Sudan gold revenues ‘unaffected by war’

Although the war between the Sudanese army and Rapid Support Forces (RSF) has continued since mid-April of last year, gold exports have allegedly not stopped or been affected by the war. In interviews with Radio Dabanga, one economic analyst called for further regulation of gold exports, while another was sceptical about the reports given the current situation in Sudan. 

At the end of last week, the Sudanese Mineral Resources Company announced a gold export report in the first quarter of this year which generated revenue exceeding $428 million for the Central Bank of Sudan (CBoS).

These revenues did not reduce the rise in the price of the US dollar against the Sudanese pound, which continues to decline without any state control, and have a negative impact on livelihoods.

According to expert and economic analyst Mohamed El Nayer, this is a good thing. “If Sudan continues to export gold at the same rate, CBoS could make over $2 billion by the end of the year,” which will have a positive impact on the exchange rate.

In 2022, gold exports exceeding $2 billion per year made up over 50 per cent of all exports from Sudan. According to the World Gold Council, that year Sudan was the world’s 16^th-largest gold producer and the fourth-largest gold producer in Africa. 

The economic expert pointed out that rationalising imports could also reduce Sudan’s trade deficit. He suggested stopping the import of non-essential goods, “given that the situation does not require importing all goods.” 

State of oil

El Nayer said that gold revenues do not completely replace oil, but they replace a very large part. “The difference is that oil is owned by the state, and most of the companies that are operating oil fields have contracts with the state. Also, the return from oil, whether in foreign cash or budget revenues, is higher than gold.” 

As gold production appeared shortly before the secession of South Sudan, it covered a large part of loss in oil revenues after the country seceded from Sudan. “I believe that it created a kind of balance, but it cannot completely cover what oil was covering, given that oil was being explored through companies with specific contracts and the production was divided between the state and companies.” 

El Nayer went on to talk about the production process. “As 80 per cent of the gold is produced by traditional and domestic mining individuals, the state only benefits from export revenues.” He suggested that controls must be implemented on smuggling, “not only with security measures to protect the borders, an important and urgent issue but with encouraging policies.”

In August 2021, Minister of Finance and Economic Planning Jibril Ibrahim issued a decision to form a steering committee to establish a gold and minerals bourse, chaired by First Undersecretary of the Ministry of Finance. In March that year, the government established state control over gold exports.

El Nayer said that if smuggling is reduced and gold production is controlled, the organised sector would grow and there would be a significant increase in export revenues relative to gold.  

Scepticism

Journalist and economic observer Hasan Mansour questioned the reports and told Radio Dabanga that talking about gold exports, national exports, and their impact on the exchange rate, is pointless while Sudan is experiencing war. 

He said that current reporting lacks accuracy. “Official export statistics are carried out by the Ministry of Foreign Trade and CBoS, and both institutions are not currently working in the de facto government.

“If we assume for the sake of argument that these numbers are correct, then what is currently being exported is nothing more than smuggled national goods. The proceeds will be missing and not included in the state budget.” 

Regarding the impact of exports on the national currency in the decline in the exchange rate, he says that it is an issue of directing resources towards war. “The state is directing all resources to war and buying weapons. Therefore, the demand for foreign exchange remains high or inflexible, and the dollar will continue to rise at a constant rate until the war ends.” 

It will suffer, and “only then will it go through a stage of relative stability for a short period of time until the country returns to its economic activities and thus there will be an abundance of foreign exchange coming to the country and thus its value will decrease against the Sudanese Pound.”

Gold diggers 

A recent UN Expert Panel on Sudan analysis found that “the United Arab Emirates (UAE) aids the RSF receiving gold that sanctioned firms illicitly smuggle out of Sudan, often in partnership with Wagner-affiliated companies, and laundering it, injecting it into the international gold market,” according to an article by John Prendergast published on February 27. 

The report confirmed the existence of complex financial networks established by the RSF before and during the war, which enables them to obtain weapons, pay salaries, finance media campaigns, lobby, and buy the support of political groups and other armed forces. 

Before the war, Sudan was witnessing a significant wave of anti-mining protests. The various protests rallied against gold mining companies, especially against the environmental and health risks posed by the use of highly toxic chemicals such as cyanide and mercury. They took place in Red Sea state, Northern State, Kordofan and Darfur. 

A 2022 report on mercury poisoning in Sudan pointed out that “years of indiscriminate use of dangerous chemicals such as mercury, cyanide, and thiourea without protective measures for miners or local populations, has exposed millions of people across Sudan to lethal risks”. 

Since the war started, Sudanese have had to focus on other urgent problems and environmental activists allege that gold mining companies are exploiting the conflict to expand their operations.