Sudan Review of Business Environment Constraints, March 2017

Objectives

DFID Sudan approached BERF for support to

  • identify general business environment  constraints in the economy with the aim of bringing a this perspective to potential future programmes;
  • identify constraints in the agricultural and related agribusiness sectors, with an emphasis on how removal of constraints will benefit the poor; and
  • assess Government of Sudan capacity to implement the reforms.

DFID Sudan’s main interest was identifying entry points where there is an opportunity to engage government in an intervention with the ability to create jobs and reduce poverty.

A menu of options for DFID Sudan engagement is identified based on an analysis of (i) the political economy (including government willingness and capacity to reform), (ii) partnerships available, (iii) DFID’s competitive advantage and (iv) value for money. The menu of options was developed on the basis of a general business environment diagnostic to identify economy-wide constraints to doing business in Sudan, as well as a sector specific diagnostic of the agricultural sector and relevant agribusiness value chains.

Key Findings / Conclusions

Sudan’s business environment is one of the most challenging in the world. Key findings are:

  • Lack of access to finance particularly for small businesses including farmers;
  • The proliferation and uncoordinated nature of regulations, taxation and fees at all levels of government, and the unpredictability of changes;
  • Lack of access to land and contested land rights including fundamental tensions between formal and informal (customary) land rights;
  • Lack of reliable low cost electricity; and
  • Limited dialogue between the GoS and the private sector on policy issues.

Specific issues for the agricultural sector include:

  • Restricted access to markets and agricultural marketing infrastructure; and
  • Lack of access to inputs: seeds, fertiliser, agricultural machinery, information / extension services, and to a skilled workforce.

Summary of Recommendations

In line with latest thinking on addressing complex institutional reform problems, and engaging in fragile states, it is recommended that DFID Sudan adopts a portfolio approach.  A menu of nine potential entry points for engagement has been identified. DFID Sudan should engage a supplier to test out a selection from the menu. The approach should be a ‘step wise’ one, taking ‘small bets’,engaging with problems that local counterparts care about, ensuring short feedback loops so that interventions that are not working can be dropped where appropriate and lessons learned and incorporated in real time. Options include:

1: Support the Ministry of Foreign Trade in Sudan’s World Trade Organisation accession process.

2: Support the Ministry of Investment to enhance coordination of government investment promotion and to facilitate policies and laws to reduce uncertainty and to support a joint vision for growth.

3: Look for opportunities to bring government and private sector together at federal level including assisting the State Minister for Investment to improve investment facilitation coordination across government.

4: Introduce a business environment component to DFID’s support to improving local government Public Financial Management with the aim of streamlining taxes and fees and reducing the number of last minute changes or rate rises.

5: Offer technical assistance to the Bank of Sudan on the development of a regulatory framework for agency banking and mobile banking and improve financial information and services for farmers.

6: Partner with the private sector to deliver services to farmers. Form cost-sharing partnerships with agribusiness companies to establish privately run extension service, with government ‘invited in’ in a low key way where appropriate.

7: Explore the opportunity to improve the business environment of private investment in renewable energy and for markets for household solar systems for small farmers. Review current status of regulatory and policy framework and if necessary address gaps in United Nations Development Programme’s technical assistance.

8: Consider partnership with the African Development Bank on vocational education for young farmers.

9: Coordinate with the Food and Agriculture Organisation, the International Fund for Agricultural Development, and Ministry of Agriculture on seeds and fertiliser standards, including potentially setting up seed and fertiliser testing laboratories and improving inspection services.