Sudan is experiencing a gold rush and is now the second-largest producer of gold in Africa and the ninth in the world.
However, its production is driven by unregulated, artisanal (individual subsistence) mining: more than 1.5 million men who put their lives at risk to dig for and extract the precious metal.
To much of their dismay, the government in Khartoum is pushing to attract foreign investors and introduce more industrialized methods. The Sudan Democracy First Group (SDFG) announced its report “The Politics of Mining and Trading of Gold in Sudan: Challenges of Corruption and Lack of Transparency”.
The report is part of SDFG’s series of publications on corruption and lack of transparency.
SDFG launched iIs ambitious Sudan Transparency Initiative (STI) in March 2015, an initiative dedicated to the study and documentation of corrupt practices and lack of transparency in Sudan, with the objective of raising awareness and mobilizes citizens to demand accountability.
The report highlights a long overdue need for a concerted, dynamic and interdisciplinary approach to issues and challenges facing the organized industrial and the artisanal gold sectors in Sudan. For such a holistic approach to be sustainable there must be rule of law and democracy.
Politics of Gold
Where there is rule of law and democracy, transparency, effective governance, social justice and environmental justice can follow, ensuring that all stakeholders are engaged in defining and implementing important policies in the mining sector.
The artisanal gold sector employs more than one million poverty-driven miners emerging from an army of uneducated, unemployed, under-privileged men and women from both the periphery and the center. They are the product of marginalization, which is itself a product of a century-old inequitable distribution of national wealth and political power.
The Geological Research Authority of Sudan (GRAS) estimated that every week between 50 and 100 kilograms of extracted gold are sent to Khartoum for black market sale and export. 75% of gold gets smuggled.
This smuggling is being enabled by the inconsistency of policies regulating the sector, monetary policies, corruption and militia control of the gold producing area of Jebel Amir.
Between 2010 and 2014, more than $4.5 billion worth of gold was smuggled from Sudan to the United Arab Emirates, according to the report of the U.N. panel of experts.
The gold industry in Sudan is affected by the legal and institutional framework in Sudan, bureaucratic and political corruption, including embezzlement, cronyism and patronage.
The kleptocratic government and militia are in alliance to appropriate gold resources. Experts and advocates recognize that it is impossible to regulate an industry partially controlled by militia, gold brokers, and speculators who are highly politically influential.
It is estimated that Musa Hilal and his armed followers make $54 million a year from their control of the gold mines. The Achilles’ heel of Sudanese economic, political and social structures is the absence of rule of law, democracy and respect of fundamental human rights.
Hence, macro-economic plans and strategies, legislative reforms, accountability and anti-corruption measures need to be dynamically and tightly connected to this bigger picture.
In other words, the ills of the gold mining sector are part and parcel of the corrupt kleptocratic political system. The EU has irrationally embarked on funding the Rapid Support Forces (RSF) militia via the government to help curb irregular migration from and through Sudan.
The Central Bank declared a new gold purchase policy in 2017, which will reduce its share of the market to 50%, leaving the other half to commercial entities. The health, safety, social and environmental impacts of release of mercury and cyanide as a byproduct of mining and processing gold are serious.
Gold production sites are negatively affecting the already impoverished agro-pastoral areas in which they are found.
Sudan, a gold producer, has taken steps to open up the trade in the precious metal further to private investors, allowing them to handle all exports and taking the business out of state hands. A circular approved bars government bodies from exporting gold and opens the trade to private firms provided they meet requirements, such as paying taxes and royalties.
Sudan has been trying to crack down on gold smuggling and generate more foreign currency. For years, the central bank had a monopoly on exports, buying gold locally at fixed prices at collection sites nationwide, which led to the illegal trade.
Sudan produced an estimated 93 tonnes of gold in 2018, Energy and Mining Minister said in last November, a level that would make it Africa’s third biggest producer after South Africa and Ghana, according to the U.S. Geological Survey.
Regulations approved in January opened gold exports to private companies but limited private mining firms to exporting 70% of their output with the rest to be sold to the central bank.
The exporters were also required to sell all foreign exchange export proceeds to the central bank at the official exchange rate, which was at that time about 45 Sudanese pounds to the dollar, equivalent to about half the black market rate. The official rate has since weakened to 55 pounds to the dollar, while the black market rate has fallen further to 146 pounds.
New Rules for Prosperity
The new rules bar the central bank from buying gold entirely except to increase official reserves, in which case it must be bought from the local market. Sudan, a gold producer, has taken steps to open up the trade in the precious metal further to private investors, allowing them to handle all exports and taking the business out of state’s hands.
Sudan had announced the adoption of a new plan to reform its economy based on imposing controls over smuggling gold.
The plan is based on five pillars, foremost of which is imposing control over gold through the Central Bank which would purchase it for the same prices it is sold in international markets.
Economic expert Mohammad Al-Tayeb said: “The government’s control over gold is a positive measure against smuggling, as well as enhancing the resources of the state.”
“If the government succeeded in controlling trade of gold, citizens would feel the results very quickly, and it would benefit the country more than the benefits of oil before the separation of South Sudan.”
“The Central Bank of Sudan had bought crude gold for an established price, and this led to the illegal trade of gold across the country,” Al-Tayeb explained. Sudan plans to set up a market to trade gold that will set a standard price in line with global rates for the precious metal.
For many years gold has been smuggled out of the country, because better prices were available abroad. This is the latest step in the government’s efforts to regulate an industry which promises to be a major contributor to the economy.
The transitional government in Khartoum has been trying to overcome shortages of imported fuel and flour, with inflation running at 80%.There is an acute shortage of foreign currency and this week the US dollar rose to almost double the official rate of the Sudanese pound on the black market.