The Politics of Mining and Trading of Gold in Sudan: Challenges of Corruption and Lack of Transparency (2)

By: Elfadil Elsharief Elhashmi

Sudan Transparency Initiative (STI) Corruption and lack of transparency and accountability dominates the discourse on the gold sector in Sudan. In undemocratic and kleptocratic political systems, corruption plays a crucial role in granting gold concessions, as well as in the export and smuggling of gold. This has an impact on the distribution of wealth and power, as well as socioeconomic life, health and safety in Sudan. Corruption is facilitated and enabled by the following factors: a) gaps in the legal framework; b) a lack of clarity and overlap in roles and responsibilities and terms of reference of various ministries and departments; c) blurred distinctions between government institutions and the ruling party; d) weak systems of checks and balances; e) the lack of separation between the executive, legislative and judicial branches of government; f) the absence of a clear demarcation between customary entitlement to land and government rights and a consequent overlap between the gold concessions claimed by large companies and land claimed by local artisanal miners; and g) absence of enforcement of financial disclosure regulations for government officials and the lack of laws that provide for public access to government information.
Corruption in the gold sector takes many forms: there is bureaucratic and political corruption, including embezzlement of public gold company revenue; tax exemptions and holidays; and cronyism, nepotism and patronage in granting gold exploration and trade licenses as well as concessions. The gold mining sector in Sudan is predominantly artisanal in nature.
85-90 per cent of output comes from artisanal mines. This report highlights interdisciplinary approaches to combat corruption as well as to address the socio-economic and environmental impacts of the gold sector. Such impacts have been exacerbated by the neoliberal policies of privatization in health and education services and unequal development. Poor educational and development services have left miners with little other choice, and inadequate health services have exacerbated the health consequences of gold mining and processing. Neoliberalism creates favorable conditions for smuggling and corruption to thrive. In the absence of rule of law, the legal and institutional frameworks which enforce regulations are too weak to confront and combat corruption. The impunity of politician entrepreneurs and high ranking public officials make efforts of the auditor general and the National Commission for Redress of Public Sector Grievances (NCR) ineffective and obsolete. The voices of the local and international media and civil society organizations are kept faint by the violent oppression of the kleptocratic/security state.
This research investigates how the kleptocratic/security state negatively affects the distribution of gold concessions, licenses and contracts, as well as revenue through corrupt processes and policies, weak law enforcement and lack of accountability and transparency in the gold mining sector. Gold revenue has been used to pump money into the security services, RSF, Janjaweed and other militia, intelligence, military

operations and weapons. Gold production in Jebel Amir’s in

Darfur is controlled by the militia, whether through tacit

government approval or by force. International efforts to red-

flag Jebel Amir’s gold as conflict gold are yet to begin. The

existing legal and regulatory frameworks have enforced socio-

economic disparities, and encouraged smuggling and impunity.

Meanwhile widespread corruption has encouraged civil war,

environmental pollution, and threats to the health and safety

of both miners and individuals in the vicinity of gold sites.
Sudan, which is economically dependent on the agricultural and

pastoral sectors, is very sensitive to the implications of

policies and practices of gold production as an extractive

industry. Although the artisanal sector provides unemployed and

uneducated agropastoralists with temporary relief, it has

proved to be environmentally destructive and to widen the gap

between the poor and the new class of politician-entrepreneurs

who are members of the Islamist ruling circles.
Defining the kleptocratic and security state The Sudanese

government is characterized by a dual nature of being both a

kleptocratic and a security/police state. Kleptocracy, or “rule

by thieves,” is defined as a government or state in which those

in power systematically steal public funds and loot national

resources. Kleptocrats gain control over vital economic assets

(usually in the banking and natural-resource sectors), to amass

wealth. As political science professor Karen Dawisha recently

put it, kleptocrats manage to nationalize risk while

privatizing profits. To this end, kleptocrats implement highly

inefficient economic policies, expropriate wealth and use the

proceeds for their own enrichment. Kleptocratic policies are

more rewarding where there is a generous flow of foreign aid

and rent from natural resources.
Of course, populations are likely to resist kleptocratic

policies, as they serve the interests of only a few, rather

than the population as a whole. As a result, kleptocratic

regimes need to use various strategies to circumvent popular

will. One such strategy is to use a divide-and-rule strategy to

weaken dissent by defusing cooperation among opponents. In

addition, such policies provide rulers with substantial

resources to buy off opponents, especially when opposition

groups are ineffective and the average productivity in the

economy is low. They may also do so by undermining democracy

and the rule of law as well as employing strong arm security

The following features illustrate the dual character of Sudan

government as a kleptocratic and security/police state:
* It is widely known that in democracies, the role of

intelligence should be limited to “the collection, analysis,

production, and utilization of information about potentially

hostile states, groups, individuals, or activities.” However,

in Sudan, the role of National Intelligence Security Services

(NISS) goes far beyond that. NISS has authority to detain

individuals and enforce laws. The NISS’ role in enforcement is

particularly problematic because it is partisan and accountable

only to the president who appoints its leaders. In a sense,

thus, the NISS can serve as both the judge and the executioner.
In 2016, 70 per cent of Sudan’s spending went to the military

