area planted and favourable weather conditions. Preliminary estimates from the Food and Agriculture Organisation (FAO) indicate a 9% rise in production in 2009.

Sudan took steps to enhance the productivity of the agricultural sector in the past year. In early June the government terminated the monopoly of the state-owned Gum Arabic Company on the production and export of Arabic gum in a bid to liberalise the market and help growers obtain netter prices and increase production. Output had been dropping for the past few years.

Sudan reached some important agreements during the year with foreign companies with a view to investing in the agriculture sector. One was signed between the Kenana Sugar Company and Egypt’s Beltone Financial to set up a $1bn private equity fund management company for agricultural projects. The venture will focus on raising funds for the grand sugar plan and promote high potential initiatives of the National Agricultural Revival Programme.

The second agreement was concluded with Qatar to establish a food and agriculture joint venture, Hassad Sudan, with potential to attract investments of more than $1bn.

Rural infrastructure is poised to receive substantial investment in a bid to improve the performance of the sector. This entails increased spending on research, irrigation, land preservation, improved fertilisers and credit services.

It is envisaged that regardless of other intervening factors, the inflow of investments into the country’s agricultural sector seems destined to continue to rise.

Meanwhile, the country’s sugar industry saw significant investment last year in the form of a deal involving a Chinese company, the China National Machinery Industry Corporation, for the construction of a $160 million sugar factory in the Blue Nile area. New Production

The Sudanese Sugar Company will operate the new facility which will have a production capacity of 125,000 tons. In 2009, the US Department of Commerce estimated the total production of sugar in Sudan as 860,000 metric tons.

Elsewhere new production entered the country through Southern Sudan Beverages Ltd (SSBL), which is a subsidiary of UK brewing company SABMiller. The company launched its first locally produced beer in Sudan, White Bull Lager produced at a $37mn brewery in Juba. Despite this new development, the pace of green investments has much scope for growth.

According to the Bank Audi report, another new commodity to start production in Sudan is ethanol when a plant at Kenana will begin producing 65 million litres a year before expanding to a projected 200 million litres within two years.

Construction

During 2009, activity in the construction sector remained vibrant driven by work geared towards the rehabilitation of infrastructure as well as increased demand for private residential and business property. The construction of roads and investment aimed at developing the country’s power capacity provided a significant stimulus to non-oil sector growth and intra-country trade in 2009 with construction capturing around 5% of country’s GDP.

The largest ongoing infrastructure project in Sudan of the year remained the $2bn Merowe Dam on the Nile, which is funded largely by China, the largest investor in the country’s construction sector. This 67 metre high and 9.2km long dam created a 12 billion cubic meter water reservoir and was in fact inaugurated at the end of March. Upgrading work on Sudan’s two largest dams on the Blue Nile also took place in 2009, activity which is in part funded by a loan from the Saudi Development Fund.

Other major developments in 2009 included a $1.2bn contract with China to upgrade the Khartoum to Port Sudan road; and the construction of a new $1.3bn international airport outside Khartoum, which is aimed at making it one of Africa’s most modern and largest hub airports.

Dynamism in the private property market is also driving construction activity in the country. Construction has been boosted in particular by factors such as reductions in the cost of construction materials worldwide, an influx of competitively priced contractors from China, a surge in land coming available for development, a gradual rise in mortgage financing and an increasing demand from foreigner and international firms present in Sudan for residential properties.
Original source: Global Arab Network
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