TOPICS > Economy

Chinese Investment Sparks Economic Boom in Sudan

May 15, 2006 at 3:45 PM EDT

MARGARET WARNER: Deep in the heart of Sudan, the Chinese are riding to work. At the Khartoum oil refinery on the outskirts of the Sudanese capital, Chinese know-how and labor are helping Africa’s largest country realize its economic potential.

MOHAMED ATIF AHMED, Deputy General Manager: All the stationary equipment are Chinese, and they are brought here in pieces and, of course, built here in this refinery.

MARGARET WARNER: Mohamed Atif Ahmed is the deputy general manager of the Khartoum refinery. It began operating in the year 2000. And when phase two, now being built by a Chinese construction company and its workers, is up and running next month, the facility will be refining 100,000 barrels of Sudanese crude into petroleum products each day.

The Chinese comprise one-third of the workforce here, while two-thirds are Sudanese. Ahmed concedes the collaboration posed some difficulties at first.

MOHAMED ATIF AHMED: The official language is English language in this refinery, so we have a real communication problem in the beginning.

MARGARET WARNER: But China is getting far more out of this business deal than just free English lessons for its staff here. The refinery is just one small part in an overall investment that has given China a 40 percent stake in Sudan’s oil industry; a third to a half of Sudan’s half-million barrel a day crude oil output ends up in China, helping to meet that country’s voracious thirst for energy.

SUDANESE BUSINESSMAN: They have a double benefit, actually. The first one is that they have an investment in Sudan, which is a good investment. And the second is they have some oil which they can take to China.

Entrepreneurs ride the oil boom

Tariq Ibrahim
Sudanese Businessman
I was fascinated by Kinko's. I thought to make the same idea over here. And after I make the first one, surprisingly, I wasn't expecting the business to develop, and to advance, and to boom like what I am experiencing these days.

MARGARET WARNER: The signs of China's investment are everywhere here, from the flags flying at the refinery, to the Chinese-owned gas stations in Khartoum where Sudanese motorists now fill up, to the busy Panda restaurant that gives visiting businessmen a taste from home.

And the Chinese aren't alone in rushing to capitalize on Sudan's seven-year-old oil boom. One of Khartoum's classic colonial hotels, where Winston Churchill once stayed, is now owned by a Malaysian company and welcomes visiting executives from that country's state-owned oil giant, Petronas.

The Gulf states and the Indians are investing heavily, too. So is Sudan's neighbor, Libya. The son of Libyan leader Muammar Qaddafi is said to be bankrolling this daringly designed 15-story hotel.

Alongside these new buildings are dusty streets and legions of struggling Sudanese businesses. But a few small-scale entrepreneurs are now riding the coattails of the oil boom.

What was the difference between your business before that pipeline started operating and after?

TARIQ IBRAHIM, Sudanese Businessman: The sky limit.

MARGARET WARNER: Tariq Ibrahim is one of many British- and American- educated Sudanese who have brought their know-how back home. A graduate of Howard University, he came back in the mid-1990s with a notion from his student days in Washington, D.C.

TARIQ IBRAHIM: I was fascinated by Kinko's. I thought to make the same idea over here. And after I make the first one, surprisingly, I wasn't expecting the business to develop, and to advance, and to boom like what I am experiencing these days.

MARGARET WARNER: Today, his copy shop has two branches serving oil and construction companies, NGOs and universities, and he's planning to open several more. There's so much traffic now in Khartoum, he says, that customers find it hard to get to his stores, so he plans to take the stores to them.

And who are the people driving all those cars? Some of them now work for him.

TARIQ IBRAHIM: When I started, I mean, salaries was, you know, wasn't like nowadays. Nowadays, I pay much, much more in salary than it used to be. And now some of my employees now start buying cars and have a better life. I mean, they didn't used to have that kind of opportunity. Even myself, when I came over here, I didn't have the chance to own a car.

OSAMA DAOUD ABDELATIF, Chair, DAL Group: It's wonderful, this oil. It fixes everything.

