The Sudan for Sale

By EWI BLOG | by: Rachel Ehrenfeld
Monday, March 25th, 2013 @ 7:37AM

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Sudan is multifaceted and complicated. It involves everything from the changing geopolitics of the Middle East and Africa — to energy and water sources, Egypt and the Sahel, control over arable land and food resources –with growing Chinese involvement; the Sunni/Shi’a (Saudi/Iranian) conflict; the arming of Hamas in Gaza, and al Qaeda and its affiliates in the Sinai peninsula and Syria; worldwide support for terrorism, and just about every human rights violation you could imagine.

As part of our study of “land grabs” in Sudan and elsewhere, we have earlier published the first part of ACD Senior Fellow J. Millard Burr’s own assessment.

In his study, Burr points out, In the late 1990s, Sudan’s agricultural potential also attracted the attention of American investor George Soros… Soros would fall in and out of love with the Sudan’s Bashir government, and thus his subsequent involvement in the nation’s agricultural development is unclear.” (see below)

Burr’s second part (below) helps to better understand Sudan’s potential trouble making elements in what is already a vast, unstable neighborhood. Look at the map (above) and read:

THE SUDAN FOR SALE

By J. Millard Burr

A recent Economic Warfare Blog noted that in April 2012 Saleh Abdullah Kamel, head of the very powerful and privately-owned Dallah al Baraka Group of Saudi Arabia and an investor with a notorious past, announced that the Government of the Sudan had agreed to “give” Saudi Arabia two million acres of land in its eastern region in an area “close to Port Sudan.” (Khartoum, Sudan news reports, 9 April 2012.)

The Kamel investment is part of a continuing effort to lease or purchase Sudanese land, a phenomenon reviewed in Summer 2012 by a tripartite UN Food and Agriculture Organization/International Institute for Environment and Development/International Fund for Agricultural Development task force. The African News Agency headlined that the study highlighted the five African nations hardest hit by the land grab,” (Pana, Paris, 31 August 2012). It named Ghana, Ethiopia, Madagascar, Mali and Sudan as the most affected, and noted that nearly 2.5 million hectares of land in the five countries had recently been “sold” to foreign investors. With regard to Sudan, it had already leased long-term “nearly 1.5 million hectares of agricultural land to the Arab states of the Gulf, Egypt and Korea Republic.”

The amount of Sudanese agricultural farmland (potential and actual) purchased or leased by foreigners is actually understated.  And the transactions are supported by the Islamist military dictatorship of Omal al-Bashir and Sudan’s Islamist investors with a long history of involvement in the Muslim Brotherhood.

Bashir’s political opposition strenuously opposes the government’s agricultural policies.  It argues that what is happening in the Sudan is part of a pattern of Gulf-Arab (Qatar, Abu Dhabi, Saudi Arabia, Kuwait) and neo-colonial “land grabs” that is occurring not only in Sudan but throughout Africa. Regarding Sheikh Kamel’s projected return on investment in Sudan, “will reach 15% of the capital in the first year, a return that is more than good and better than investing in any another business sector.”

His project area in East Sudan allows products to be easily transported by road to Port Sudan and then shipped to Saudi Arabia’s Red Sea ports. The project was justified as a response to the pressing Saudi need to provide its growing population a guaranteed source of basic commodities such as wheat, rice, and sugar. Sheikh Kamel, whose net worth has been estimated at some $5 billion, noted that once completed the Sudan project would provide Saudi Arabia a continuous and dependable source of food.

Kamel’s investment is secure because it is backed by the Saudi Industrial Development Fund (SIDF), a government entity that offers credit guarantees to companies that invest in foreign agricultural projects. (Sudan Tribune, 10 April 2012.)

Just how the Sudan will directly benefit from the project is not at all clear, but the government claims that agricultural exports will make up somewhat for the petroleum resources lost to Khartoum with the creation in 2012 of the breakaway South Sudan Republic.  (Before the breakaway oil accounted for 90% of Sudan’s exports: exports are now greatly diminished.)

EARLY DEVELOPMENTS IN THE SUDAN – THE GEZIRA

Kamel is hardly the first plunger to see fabulous possibilities in the Sudan’s unused eastern desert lands.  Following its occupation, the United Kingdom initiated agricultural development in 1904 with the founding of the Department of Agriculture Shambat Research Farm near Khartoum. It experimented with long-staple cotton cultivation, and in 1918 introduced a pilot irrigation scheme southeast of Khartoum near Wad Medani. The success of that program led to the continued expansion in both that and adjacent Gezira project area.

