Sudanese Rapid Support Forces (RSF) display gold bars seized from a
plane that landed at Khartoum Airport in an investigation into possible
smuggling, in Khartoum Sudan May 9, 2019. PHOTO | REUTERS
Sudan has begun allowing private traders to export gold, a
measure designed to crack down on smuggling and attract foreign
currency into the country’s cash-strapped treasury.
Until
now Sudan’s central bank has been the sole body legally allowed to buy
and export gold and set up centers to buy the metal from small-scale
miners.
Acting central bank governor Badr al-Din Abdel Rahim Ibrahim said on January 1 the bank would end its gold purchases entirely.
Last
week, a little-known private company founded in 2015, al-Fakher, became
the first to take advantage of the new regulations, exporting an
initial 155 kg.
Any added revenue from the new system
would help Sudan’s government cope with severe economic pressure as it
tries to navigate a three-year political transition.
The
government is serving under a military-civilian power-sharing deal
struck after president Omar al-Bashir was ousted last year.
Sudan produced an estimated 93 tons of gold in 2018, Energy and
Mining Minister Adil Ibrahim told Reuters in November, which would make
it Africa’s third biggest producer after South Africa and Ghana,
according to the US Geological Survey.
In new
regulations circulated on January 1, the central bank said private
mining companies could now export up to 70 per cent of their production
provided they deposited proceeds in local banks. They had to sell the
other 30 per cent to the central bank.
The companies
would also have to sell any foreign currency they earned, unless used
for their mining business, directly to the central bank at the official
exchange rate, now 45 Sudanese pounds to the dollar. The black market
rate is 88 pounds to the dollar.
Gold traders in Sudan
welcomed the central bank’s move to open up exports but said the
government-set exchange rate and the requirement to turn production over
to the bank make the trade unattractive.
“We traders
ask to be allowed to export the entire quantity of gold and refuse to
give 30 per cent to the Central Bank of Sudan,” said Mohamed Tabidi, a
prominent jeweller and one of Khartoum’s main gold dealers.
“We
ask that the central bank deal with us according to the market price
and via direct negotiations.” The official exchange rate was
unrealistic, he said.
Smuggling
Before
the new regulations, the central bank bought gold at a discount to the
international price. As a result, an estimated 70-80% of it was smuggled
abroad, according to government officials.
The
smuggling has hurt. The government lost its main source of foreign
exchange when South Sudan seceded from Sudan in 2011, taking most of the
country’s oil with it.
Gold production in the north
began soaring just as oil income fell off, but because so much was
smuggled abroad, the state was deprived of foreign exchange.
The
central bank has been printing Sudanese pounds equivalent to $200
million a month to buy and export gold to finance subsidised
commodities, mainly fuel and wheat, the finance ministry said in a 2020
budget statement last week.
“This has led to the loss
of control of the economy and the transformation of the economy into a
state of explosive inflation and near freefall of the exchange rate in
the parallel market,” it said.
Any company can export
gold under the same conditions al-Fakher followed, finance minister
Ibrahim Elbadawi told the Sudanese News Agency.
One
banker said the new system could ultimately succeed. “If they stick to
it without changing the rules every now and then, and the players are
truly private sector, then yes, it will work.”
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