U.S. sanctions hit businesses

Osama Daoud Abdelatif
Chairman, DAL Group
U.S. sanctions, have only hurt the friends of the U.S. They've not hurt the targets that they were aimed at. It actually really just hurt people like ourselves who have no problem with the U.S...

MARGARET WARNER: At the top of Sudan's economic ladder, you can find Osama Daoud Abdelatif. The chairman of the DAL Group, Sudan's largest private employer, he's built a conglomerate on heavy machinery, motor cars, agricultural products, real estate, and Coke.

Though the U.S. slapped economic sanctions on Sudan more than 15 years ado, charging Khartoum with supporting terrorism, food and drug products are exempt. So "the real thing" now rolls off the DAL Group's spotless production lines. DAL Group expects to sell 30 million cases of soft drinks in Sudan this year, double what it sold just four years ago.

OSAMA DAOUD ABDELATIF: There is a major boom. Actually, in every aspect of business that we do, there is a major boom.

You see it everywhere. I mean, this road here did not exist. We had a very bad road here, and now we have a very nice road, three lanes. You know, it makes life a lot easier. So you see it everywhere; I mean, Khartoum has seen a tremendous change.

MARGARET WARNER: But U.S. Sanctions still pose a problem for Osama Daoud Abdelatif. He's not allowed to communicate with Coke's corporate headquarters back in the States or use the company's marketing materials in Sudan.

He holds the Caterpillar equipment concession, but can only sell what he can buy in Europe, despite the growing demand for construction equipment here. And U.S. Sanctions have imposed such a chokehold on international dollar transactions that, by the end of this year, he's vowed to convert all of his operations out of dollars and into euros.

OSAMA DAOUD ABDELATIF: I think the sanctions, U.S. sanctions, have only hurt the friends of the U.S. They've not hurt the targets that they were aimed at. It actually really just hurt people like ourselves who have no problem with the U.S., who have been working very happily with these American companies for many, many years, and really it has just hurt people like us.

I mean, people stop buying Caterpillar; they buy Volvo. They don't stop buying. You know, so it's obvious who lost out.

MARGARET WARNER: Kinko's-inspired Tariq Ibrahim also chafes under sanctions. He can't buy American copying and printing equipment from the U.S., but he wants it so badly he travels to Dubai to get the latest state-of-the-art machines. He says his customers know the difference between a U.S. printer and a Chinese one.

TARIQ IBRAHIM: Frankly, I mean, if I have American products and services, I have customers, good customers. If I, you know, like, for China's products, believe me, I can't compete in the market. People, they have the sense of quality. They know where the good stuff are.

If you say American or British, they respect it. And, you know what, they don't negotiate more. They don't negotiate at all regarding the prices.

The diplomatic effect

Cameron Hume
U.S. Envoy to Sudan
[I]f you're here in Khartoum, it looks like a large construction site. It's one of the fastest-growing economies in the world. But in most places in the country, people are very, very poor, poorer than any of your viewers can imagine.

MARGARET WARNER: You hear admiration for the U.S. and its products all over Khartoum, coupled with hopes that U.S. economic sanctions may be lifted now that the military-led government has signed a peace agreement over Darfur.

Sudan's newfound oil wealth helped fuel its military operations in Darfur and, thanks to China's veto power on the UN Security Council, helped it to resist international pressure to settle the conflict before now. The top U.S. diplomat here says, if the Darfur peace deal actually bears fruit, the Sudanese may see an end to sanctions, but it won't happen overnight.

CAMERON HUME, U.S. Envoy to Sudan: Well, I think we have largely a fact-based foreign policy. And I think, when the facts change, our actions will change, too.

MARGARET WARNER: If sanctions are lifted, he says, U.S. investors will find Sudan's new economy appealing, but they'll also see considerable risk.

CAMERON HUME: Well, if you're here in Khartoum, it looks like a large construction site. It's one of the fastest-growing economies in the world. But in most places in the country, people are very, very poor, poorer than any of your viewers can imagine. And so I would say that, when you're running a country like that, you really do run the risks of being a failed state.

