The aftermath of South Sudan’s cessation coupled with political turmoil in the Arab world, have left the Khartoum government feeling isolated and economically vulnerable.
At a recent conference on infrastructure and investments in the Horn, the Sudan government delegation complained of being left out of most projects despite being a founder member of the Inter-Governmental Authority on Development.
The independence of the south, nine months ago, has not only seen Sudan embark on a major restructuring of its economy after losing the majority of the oil wealth, but also has initiated diplomatic offensive to show that it is an integral part of the eastern African region.
The end of the Hosni Mubarak regime in Egypt and that of Muammar Gaddafi in Libya last year has brought about mixed fortunes for Khartoum.
While Egypt has always played the role of a “godfather” to Sudan, relations between the late Gaddafi and President Omar al-Bashir was characterised by mutual suspicion; with Khartoum suspecting that the former Libyan leader was supporting militias in Darfur.
Muhamed Ali, a security expert on The Horn argues that in the past when Sudan found itself under pressure from southern African neighbours, it could easily get a cushion from Arab countries with which it shares historical and cultural links. But this has since changed.
Indeed, a vulnerable Khartoum, is willing to settle post-secession issues with the south. After almost a month of negotiations in Addis Ababa, the two Sudans agreed to work out a framework on border demarcation and citizenship.
Khartoum now has no choice but to restructure its economy to make up for the 67 per cent loss on oil revenue, with new oil fields being developed in Blue Nile, Southern Kordofan and South Darfur.
Sudan’s Deputy Ambassador to Kenya Hassan Ali Osman said his government is positive that it would be producing 200,000 barrels per day by the end of 2012 from the current 115,000 barrels per day. The ultimate goal is to reach 350,000 barrels per day by 2014, which is the current production capacity of South Sudan.
But the biggest challenge for Sudan is to forge a working relation with the independent south that is increasingly seeing its future as lying with the EAC.
Sudan is also looking at diversifying its cement market—South Sudan needs a lot of it for reconstruction. The country is currently producing five million tonnes of cement annually.
Khartoum has also directed its attention to gold, 10 tonnes of which was sold in the first quarter of 2012, earning about $2.7 billion.
There is also increased investment in sugar production with three joint ventures with China, the United Arab Emirates and Morocco to ramp up capacity from the current 450 tonnes produced per year. Once these joint ventures start, there are plans to increase the production of ethanol for export from which Sudan earned $47 million in the first quarter.
While it has been a major economic blow for Khartoum following South Sudan’s decision to shut down oil production in January, a new pipeline for the south could take a minimum of three years. This could pose problems because the Chinese and Indian companies involved in oil production in the south might not be willing to wait that long.
Michael Majok, the Ambassador of South Sudan to Kenya, conceded that the proposed pipeline to Lamu might take a while but with serious commitment between Kenya and South Sudan, it could take only 11 months.
By Fred Oluoch and Julius Barigaba