The Gezira is the oldest of all the Sudan’s major agricultural schemes. It began in 1925 as a half-million-acre cotton project located between the Blue and White Nile south of Khartoum. Backed by the Anglo-Egyptian Sudan’s colonial government, farmers were given usufruct right to land in five-acre plots. They were to receive an annual stipend, and in return the government would receive a percentage of the crop produced. Essential to the Gezira scheme was a dam constructed at Sennar, upstream on the Blue Nile. In 1962 the Managel, a southwestern extension comprising an additional 500,000 acres contiguous to the Gezira, was initiated.

Although the Gezira farm payment system ceased more than forty years ago the government still demands half the crop produced–which now includes sorghum, sesame, peanuts, wheat and vegetables as well as cotton.  Given the government’s usual malign neglect combined with a cumbersome bureaucracy, it is not surprising that despite some modernization over the last two decades crop production has not improved significantly in that huge region.

Over the years farmers have suffered in silence and endured government neglect. However, that changed in 2005 when the Bashir government introduced a law nationalizing ownership of land in the Gezira. In return, the government promised it would compensate famers for land nationalized. However, when the government put its sequestration plan to the test at mid-year 2011, hundreds of dissatisfied farmers battled police at the headquarters of the Gezira scheme.

Demonstrating against what they argued was an unfair price offered for their land, they marched on the Governor of Gezira’s office. They were beaten back by police who used their batons with gusto to beat back the protestors. While the farmers were protesting the Sudan media was reporting that the Sudanese economic basket case was “desperately seeking foreign investment for its agricultural sector to boost output and offset the expected decline in oil revenues.”

INVESTORS FROM TINY ROWLAND TO GEORGE SOROS

In the 1970s, the plethora of petrodollars led the Saudi Arabia royal family and Saudi investors like Adnan Khashoggi to take an interest in Sudanese agricultural potential. Although the Saudis soon beat a retreat, Khashoggi’s friend Roland “Tiny” Rowland, the Anglo-African plunger nonpareil, in 1975 used his Lonhro Corporation to create what is now the 100,000-acre Kenana development 150 miles south of Khartoum. Centered at Rabak on the White Nile, the $1 billion project, which was finally undertaken after five years of negotiations, would benefit from a continuous Nile River water supply. Then and now, it was one of the world’s largest sugar projects.

After decades of corporate turbulence, Rowland lost control of Lonhro in 1994. Still, when he died in 1998 he was accounted, like his friend Khashoggi, one of the world’s richest men. Though he tried to recoup his losses, he was never again the African powerhouse he had been.

Osama Bin Laden, yet another Saudi investor, was also granted special privileges in the Sudan. In the early 1990s, his Al-Thimar al-Mubaraka Agriculture Company was granted a million acre concession in the Gash River Delta region of eastern Sudan. That project resulted in the eviction of thousands of ethnic Hadendowa and caused nothing but trouble before Bin Laden departed the Sudan in April 1996. It is believed that it is this region, which has been leased to Saudi Arabian interests.

In the late 1990s, Sudan’s agricultural potential also attracted the attention of American investor George Soros. In 1998, the business press focused on the “George Soros-backed Blakeney Management” and its interest in Lonhro and its subsidiary Lonhro Africa. Blakeney Management called itself “one of the oldest and largest institutional investors in Africa and the Middle East,” and it managed investments “for some of the largest institutions in the world.”

Blakeney, founded in 1990, seemed determined to become the new Lonhro. It began by taking a minority stake in African Lakes, a trading company of which the Soros Fund Management reportedly owned 13%, and the Soros Quantum Emerging Growth Fund also was said to have a stake. (“Bid for Lonhro Africa looks increasingly likely,” The Independent, London, 9 June 1998.)  In 1999 the Greenway Partners of New York, a management firm associated with Soros, reportedly purchased at least 4 percent of Lonhro Africa, and Soros’s own Plantation and General Group was involved in an effort to buy Lonhro Africa.

