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ALMA Risk,
Mayfair,
London
Sudan’s gold sector, once the main force behind economic growth, is now at the centre of the nation’s conflict economy. Gold still accounts for approximately half of the Sudanese export value. However, it is now the commodity that is fuelling one of the world’s most brutal civil wars. Since April 2023, Sudan has been embroiled in fighting between the Rapid Support Forces (RSF), led by Mohamed Hamdan Daglo, and the Sudanese Armed Forces (SAF) led by General Abdel Fattah al-Burhan.
Sudan borders seven countries and sits at the crossroads of sub-Saharan Africa and the Middle East, with an important Red Sea coast. The river Nile converges at Khartoum, Sudan’s capital, and flows through the Sahelian belt into the Nile Valley and Gezira. These natural advantages provide extensive farmland, giving Sudan the potential to become a major agricultural producer. Gulf States have acknowledged this and have spent $53 billion in Sudanese agriculture in the past decade, with Saudi Arabia spending $35.7 billion to secure food supply. Despite its natural resources and geographic advantages, persistent domestic unrest and conflict have prevented Sudan from capitalising on these strengths. As a result, infrastructure remains underdeveloped and the political environment unstable.
When South Sudan gained independence from Sudan in 2011, it took with it 75% of the country’s oil reserves, which had accounted for around 90% of the nations export earnings. As a result, gold quickly became Sudan’s foremost export. In recent years, gold output exceeded 80 tonnes annually, making it one of Africa’s top producers. However, the true scale of gold production is even larger. At least 50% of the Sudanese gold production is smuggled and therefore not reflected in official figures. The multi billion dollar gold trade and the nature in which it is traded has made it the most significant source of income for both the SAF and RSF. In recent years, the United Arab Emirates is the main destination for Sudanese gold but often through unconventional routes. While gold is Sudan’s leading export earner it is also entangled in conflict, corruption and foreign exploitation.
Despite substantial resources Sudan’s investment climate has been fraught with economic mismanagement, sanctions and political instability, even before the current civil war. This has caused ‘international isolation’ and prohibited a growing economy. The ongoing civil war caused GDP to contract by 40% in 2023 and a further 28% last year. The current ‘war economy’ has meant that both sides are now heavily reliant on gold to generate revenue.
This has caused foreign investors to either suspend or stop operations altogether. Businesses that have remained face difficulty in repatriating profits and obtaining foreign exchange due to the fragmentation of any central financial systems. In the main conflict zones, commercial banking has collapsed, while the US and EU have expanded sanctions on both rival factions.
Despite this economic turmoil, The SAF led administration have tried to generate capital. Recent policies have included lowering corporate tax on foreign gold companies, which has continued interest from external nations and their mining firms, in particular Russia and China. This was done to reignite interest as organisations from both countries had left during the war. However, for the near future, any immediate investment in Sudan entails exceptionally high business and investment risk.
Security risks in Sudan are at a critical level, across several of the nation’s regions. Khartoum, which is Africa’s third largest city, has been significantly impacted. Civilians continue to face indiscriminate artillery and airstrikes, as well as ethnically targeted violence. The ongoing conflict has brought about an almost complete collapse of law and order, with pre-war judicial institutions no longer functioning. Furthermore, over 12 million people have been displaced because of the civil war, whether that’s within Sudan or to neighbouring countries.
External actors have had a significant influence on the events in Sudan. Egypt are backing the SAF but nations like the UAE support the RSF. Egypt shares a long border with Sudan and has supported the Sudanese army with training and used Cairo as a conduit for Sudanese gold since the start of the conflict. Wagner linked forces have long operated in Sudan’s gold zones. In June 2024, the SAF awarded a key gold licence to a Russian firm. The move coincided with Moscow’s pivot from earlier RSF links to open SAF support, including arms deliveries and talks on a Red Sea naval foothold. The involvement of Egypt, the Gulf States and Russia raises the regional stakes. RSF smuggling routes through Chad and Libya risk drawing neighbours into the conflict.
Sudan’s governance environment has deteriorated sharply with the collapse of central systems. Transparency International’s Corruption Perceptions Index (CPI) 2024 ranks Sudan 170th out of 180 countries, with a score of 15/100. The Civil War has caused a divide on what was an already weak state institutionally. The SAF control the central bank in Port Sudan and the RSF run a shadow fiscal system built on illicit gold sales. Rule of law is nearly completely absent in the war, contracts and property rights depend on armed influence and corruption is present across all sectors. Khartoum’s markets, factories and banks have been looted and movements of goods remain risky with slow trade routes. Furthermore, access to finance is nearly impossible, foreign banks have exited and domestic banks function in SAF controlled regions.
Sudan has vast natural resources but is currently one of the world’s harshest investment climates. The civil war has effectively collapsed the economy, while sanctions from the US, UK and EU on key organisations make investing largely impossible. However, long term potential in a post war Sudan remains. With over two hundred million acres of arable land, abundant Nile waters and a strategic Red Sea position, Sudan has innate potential to connect the Middle East and Africa. Sudan’s gold sector, if regulated, could be used to finance reconstruction rather than continued conflict. Ultimately, Sudan’s future will depend on whether peace and institutional reform can be reached.
