Sudan's Transition: A Strategic Opportunity for the German Government

19. März 2020   ·   Philipp Jahn

The stability of the wider East African region depends on the success of Sudan's transitional government. The German government should prioritize supporting Khartoum in the handling of subsidies and in strengthening the country's middle class. To succeed in this, Berlin needs to ensure coherence between short-term crisis prevention and longer-term development cooperation.

Sudan urgently needs international support. The stakes are high, also for Germany and Europe. Sudan is the third largest country in Africa with a population of over 40 million. It is in the middle of a severe economic crisis. At the same time, and following the successful revolution in 2019, it is also undergoing a fragile political transformation. The thirty-year dictatorship of Omer al-Bashir undermined the country’s institutions whilst amassing foreign debt of 56 billion USD. Currently, the negligible and underfunded national budget is mainly used to maintain social peace: Goods such as petrol, diesel, cooking gas, wheat, and electricity are heavily subsidized to prevent the impoverished population from rebelling.

The Transitional Government Is in Need of Support From the German Federal Government

If the transitional government under Prime Minister Hamdok, which has been in office since the summer of 2019, fails to stabilize the state, the country – which has already been marked by numerous regional conflicts – will likely be facing yet another threat: disintegration. Due to the regional importance of Sudan, this would directly impact all of East Africa, not least because its key neighbor Ethiopia is itself undergoing a difficult transformation. Despite a severe economic crisis, Sudan is one of Ethiopia's most important trading partners. Conversely, a successful transformation of both countries could create a democratic and economic center from which the entire region could benefit.

Given this context, Germany must lend its support to the Hamdok government during this transformational period. The visits of both Foreign Minister Heiko Maas in September 2019 and Development Minister Gerd Müller in February 2020 have  raised great expectations of a substantial German involvement in Sudan. For the German government, this is a window of opportunity and a chance to implement the goals of crisis prevention and peacebuilding set out in the guidelines on “Preventing Crises, Overcoming Conflicts, Promoting Peace”. In the guidelines, the German government summarized: “For comprehensive and effective assistance of social transformation processes, it is necessary to coordinate and synchronize the short, medium, and long­term support measures, and to take the transi­tions between those measures into account.” In Sudan, an important geographical neighbor to Europe, Berlin can now show how short-term crisis prevention and sustainable development cooperation can work in concert. To achieve this, however, the German Foreign Office and the Ministry for Economic Cooperation and Development (BMZ) must develop a coherent policy with common strategic priorities for Sudan's support.

Understanding Local Interests: The Ethiopian Model vs. Market Liberalization

Setting strategic priorities requires an in-depth understanding of the situation on the ground. However, the many competing power centers in Sudan make an analysis regarding the various actors' interests difficult. The most important power centers are the military, the Forces of Freedom and Change (FFC), and the technocratic government. These power centers, in turn, are marked by yet more subdivision: Within the military, for example, an important faction is General Hemeti and his Rapid Support Forces. And the FFC comprises a string of different political parties. Whereas the military and the FFC are both represented in the government that was formed in September, there are two main political camps that remain crucial for decision-making processes in the government.

One of these, the “development politicians”, prefers to follow the Ethiopian model and establish a "Development State". Oftentimes, these development politicians have spent considerable parts of their careers in Ethiopia and admire the progress there. At the same time, they are aware of the weaknesses of the Ethiopian experience and are trying to avoid them in their own policies. The group understands development as a non-linear concept in which dynamic changes happen suddenly. They see the transformation period as the continuation of a deeper – and social – revolution.

The other group consists of financial experts favoring deregulation and market liberalization. They want to restructure the budget, reduce debt, and rely on foreign investors. In contrast to the development politicians, they see development as a linear concept in which changes build on each other and eventually lead to a stable economy within a fixed time frame. For them, the transition period is a time in which far-reaching economic reforms can be implemented. So far, both groups have been able to agree on a list of ten priorities, which they developed on the basis of the revolutionary slogan “Freedom, Peace and Justice”.

Between One and Two Thirds of the Sudanese State Budget Goes Into Subsidies

The current political debate in Sudan, however, is shaped less by these ten priorities than by the pressing political decision on how and when to cut state subsidies so that the national budget can be rehabilitated. According to estimates, the Sudanese state spends one to two thirds of its budget on subsidizing goods. In Sudan, petrol and diesel are cheaper than water; cooking gas and electricity are less expensive than in oil-rich Saudi Arabia. At the same time, subsidy cut-backs are the biggest political mobilization factor. Omer al-Bashir's plan to reduce wheat subsidies in December 2018 led to the first nationwide demonstrations, culminating in the end to his 30-year rule four months later.