The reason for such interest in agriculture was becoming obvious. According to UN data, in 1960 there were 1.1 acres of arable farmland per capita globally; by 2000 that had fallen to 0.6 acre. How people will be fed is the billion dollar question because over the next 40 years the population of the world is projected to grow from 6 to 9 billion.

Soros would fall in and out of love with the Sudan’s Bashir government, and thus his subsequent involvement in the nation’s agricultural development is unclear. What is clear, however, is that Soros, like other powerful investors anticipates a world-wide food scarcity; thus, they have been buying farmland from the Ukraine to the U.S., and from the Sudan to Brazil. The Soros involvement in Africa today is unclear, but international interest in the Sudan and its agricultural potential has hardly abated.

KENANA SUGAR AND THE HONG KONG PLAY

In 2008, the Sudanese Ministry of Agriculture and Forestry announced it would spend the equivalent of $1.5 billion to implement a massive program to develop the agricultural sector. Emphasis would be placed on “harvesting water resources,” and farmland irrigation. It then jump-started a 2008-2011 program to attract $5 billion in investments to stimulate the nation’s “agricultural revitalization.” (“Sudan spends $1.5 billion to develop agriculture,” Sudan Tribune, October 4, 2008.)  “Revitalization” was an apt expression because the nation’s agriculture had long been underutilized. (UNFAO had already estimated there are 105 million hectares of land suitable for cultivation in Sudan, but land cultivated accounted to less than 7% of that total.)

The Sudan Ministry of Agriculture next announced that Kuwait, the UAE, Jordan and Sandi Arabia had recently signed (unpublished) contracts with Sudan. And among recent developments, in March 2012 the Kenana company–located in White Nile state and Sudan’s biggest sugar company with $600 million in annual revenue–announced a spate of new developments.

The Kenana, which was created in the 1970s by the Lonhro organization and its dynamo Tiny Rowland, began life in a decade characterized by Gulf nation interest in the unused lands of eastern Sudan. However, although many plans were laid, few came to fruition. This time, it was reported that the Kenana’s substantial cost would be financed by an Initial Public Offering (IPO) on the Hong Kong stock exchange.

The company expected to raise $200 million to be used to double Kenana’s sugar output to more than a million tons per annum. Should the plan succeed, it would both fulfill domestic need and an excess would be exported. It would also fill the pockets of the Kenana majority ownership, which is today reportedly in the hands of Kuwaiti and Saudi Arabian investors who are joined by a cabal of wealthy Sudanese who are reportedly members of the Muslim Brotherhood.

In November 2012 the huge Kenana Sugar Company was pumping the investment in “three primary projects,” including a 250,000-acre expansion that could be used for cultivation of “basic food crops.” To achieve that end, Kenana announced that it was poised to launch a new billion-dollar fund, the Agricultural Investment Fund (acronym, MAHASEEL) to be partnered with CIFG. (“CIFG, Kenana launch giant agricultural investment fund at regional level,” Sudan Vision Daily, 22 November 2012.).

The Fund foresees the production, marketing and management of basic crops, and the creation of a factory to produce both sugar and ethanol. The project, as proposed, has an incredibly ambitious Target Minimum Profit Rate of 25 percent per annum. It only has to be concerned with a ponderous bureaucracy and an omnipresent military and civilian kleptocracy. CIFG is a financial guaranty insurance company and subsidiary of CNCE, a part of France’s Groupe Caisse d’Eparge, whose operation and administration is multinational in character. Investments are to be made not only in the Sudan’s agricultural sector but elsewhere in the Middle East and North Africa. Customarilly, the MAHASEEL Fund does not participate unless it controls at least 51 percent of companies in which it invests.

HONG KONG, CHINA, SOUTH AFRICA, FRANCE

Hong Kong was a logical exchange for an IPO given Chinese interest in agricultural production. In 2008 China announced it would invest $5 billion in agriculture in Africa alone.  Since then, China has moved expeditiously to implement the plan, arguing that its investments are necessary given that China has only 7% of the world’s arable land but 20% of the world’s population. Among its investments, the powerful China National Complete Plant Import and Export Corporation (Complant) holds a stake in the construction of the Redais project in Sennar state, eastern Sudan.  The development is projected to produce 500,000 tons of raw sugar beginning in 2014.