and intelligence, as compared to 2.3 per cent for education and

1 per cent for health. In 2014, Sudan spent only 1.8 per cent of its GDP on the health sector.11 Military budgets characterized as “classified security operations” are not disclosed in the budget and the Ministry of Finance does not have records of expenditures of the president, security and defense. In December 2015, Omer Al-Bashir said, “To those voices that speak in the street or in the media about the armed forces budget, I say that if 100 per cent of the state’s budget was allocated to the army to secure the country then that would still not be enough.”
The RSF budget alone was 3.2 billion Sudanese pounds in 2016, 32 times the budget for education and 6 times the budget for health services.
High ranking officials in the police, military and the NISS often have their own private enterprises, which receive favorable treatment from the government. Even though the judiciary is institutionally separate, it is largely controlled by the executive branch of the government. Gold production and export Gold production in Sudan goes back to the Nubian kingdom of Meroe, and was a pretext for the Ottoman Empire to invade Sudan in 1820. Commercial gold production commenced in 1990 after the establishment of the Sudanese-French Ariab Gold Mining Company.17 In 2012, Sudan ccounted for nearly 2 per cent of the world’s gold production. However, Sudan is witnessing a dramatic hike in its annual gold production, jumping from 15 tons in 2009 to 73 tons in 2014. In 2013, thirteen industrial gold mining companies were operational. The government has stake in several of these including the Hassai mine in Red Sea State and Gabgaba Mine in River Nile State. At the same time, between 2012 and 2013, 120 industrial firms were issued prospection licenses. International gold prices jumped from US $1000/oz. in 2009 to US $1300/oz. in 2014. Sudan’s Minister of Minerals Ahmed Mohamed Sadiq al-Karouri confirmed that gold reserves stood at 944 tons in 2012, ranking third in Africa. Although gold was an important foreign exchange earner in 2013, the gold trading activities of the Central Bank reportedly have little impact on state revenue. The country’s gold industry is now worth about US $2.5 billion a year.
Gold exports ranged from 6,000 to 47,000 kilograms between 2002 and 2016. The annual value of gold exports ranged from US$86 million in 2009 to more than US$ 1 billion in 2016. Gold export is crucial for the nation, constituting 53 per cent of total exports in 2012. Given the sharp fall in crude petroleum production from 168.7 million barrels in 2010 to 37.7 million barrels in 2012 after the secession of South Sudan.
Currently, the main importers of the Sudanese gold are the United Arab Emirates and Canada. The United Kingdom was a main importer during 2002-2004.
Gold was among four products targeted for promotion in the government’s three-year economic program from 2012-2014. As part of this strategy, the Central Bank of Sudan monopolized the purchase of gold from the local traditional gold mining sector, established a gold refinery, encouraged gold miners to save money in the banking system and declared its intention to “finance poor and marginalized segments of the society to reduce poverty and unemployment.” However, the sector has fallen short of its potential as a driver of development because of smuggling and the inability to control the purchase of gold. The facilitation and control of access to credit to miners also failed miserably as no banking kiosks were created in the artisanal mining areas. As a result, there was no protection for poor miners from brokers and rich businessmen who finance gold operations. Gold purchasing turned out to be inflationary, as it was funded by printing money.
One of the objectives of the of the Five-Year Economic Reform Program (2015-2019) is to position the mining sector as an engine of growth by increasing gold production from 76 tons in 2015 to 103 tons in 2019 through providing loans and grants, encouraging joint ventures, monopolizing gold purchases, regulating and organizing artisanal gold mining and improving production and conditions of miners and local communities. In deference to the Minamata Convention on Mercury, the Five-Year Economic Reform Program included a National Plan for the Elimination of the use of Mercury in Mining. Like its predecessor, the program has not improved the environmental consequences or health and safety of miners and local communities. To make matters worse, the plan suffered a major interruption in early 2017, when the Central Bank’s gold purchase and export monopoly was relaxed to allow private companies to export gold.
Sudan was expected to produce 100 tons of gold in 2016. Sudan currently ranks third in gold production in Africa behind South Africa and Ghana but aims to move to first place by 2018. Given such ambitious expectations, the impact of the gold sector must be urgently addressed.
There are three types of mining in Sudan: artisanal (traditional) mining, small-scale mining and large-scale mining. There is also considerable trade in reprocessing mining residues (using mining tailings known as “karta”). There are 173 companies involved in small-scale mining, 142 in large- scale mining and 52 karta companies. Other sources estimated 132 companies operating in the regular mining sector in Sudan including 15 large foreign companies. Due to US sanctions imposed in the 1990s, few foreign businesses have risked setting up mining enterprises in Sudan. The size of future foreign investment will depend on US action regarding sanctions.

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