Op-ed Sudan: Hidden economic stakes in ongoing power struggle

In deposing their boss, former President Omar Al Bashir, Sudan’s top generals seemed to bend to the will of a massive, nationwide uprising this spring. Yet strategies by the old guard to retain control over a hijacked economy continue to stymie both the hopes for political transformation and prospects for an economic revival that have brought millions into the streets, says Dr Suliman Baldo, Senior Policy Advisor at the Enough Project:

On Monday June 3rd, the Transitional Military Council (TMC), which installed itself in Bashir’s place, sent security forces to break up a 10 week sit-in of peaceful protesters demanding the handing over of power to the leadership of the protests, the Declaration of Freedom and Change Forces (FCF). In the weeks that followed, the TMC reneged on earlier draft agreements to transfer power to a civilian transitional government that would pave Sudan’s path to democratic election three years down the road.

Having rid itself of the daily pressures that the sit-in represented, the TMC frantically attempted to build a political constituency to legitimize its power grab. The TMC relied on the crowd appeal of tribal and Sufi sect Sheikhs, and the overwhelming intimidating military presence in urban hotbeds of protests.

To occupy the information space, the TMC imposed a total Internet blackout, while it used the state-owned mass media and the omnipresent media machines originally built by Bashir to blanket the space with propaganda promoting its leaders and disparaging the leaders of the civilian protest movement. However, the June 30th “million person marches” that took place throughout Sudan in response to FCF’s calls halted the TMC’s power grab, and forced a power-sharing agreement in which the military holds equal representation in a Sovereign Transitional Council with the FCF, while the latter retains control over the formation of a civilian cabinet and a transitional legislature.

The TMC appears bent on retaining power at any cost, evidenced by more than 140 civilians reportedly killed and hundreds more wounded at the hands of military and security forces in the course of June alone. Moreover, the TMC has played on the economic and security interests of the regional powers to garner the backing of Saudi Arabia, the United Arab Emirates, and Egypt.

Decades of Corruption, Squandered Wealth

During the oil decade, from 1999 to 2011, Bashir’s regime controlled much of Sudan’s considerable revenues from the windfall of petrodollars, estimated at $75 billion. Starting in 2011, when South Sudan opted for independence and took away 75 percent of the oil, the regime took control of newly discovered artisanal gold reserves. However, rather than using this national resource wealth to deliver development goods to the population and build the foundations for sustainable economic growth by modernizing Sudan’s physical infrastructure and its traditional productive sectors of agriculture and transportation, al-Bashir’s regime squandered the revenues from both resources. The regime spent without reserve on an elaborate patronage system to maintain its grip on power, while allowing Sudan’s oil and gold sectors to fall into disrepair. Much of what remained of Sudan’s wealth also ended up in the private pockets of those in the inner circle of power, their families and their business partners, as documented in a recent Enough Project report.

The biggest beneficiaries of this diversion of wealth have been the security and defense sectors and the National Congress Party (NCP), which was until recently the ruling party and is essentially a front for the Muslim Brotherhood movement. During Bashir’s rule, upwards of 70 percent of government expenses were consistently dedicated to the defense and security sector, while all of the public education, health, agriculture, industry, and trade sectors received less than 10 percent of the budgetary expenses for their operation and growth. The documented collapse of these sectors is evident for all to see. During this period, the Sudan Armed Forces (SAF), Rapid Support Forces (RSF), National Intelligence and Security Service (NISS), and the national police force were empowered to develop elaborate corporate holdings, mostly registered under private companies law. As a result, these supposedly public corporate entities benefited from privileged access to state import and export contracts but were allowed to keep much of their revenue off the government’s budget.

Bashir’s regime deliberately obliterated or ignored surviving remnants of the systems of oversight over state resources, making systemic corruption the rule rather than the exception. What was initially meant to finance the Muslim Brotherhood’s grandiose scheme of exporting their version of political Islam to the world ended up feeding massive corruption. This meant that Sudan was one of the 10 most corrupt countries for many years in a row, according to multiple global grading systems. The only beneficiaries of the system, in addition to those managing the security sector companies, were the regime’s top officials, their family members and business associates; they became scandalously enriched while a majority of Sudanese were condemned to destitution. Millions in Sudan continue to survive on the largesse of international humanitarian assistance today or the remittances of family members who had to migrate to seek a decent living.

A Charm Offensive

Since its takeover on April 11, the TMC has been attempting to gain legitimacy by making token concessions to protester demands for an end to the endemic corruption — a main driver of the uprising. Nevertheless, the much-touted anti-corruption drive is clearly very limited, sparing many of Sudan’s best-known kleptocrats and, above all, attempting to protect the economic empire that the security sector has always ruled without civilian oversight.