In December 2019, the new technocratic government's Finance Minister announced that the subsidies for diesel and petrol would be gradually reduced. Only a few hours later, under pressure by the FFC, he had to retract. Now, the question of subsidies will be discussed again at a conference in March 2020. The “finance politicians” within the government are pushing for an earlier reduction of subsidies, especially those for gasoline. Since February 2020, some petrol stations have been selling less subsidized petrol. In contrast, the “development politicians” want to improve government services for citizens before reducing subsidies. Their argument is that by fighting corruption and distributing the subsidized goods more efficiently, massive savings in the national budget could already be achieved. However, the question of reducing subsidies must be resolved while the technocratic transitional government is in charge, and thus before the parliamentary elections in 2022. The political transaction costs of cutting subsidies would be too high for elected officials. A democratically elected government forced to cut subsidies would be paralyzed and would quickly lose power.

The Resumption of Bilateral Development Cooperation Is an Important Step

Against this background, it was an important step that on February 13th, 2020, the German Bundestag decided to resume and expand bilateral cooperation with Sudan. This enables the BMZ to resume bilateral development cooperation with Sudan, which was discontinued in 1989 (also following a decision by the Bundestag) shortly before Omer al-Bashir's coup d'état. The current decision provides a mandate for all  relevant ministries to increase their involvement in Sudan. It contains stipulations that the German government should support the transition process in the areas of rule of law, good government reform, preparation for elections, party building, support for civil society, economic reforms, and the rehabilitation of infrastructure.

In the context of the political situation and the debate on subsidies outlined above, as well as the resumption of bilateral development cooperation in Sudan, three points of action are crucial for a coherent German policy on Sudan. In these efforts, the long-term transformation of Sudan, rather than the issue of migration should primarily guide government policy.

Reduction of Subsidies: Meaningful Links Between Crisis Prevention and Development Cooperation

The German government’s top strategic priority should be supporting the Sudanese government in resolving the issue of the future of subsidies. The German Foreign Office has already taken action along this line: Following the request of Prime Minister Hamdok, it is supporting the stabilization of the electricity supply in Khartoum. However, it is important that Berlin understands the situation in Sudan as revolutionary and dynamic, much like the development politicians. Crisis prevention measures like the one mentioned above must not automatically lead to energy becoming a priority sector within a BMZ country program. Crisis prevention must be thought of as intertwined with development policy, but not in a linear way. Development policy interventions, for example in the area of good financial governance, must begin now, if Sudan is to be put on a long-term development path. Strategically important regions like Port Sudan must be given priority support alongside Khartoum. Port Sudan is the country's most important port, and if it collapses, the supply situation throughout the country would be impacted.

Prevent the Erosion of the Middle Class

A second strategic priority for the German government must be to prevent the erosion of Sudan's middle class, as it continues to hold the country's greatest potential. The old regime's wealth-grasping rent-seekers destroyed decades of productivity, leading to the impoverishment of the middle class. Many doctors, engineers, civil servants, and skilled workers need to work several jobs already. Some work as Tirhal drivers – a Sudanese Uber which is only lucrative because gasoline is virtually free. The abolition of subsidies will therefore hit the middle class hard. However, it was the children of the middle class who supported and organized the revolution in Khartoum in the first place. And it is the middle class that is counting on the dividend of democracy. Crisis prevention interventions by the German Foreign Office must therefore also take the middle class into account and, for example, create short-term opportunities to compensate for the loss of income and savings from subsidies. Without subsidies, farmers can no longer afford to irrigate their fields with water from the Nile. This must also be remedied through crisis prevention interventions. In the same vein, development policy interventions should aim to unlock the potential of the middle class.

Deepening Development Policy Expertise on Sudan

Thirdly, for both of these priorities it is crucial to strengthen development policy expertise – both in Berlin and in Sudan. The focus set by German (and international) engagement over the past three decades has led to the situation that expertise on Sudan focuses on the areas of short-term crisis prevention, migration policy, UN peace missions, and humanitarian aid. There is a lack of sufficient development policy expertise on Sudan. For instance, there is currently no specialized BMZ advisor at the German Embassy. The German government has already recognized this problem and has begun to build up corresponding expertise. The BMZ will send an advisor to the embassy from April 2020 onwards. In addition, it should consider setting up a team to advise the main actors in the German government. Think tanks, civil society, and political foundations could also play a role here. However, more than only this effort will be needed, especially if the German government wants to ensure that development assistance through the BMZ and the short-term crisis prevention measures of the German Foreign Office are coordinated in a meaningful way. Finally, the Bundestag needs to specify which expertise is deemed particularly important by the legislature.

The visits of Heiko Maas, Gerd Müller, and President Frank-Walter Steinmeier in recent months have raised expectations. Germany does have the means to fulfill these expectations. But these means must be part of a well-considered and coherent policy of the German government. Germany's reputation in this important region would benefit from that.