Sudan aiming to sweeten its economy by boosting sugar exports

By Ulf Laessing  /  Reuters, NEAR SOFIYA, Sudan

Sun, May 26, 2013 - Page 14

In a hangar-shaped factory hall in central Sudan, a dozen workers rush to pack refined white sugar gushing from a funnel into paper bags to be loaded on three trucks parked outside.

Next year, the management at Kenana Sugar Co hopes the plant will be even busier as the African country seeks to increase sugar exports.

Faced with the loss of most of its oil production after South Sudan seceded in 2011, Sudan has been scrambling to find new sources for state revenue and US dollars to pay for imports. Developing its sugar industry is a priority, along with searching for gold.

“There is plenty of land suitable for sugar cultivation and also the water is plenty,” said El Zein Mohammed Doush, head of the sugar business unit at Kenana’s main plant 270km south of the country’s capital, Khartoum.

Boosting sugar production also has political undertones. The sweetener is the most important food ingredient in a country where it is normal to put three spoonfuls in a small glass of tea or orange juice.

The price of sugar is such a sensitive issue in Sudan that it can spark revolutions. A huge spike was one reason for protests that led to the toppling of former Sudanese president Jaafar Nimeiri in 1985.

Thanks to a capital injection of US$500 million from its main Gulf owners, Saudi Arabia and Kuwait, Kenana wants to more than double its output to 1 million tonnes in 2015. Its affiliate, White Nile Sugar Co, is aiming to produce 250,000 tonnes from next year.

That would help cover domestic demand of 1.2 million tonnes and leave room for more exports. Currently, plants produce between 600,000 and 700,000 tonnes in total annually, analysts estimate. By next year, output could reach between 900,000 and 1 million tonnes.

Sudan, one of the biggest African sugar producers after Egypt and South Africa, hopes to become a global player by 2020 competing with world leaders such as Brazil.

In all, Sudan wants to produce 10 million tonnes by 2020 as more plants will go online by then, Doush said. Kenana is already planning two more factories, while the Sudanese government has put up for sale four state-owned plants which need modernization. Under a deal with Kenana’s Gulf investors, the company is allowed to export up to half of its output, which goes to Africa, the Gulf and Europe.

To diversify its products, Kenana also plans to more than triple the output of biofuels, a byproduct of sugar production, to 200 million liters by 2015.

“Ninety percent of our ethanol goes to the European Union, France, Holland,” said Ahmed Rabih, head of Kentana’s ethanol business unit.

Sudan has been in turmoil since the loss of its oil, but its economic situation is expected to improve after South Sudan resumes exporting crude through its facilities.

The IMF has urged Sudan to use the US$2 billion Khartoum expects to make from pipeline fees from South Sudan until 2015 to reform the agricultural sector to boost non-oil exports.

Unlike other Arab countries made up mostly of desert, Sudan is a prime location for food production due to its vast fertile scrubland and easy access to the Nile River.

However, analysts say the sector has been as badly managed as the rest of the country, which is widely associated with ethnic wars, corruption and coups.

Yet the sugar sector is in better shape than others as it enjoys various subsidies and the main plants are run by Kenana, which is kept flush with Gulf money.

Despite this, Mohammed al-Jak, an economics professor at the University of Khartoum, said the firm’s 2020 target of 10 million tonnes of output was unrealistic.

“I think a lack of funding and infrastructure will be big obstacles for even to reach half of this goal,” he said.

The expansion plans also come at a time of an economic downturn coupled with global excess supplies. Raw sugar benchmark futures trade about US$0.168 per pound (0.45kg), less than half their peak price reached two years ago.

Harry Verhoeven, an expert on the Sudanese economy at the UK’s Oxford University, said Kenana was posting a profit and was one of the most sophisticated firms in Sudan, but remained a long way from becoming a global player.

He said the Sudanese government was undermining the sector’s efficiency by controlling the main sugar firms, shielding them from competition and pampering them with subsidies.

Analysts say the market gets distorted because the government is guaranteeing the firms a sugar price almost double their production costs, which opens the door for corruption.

In addition, though Kenana says it has hired 4,000 unskilled workers who get free medical care, critics say the sugar industry makes big profits while the mostly poor Sudanese benefit little from it.