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Soldiers in Business Suits

Staff Writer

 

Military and security services in Sudan possess numerous investment companies engaging in diverse military and civilian economic activities. 

The precise count of these companies remains undisclosed, this secrecy is driven by the intention to safeguard their substantial financial assets and profits beyond the reach of civilian governance. Consequently, they operate through methods that bypass established systems of oversight, avoiding financial and regulatory measures imposed by the state on investment companies. 

Statistical estimates indicate that approximately 250 companies are under the ownership of the Sudanese Armed Forces (SAF), the Rapid Support Forces (RSF), and other security services. These entities not only operate within military domains but also extend their influence into various civilian sectors. Engagements include the production and export of gold and other minerals, marble, leather, livestock, and Gum arabic export. Moreover, these entities exert control over 60% of the wheat market in Sudan. Their activities span across communications, banking, water distribution, construction, real estate development, aviation, transportation, tourism facilities, household appliances production, pipes, medicines, and the textile industry.

Military and security investment companies and their contribution to the Sudanese economy 

Military and security investment companies conduct their investment activities without being subject to oversight of state institutions responsible for regulating and monitoring government investment performance. Their revenues remain outside the jurisdiction of the Ministry of Finance, and their accounts are not subject to review by the Auditor General for the Government of Sudan. Additionally, these companies receive numerous government privileges, making it challenging for other companies to compete with them. These privileges include customs and tax exemptions and relief from many government fees that other investment companies are subject to. 

The Auditor General for the Government of Sudan revealed in his 2020 report that ten companies obtained tax exemptions ranging from 10 to 26 years. Among these companies is the Giad Auto & Truck Manufacturing Co. Giad Automotive Industry Co. Ltd., affiliated with the DIS, which received a 20-year tax exemption starting in 2000 and ending in 2020. Similarly, the Gaid Steel Company, also affiliated with the DIS, received an 18-year tax exemption starting in January 2001. The Giad Furniture and Medical Equipment Company obtained a 10-year exemption starting in July 2009. 

The Auditor General for the Republic of Sudan noted in the same report that tax exemptions are granted according to the Investment Law to encourage investment and attract capital. If these objectives are not achieved, expanding the granting of these exemptions contradicts tax collection. He further pointed out that granting tax exemptions for such long periods is not supported by any law or regulation. The Investment Encouragement Law in the Khartoum State allows tax exemptions for a period not exceeding 5 years, renewable once. The Federal Investment Guarantee Law permits tax exemptions for strategic projects for a maximum period of 10 years. 

Moreover, military and security company vehicles are supplied with government fuel and receive favorable treatment by traffic police. Moreover, they are exempt from routine procedures that other vehicles undergo, such as highway traffic tolls, and inspection procedures at security, traffic, and customs checkpoints. 

Upon assuming his office as Prime Minster of the Transitional Government, in accordance with the 2019 Constitutional Document, Dr. Abdullah Hamdok opened an investigation into the activities and ownership of these companies. In his speech marking the one-year anniversary of assuming office, he called for the Ministry of Finance and Economic Planning to have full jurisdiction over public funds, revealing that 82% of the Sudanese economy was controlled by military and security companies, outside the Ministry of Finance’s purview. This demand is considered a pivotal factor leading to the army’s coup, supported by RSF, against the constitutional document on October 25, 2021. 

In September 2020, the Transitional Government established a strategic commodities portfolio through the Economic Emergency Committee to address issues related to medicine and fuel imports and stabilize the exchange rate. However, investment companies owned by SAF and RSF undermined its goals by smuggling fuel from Libya, distributing it to miners and distribution companies at a price below the portfolio’s determined rate. This led to the portfolio’s financial failure, accumulating a debt of 520 million UAE dirhams. Following the October 25, 2021 coup, the authorities dismissed the portfolio manager and dissolved its executive committee. 

In March 2023, shortly before the outbreak of the current war, Abdul Rahim Dagalo, CEO of Al Junaid Multi Activities Co Ltd, withdrew 800-kilogram gold, which was the company’ share in the strategic commodities portfolio due to the portfolio’s financial distress. This withdrawal, coupled with the portfolio’s inability to settle debts to the Nilein Bank, Abu Dhabi branch, resulted in the closure of the bank’s branch in Abu Dhabi, as it could not fulfill the UAE Central Bank’s obligations to raise the capital of foreign banks. 

The Role of Military and Security Investment Companies in the Current Armed Conflict 

Many observers of Sudanese affairs contend that a pivotal cause of the war in Sudan is the hindrance of the Political Framework Agreement transformation into a final agreement. This hindrance is rooted in the agreement’s explicit clauses, indicating the transfer of ownership of all military and security investment companies with civilian activities to the Ministry of Finance. The agreement suggests that military and security institutions should retain ownership of companies involved solely in military activities, which must also be subject to the supervision and control of the Ministry of Finance. This proposal poses a direct threat to the massive economic empires owned by both conflicting parties in Sudan. 

Following the outbreak of armed conflict between the SAFand the RSF on April 15, 2023, numerous companies were adversely affected. Operations of most companies in conflict areas ceased, with many facing destruction, particularly those situated in the capital, Khartoum. However, both warring parties continued some of their business activities in areas under their respective control. The RSF continued gold production 

and export to the UAE and Russia through cooperating neighboring countries’ airports. Simultaneously, the SAF maintained their companies’ operations and exports through Port Sudan, now the new administrative capital of the country. 

These companies played a pivotal role in fueling the war in Sudan, providing financial resources to the warring parties. SAF became heavily reliant on its investment companies’ revenues after the banking system collapsed, and most state financial institutions rendered out of service due to the war. Similarly, RSF continued to rely on their economic strength, driven by their investment companies, to modernize and develop their forces. 

After the outbreak of the armed conflict, most public and private sector institutions experienced disruptions, resulting in halted monthly salary payments for many employees. However, unlike state employees, military and security services personnel continued to receive their salaries, illustrating the dependence of military authorities on substantial financial returns provided by military investment companies. These companies, particularly those associated with gold production and export, not only sustained the SAF financially but also contributed to financing the subsistence and food supplies of forces engaged in conflict areas and stationed in other states. 

The Full report can be downloaded HERE

Written by Staff Writer

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