In 2012 the Sudan Ministry of Agriculture announced that it had supervised an agreement involving the Al Fao Farmers Council of eastern Sudan and the Chinese Center for Transfer of Agricultural Technologies in Sudan. The plan involved the cultivation of “genetically engineered Chinese cotton in Al Rahad Agricultural Scheme.” Development would occur in both the historic Gadarif scheme located between the Blue and White Nile rivers and other undisclosed locations in eastern Sudan.

In early 2012 Khartoum media reported that the White Nile Sugar Company’s Kenana project would be expanded by 9,000 acres. In search of capital, White Nile Sugar was reported to be in talks with Ilovo, the largest sugar producer in South Africa (and which in 1997 purchased Lonhro’s south African holdings).

THE SUDAN PROJECT AND THE EGYPTIAN WILD CARD

What is left unsaid for the present is what did Sheikh Kamel and other international plunders do to deserve such a handsome gift? How does the Sudan really benefit from this project? And why would Khartoum relinquish sovereignty to such a large landholding? Has Saudi Arabia played the oil card, offering somehow to make up Khartoum’s loss of revenue that occurred following the creation of the South Sudan? And why would Saudi Arabia approve an investment in a country where it has had mostly an antagonistic relationship since the military junta seized power in 1989? Is it perhaps an effort to further isolate Iran, and reduce its long-standing influence in the Sudan?

As for China, it has invested in Sudan’s petroleum industry for nearly twenty years and knows perfectly well the pitfalls that await the unwary investor in the Sudan. So does Qatar, which has its own National Food Security Program. Its Muwashi Livestock Company now plans major investments in industrial agriculture and food sources in the Sudan. Investments are likely to increase soon as there exists a close relationship between the Sudanese Muslim Brotherhood and the ruling al-Thani of Qatar–and with their Egyptian resident, the Muslim Brotherhood intellectual Yusuf al-Qaradawi.

Finally, missing in the overall Sudanese mosaic is the crucial Egyptian tessera. From the Sudan revolution of 30 June 1989 until the Arab Spring that deposed Egypt President Hosni Mubarak, the governments of the Sudan and Egypt were barely on speaking terms. Thus, it was not until early 2012 that the first Egyptian company to become involved in Sudan was established. It is involved in a reclamation effort on 27,000 acres some 180 miles north of Khartoum and 350 miles south of  the border with Egypt. It is in a region where China is finishing construction of five reservoirs.

Two dams, the Kajbar on the Nile’s 3rd Cataract, and the Dal Dam at the 2nd, are already causing problems because they will displace some 20,000 Nubian Sudanese.

Until the military dictatorship brought an Islamist government to power to the Sudan in June 1989, Egypt and the Sudan had been involved in a half-century of talks that would have allowed the emigration of hundreds of thousands of Egyptian fellahin. Their move would have reduced population pressure in Egypt, and they would have served as the raw material needed to begin the cultivation of untold acres of farmland in eastern Sudan.

According to information provided the author, the Egyptians have sought to revive the issue. Direct discussions involving leaders of the Egyptian and Sudan chapters of the Muslim Brotherhood were initiated in Khartoum shortly after Egypt President Mubarak was ousted. Sudan’s vice president (who heads the committee that calculates the compensation to be granted the Gezira farmers and is a member of the Muslim Brotherhood) was said to have taken part.

As politics now stand in both Egypt and the Sudan, the Brotherhood seems to be the key to bilateral agricultural developments. That friendship will be put to the test very soon for another reason: both Ethiopia and the Sudan have demonstrated greater need for Nile waters, a situation that Egypt has reason to fear. The Nile waters are, of course, Egypt’s crucial geopolitical modality.

But that is an essay for another time.

*J. Millard Burr is a senior fellow of the Economic Warfare Institute and coauthor of Alms for Jihad.  The Selling of Sudan: Part 1 is available via a search on http://econwarfare.org, which is unfortunately undergoing maintenance at the moment.

Further Reading:

In Delicate Balance, Sudan Courts Both Iran and Saudi Arabia

South Sudan woos UAE investors

Moody’s: Petronas biggest beneficiary from South Sudan oil export

South Sudan: Oil, the Environment and Border Conflicts

Pakistan can export food items to South Sudan


Categories: ACD/EWI Blog, Financial Jihad, Soros, Soros - Africa interests
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