MARGARET WARNER: The elements of that potential failure include a huge disparity between downtown Khartoum, where hundreds of new villas are under construction for the capital's business elite, and a place like Nyala, the major city in south Darfur.

The poverty in Sudan's periphery has fueled conflicts, not only in Darfur, but to the south and east, as well. Even in Khartoum, most people aren't sharing in the city's economic boom.

Every weekend for 30 years, Sheeb Sayid has fried and sold freshly caught fish on the banks of the Nile River. He says he's happy to see Khartoum developing, but most of his customers aren't feeling a change in their own lives.

SUDANESE BUSINESSMAN (through translator): This has made no difference to my customers. They have limited income, and most of them are government employees who have low incomes.

MARGARET WARNER: Khartoum's population is also exploding with people who have no incomes, as many Sudanese abandon the countryside and head to the capital under the mistaken impression that its streets are paved with gold.

Sudan's agricultural economy, considered the breadbasket of Africa before the discovery of oil, is struggling. Drought and antiquated farming methods have prompted many to abandon the fields altogether, and some here fault the government for not using Sudan's new oil revenues to modernize other sectors like agriculture.

ABDA EL-MAHDI, Former Deputy Finance Minister: It's the responsibility of the government that does not have a clear strategy and a clear policy.

MARGARET WARNER: Abda El-Mahdi is a former deputy finance minister whose political party withdrew from the government in 2003 in a dispute over the regime's handling of the Darfur crisis. She says, if the dramatic economic disparities and the political unrest they're creating aren't addressed soon, even investors from Asia could get cold feet.

ABDA EL-MAHDI: In spite of the oil boom, in spite of the economic boom, if the unrest becomes more widespread, the political instability will be so high that even the investors who did not think that it was relevant to them and were coming into the main urban areas will be affected, and will stop coming in, and will stop investing.

Business, Government Intersect

Busy Street in Khartoum

MARGARET WARNER: On the international stage, the government of Sudan insists it's turned over a new leaf, saying it no longer supports terrorists like Osama bin Laden, has settled two violent civil wars, and now promises to be a responsible global citizen. It is being pressured to live up to that promise, not only by the international community, but by some of the same Sudanese who are helping to create today's economic boom.

At night, these hip, young people gravitate to places like Ozone, a stylish new pastry and coffee shop in the center of Khartoum. You can literally see the changing face of Sudan at the tables here. You can also hear complaints about the government's capricious management of the economy, with growing favoritism and corruption that make it hard for entrepreneurs who don't have the right connections.

HASHAM IBRAHIM, Sudanese Businessman: I say I'll give it two more years, maybe three. If it's still going bad and the political climate is the same, I might go back to England, to be honest.

MARGARET WARNER: Hasham Ibrahim is a software specialist who was educated in Britain and returned to Sudan, hoping to contribute to the country's regeneration.

HASHAM IBRAHIM: To be honest, brutally honest, I'd like to change the way people are treated in the Sudan. There's enough money in this country now for everybody to be having a good job and have a good living, and that's not happening.

And the war is over now in the south. In Darfur, hopefully, it's going to go over soon. So we want to see something. I mean, peace, all this, we signed this, we signed that, where is it? Where is it? I can't see anything for myself.

MARGARET WARNER: Ozone is owned by the one entrepreneur in Sudan with the economic muscle to create a new reality here for his company, his investors, and his employees, many of whom are Sudanese ex-patriots who have come home. DAL Group owner Usama Daoud Abdelatif says the relationship between business and government here has to change.

OSAMA DAOUD ABDELATIF: I think the government has to govern. It should not be involved in any activities which are nothing to do with actually governing. I think they should restrict themselves to things like, maybe, education, health and security, that type of thing. I don't think the government has a role long-term to play in the economy directly.

MARGARET WARNER: If he has his way, the government will play no role in running his latest project: the construction of Al Sunut or "The Forest," a city within a city in the center of Khartoum.

This construction site will eventually be filled with gleaming skyscrapers, luxury apartments, a golf course, and new homes overlooking the Nile. It is an enormous gamble that rests on Sudan's oil boom setting the country on the path to a much broader economic and political rebirth.