The $3 billion that Saudi Arabia and the United Arab Emirates pledged to assist the TMC in addressing the economic crisis will only provide temporary relief. The TMC is deluding itself in believing that it could rely on such short-term infusions indefinitely while it presided over ruining what remains of Sudan’s productive capacity.

The TMC started its charm offensive by throwing the NCP, already weakened by years of Bashir’s manipulations, under the bus. After freezing out the NCP, the TMC made public a preliminary list of the NCP’s assets. According to media reports, NCP assets have an estimated value of a whopping $31 billion and include a fleet of 5,000 cars, 3,000 companies exempted from tax and customs duties, 1,500 real estate holdings, and a headquarters office built at a cost of $50 million — not counting cash seized and the deposits in the NCP’s accounts.

On May 9, authorities reported foiling an attempt to smuggle large quantities of gold bars out of the country’s River Nile state on a helicopter. The seizure was made by the RSF, which was initially composed of former Janjaweed militiamen. They were first integrated in 2013 under the operational command of Sudan’s NISS and later integrated into the army, in 2015, and in both cases they formed a direct line of command to Bashir.

The sudden implosion of Bashir’s regime revealed that many top former officials and members of their families were hoarding cash in their homes and local bank accounts. When Bashir was deposed on April 11, authorities found nearly 6 million euros ($6.7 million), $351,000 in U.S. dollars, and 5 million Sudanese pounds ($150,000), all in cash, at his official residence. On April 20, the Office of the Public Prosecutor initiated an investigation of the deposed president on charges of money laundering, possession of large sums of hard currency without legal ground, and terrorism financing. The president also had access to 143 million Sudanese pounds and 315 million Saudi riyals in an off-budget local bank account.

One would be seriously misled, however, if they took it for granted that any of these steps mean that an era of transparency and anti-corruption fervor has dawned in Sudan before the civilians whose protests have toppled Bashir are able to take matters in their own hands.

“Gold we control”

On April 24, General Mohamed Hamdan Dagalo, aka “Hemedti”, commander of the RSF and now TMC deputy chairman, declared in a press conference that he was donating $1.03 billion to the Central Bank of Sudan and the Ministry of Finance and National Economy. The money came, he explained, from the “salaries of our soldiers and from gold mining operations we run.” The gesture and public statement were a clear admission that the salaries of RSF fighters deployed in the war in Yemen are kept in off-budget accounts that are controlled neither by the government’s finance ministry nor its central bank. These forces are fighting in support of the Saudi-led war effort there against the pro-Iranian Houthi rebels and are being paid by the Saudis and Emiratis.

Similarly, Dagalo’s reference to “gold we control” offered a stark reminder of the general’s ownership — together with his brother, the deputy commander of the RSF — of the Al-Junaid Group of Companies. This family business has rapidly expanded in recent years, from running modest trading activities to managing subsidiaries in the iron and steel, transport, construction, engineering, media, and tourism sectors. The group’s gold and minerals exploration company appears to be growing its business, with new mining licenses granted to it by the former regime for activity throughout Sudan.

Countering Kleptocracy

The TMC’s insistence on retaining real power during the transition appears to be largely motivated by the desire of the commanders to preserve the tremendous economic power that the regime they protected had granted the defense and security sector and its top commanders over the past three decades.

The TMC must hand over power to the civilians primarily because this is what the people of Sudan want and what they have sacrificed their lives for. A rapid transfer of power to civilians could bring to a decisive end some of the most damaging corrupt structures that have crippled the economy of Sudan. The kleptocratic status quo, left unchecked if the power grab by the military and the security establishment is allowed to prevail, will continually undermine the country’s prospects for stabilization and growth.

Sudan’s civilian transitional authorities should know that there will be no healing of the country’s economy as long as the security sector continues to enjoy total autonomy in managing its massive business interests. It was empowered with this level of control away from the oversight of the Ministry of Finance and the independent audit chamber under Bashir’s regime.

The large seizures of foreign cash from private homes and obscure offices and the aborted attempt to smuggle a load of gold via helicopter out of the country, coupled with Sudan’s weak enforcement of its own anti-money laundering laws and high-level government corruption, should prompt the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to issue an anti-money laundering advisory warning banks about the risks of capital flight from regime elites who seek to squirrel away out of Sudan the proceeds of their decades of corruption. Top former regime officials implicated in grand corruption, many of whom also oversaw or directed mass violations of human rights such as the June killings of protesters, must be sanctioned under the Treasury Department’s Global Magnitsky sanctions authority.

Future international development assistance and private investments should be made contingent on Sudan’s implementation of the best internationally recognized standards for transparency and accountability in the management of public funds. Under current conditions, the dominant economic entities and activities of the defense and security sector would fail any such test. The sector should not be allowed to continue denying the Sudanese people the benefit of their national wealth by concentrating it in the hands that are controlling this hidden economy.